Mike Ghaffary
Mar 8, 2018 · 6 min read

Today, HubHaus announced that Social Capital led a $10M Series A investment in the company. I’m excited to join the company’s Board of Directors and can’t wait to support HubHaus as they work on one of our country’s biggest problems: housing.

The Housing Problem

I joined Social Capital last summer largely because of its mission: to advance humanity by solving the world’s hardest problems. One of my main focus areas for investment is marketplaces, because I managed one previously (Eat24, which we acquired at Yelp), and because of the two-sided network effects that make them very valuable both to users and to the supply side.

Thus, HubHaus, the marketplace for long-term shared housing, resonated with me personally, addressing one of humanity’s basic needs: housing. In the San Francisco Bay Area, this is a particularly hard problem, so it’s no coincidence that HubHaus was born here. Co-founder and CEO Shruti Merchant started HubHaus after trying to set up her own shared living home while running another startup that she had dropped out of medical school for. No one company can solve the housing crisis, but HubHaus has an important role to play in providing a new model to increase people’s options.

There are a few major reasons why shared housing is a growing trend:

  • Migration to cities and the larger metropolitan areas
  • Changes in lifestyle (people are getting married later and buying houses later)
  • The sharing economy is a larger trend across verticals (ride-sharing and sharing in every other category)

In San Francisco, for example, where demand dwarfs housing supply, the average apartment costs $3,400 per month, and even the average studio costs $2,450. This drives many people to move to other geographies, commute long distances, or try to find a friend or relative’s couch to crash on. Shruti’s vision is to offer a fourth option: HubHaus, which lets you move to a new city for an average of $1,350 in housing costs per month, sharing a home with 5 to 10 other people, each with private bedrooms and shared communal areas like the kitchen and living room.

The housing problem obviously isn’t limited to the Bay Area. The average consumer household in the United States spends about $57,000 per year, and 62% goes to just three categories: housing, furniture, and food, with housing being the largest by far. Meanwhile, there is strong demand for shared housing, with sites like Roommates.com, for example, getting over 1 million daily page views, but only a small fraction of that demand to match up being met. Some people who want roommates are lucky enough to pair up with one other person and find something they can afford, but even splitting a 2 bedroom unit can be very pricey in the most populated metropolitan areas of the country. Remember, about 250 million Americans live in or near urban areas, which means that about 75% of our population lives in only 3% of our land area.

Like Shruti, I’ve tried to set up a shared house before, but unlike her, I failed because it was too challenging to get everyone aligned to all move in at the same time. When I first moved to San Francisco, I remember seeing craigslist listings to move into exciting sounding larger houses, each with their own identity and roommates. They were impossible to get into, though, because there were only a handful in the entire city and orders of magnitude more demand. I ended up going with a tiny studio apartment that had a murphy bed that folded into the wall.

Even for people who do manage to set up a shared housing situation, it quickly becomes unwieldy once you go past 2 or 3 roommates. What happens when one of the roommates needs to move (which happens every at least 18 months — the typical vacancy frequency for an entire home — if not more frequently with individuals)? Who is willing to risk doing the master lease on a 4 or 5 bedroom home, where the entire rent starts to add up and the main person who signs on (and possibly even later roommates) could be liable for the entire rent if others don’t pay, not just their share?

The HubHaus Solution

One company and one model can’t solve the entire housing crisis, but it is amazing to see how much traction HubHaus already has. Over 400 community members live in 70 houses managed by HubHaus in the Bay Area and the greater Los Angeles area. Each house has its own unique feel and sense of community, which is by design: HubHaus doesn’t try to force furniture, decor, or a specific type of social calendar on its residents. Instead, each HubHaus is free to form its own character, with the support and help of the company.

I was really struck by this as I visited various HubHauses while getting to know the company. One community member, Pam, had moved to the United States for college from Costa Rica on a scholarship. After finishing her degree in architecture in Montana, she found a dream job at an architecture firm in San Francisco, but couldn’t afford to live anywhere near work. Instead she lived 2 hours east of the city, losing 4 hours to commuting each day, but that wasn’t even her biggest challenge with the living situation. She found it hard to make friends and feel any sense of community here, being from another country and not having a default network of people.

Then Pam found out about HubHaus and moved into one right next to a BART stop on the Peninsula that lets her get to work in about 20 minutes. The real win was that she was instantly plugged into a community: a network of friends not only in her house, but in all the surrounding houses in her HubHaus “neighborhood.” HubHaus has events both within the house and jointly with others, and I could see by the way she lit up when speaking about it what a difference this had made in her life.

Owners I spoke to were equally happy with the service. For them, having a reliable partner to work with was really valuable. I heard several stories of how in a normal shared house, if one resident moves out, it could trigger a cascading effect where the entire shared living situation falls apart and the owner is scrambling to find someone new, often with costly vacant time. According to census data, 7% of houses are vacant at any given time, where for HubHaus owners, their houses are vacant 0% of the time. They also found HubHaus community members more reliable in taking care of their home.

Coming back to the marketplace concept, as an investor, seeing this level of enthusiasm on both the demand and supply side of marketplace is really compelling. The magic of the two sided network effect is that every new resident makes HubHaus more valuable to owners, and every new house/owner makes HubHaus more valuable to residents as they take new jobs, move to new cities, or even just want to move locally a few towns over. We used our Platform to conduct quantitative diligence (for example, our 8-ball analysis) giving us a thorough data-driven view of product-market fit for both the demand-side members as well as the supply-side of homeowners.

I was also lucky enough to meet with most of the HubHaus team, and everyone I met shared the enthusiasm and belief in the HubHaus mission. Shruti and every member of the HubHaus team are committed to building a real community, something more meaningful and exceptional than the norm (and they are hiring!). We are excited to partner with Shruti and team as they continue to move forward and help people find housing, one HubHaus at a time.



Social Capital

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Thanks to Ashley Mayer

Mike Ghaffary

Written by

General Partner at Canvas Ventures. Previously executive at Yelp and CEO of Eat24. Investor in Strava, Optimizely, Atrium, Faire, HubHaus, etc. Repeat founder.

Social Capital

A place to share news, notes and points of view

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