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With Scott Orn

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Scott Orn

Scott Orn, CFA

Shruti Merchant of HubHaus on Pioneering Long-Term Home Sharing

Posted on: 03/16/2018

Shruti Merchant

Shruti Merchant

Co-Founder & CEO - HubHaus

Shruti Merchant of HubHaus - Podcast Summary

Shruti Merchant of HubHaus is pioneering long-term home sharing. HubHaus members share a large house and use the platform to connect with potential roommates, easily pay rent and split bills. The community is designed for young professionals who want more from their housing than just a place to sleep. A week after taping the podcast, Shruti announced a $10M investment from Social Capital, General Catalyst, and other angel investors. :)

Shruti Merchant of HubHaus - Podcast Transcript

Scott: Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. Before we get on to our podcast with Shruti of HubHaus, quick shout out to cruzetax.com. It’s our self-service tax website for our startups who just need a tax return. It’s very fast. We’re doing it in ten business days. You upload your tax documents, you answer some questions and ten days later, your tax return is done. It’s pretty amazing. I’m very proud of it. You know, in the industry, it’s usually kind of a three- to six-month process, so we’re doing this super-fast, but we have the same lovable/intelligent/thorough/handsome and beautiful Kruze Tax CPAs doing your tax returns, so it’s getting the all-star treatment, but at a price point that’s very, very affordable for startups. Hope folks like it. Check out cruzetax.com and now for a great podcast with Shruti. This company is really onto something. I love it and this was a fun podcast to record. Welcome to Founders and Friends Podcast with Scott Orn at Kruze Consulting. My very special guest today is Shruti Merchant from HubHaus. Welcome, Shruti.
Shruti: Hi, thank you.
Scott: Thank you for coming on. So you have a really cool concept, a really cool company you’ve been building. Maybe tell everyone how you had the idea for HubHaus.
Shruti: Yeah, absolutely. So I moved out here in 2014. I had just dropped out of med school. I didn’t know anyone in the area. I, basically, met up with seven random strangers through Craigslist and we ended up setting up our first shared home, and while we were doing that, there were just so many pain points along the way, so we had to get the furniture for the house. We had to put all the housemates together. We had to fill up the last room which came up. Whenever anyone moved out, we had to find somebody new to fill the room. We had one tenant who ended up being a little crazy. We had to evict him. We were on a shared lease together…
Scott: Oh, you had to really evict him. Oh my gosh.
Shruti: Yeah, well, it wasn’t an actual eviction. It was more of a wait-till-the-lease ends and then resign the lease without him on it because it’s seven people to one lease.
Scott: Yeah.
Shruti: Yeah. So after I moved out of that house, we realized that others were having the exact same issue. Housing, being so expensive and so ridiculous out here was actually one of the main reasons why residents were turning down Stanford to come out here.
Scott: Oh my gosh.
Shruti: Yeah. We realized that there were so many trends moving in this direction. 86% of millennials were feeling lonely and depressed. Close to half of renters report being rent burdened. All the trends were moving towards this type of shared living in this new way of living with people, and there were 17 million people living in shared housing arrangements, but there was no standardized way of doing it. There was no quality control. There was no brand who could actually run it, foster the community, nurture the community, and make sure the shared housing experience was this amazing experience.
Scott: Yeah.
Shruti: And so we launched our first few houses, not only to solve the housing problem but also tackle this problem of “When I move to a new area, I don’t know anyone and it really sucks.”
Scott: Yeah, it’s like social too, right, cause you tend to hang out with your roommates when you’re younger and that’s part of the whole experience.
Shruti: Yeah, exactly. It’s just so difficult to meet people outside your immediate circle and when you’re new to an area, the most natural way to create that initial immediate circle is the people you live with. And so, for me, I just wanted to build this product that I wish that I had when I moved out here. We launched our first few homes and we realized pretty quickly that not only were these communities just as strong as our original house, but we only had to seed it and create the base and the community actually, the people in the house would create their own culture and would run with the actual community concept. So, after we realized that - and in addition to that, each house took almost a unique personality, which created a really awesome blend when we brought all the houses together to create a neighborhood. I remember our first barbecue, which we held where we had, I think it was only 30 or 40 people at the time who were living in HubHauses. We had four or five houses and it was just this amazing, magical experience of everyone coming together for the first time. These were all folks who were new to the area, they didn’t know anyone, and all of them walked away with somebody who they could become friends with, and after that, they just started hanging out more with each other and we really created this magical social environment.
Scott: That’s incredible. I love the idea so much. You made that point early about how Craigslist - like, you went to Craigslist and Craigslist is such a powerful site but there’s so many frictions and you don’t always feel safe and things like that. Was that the moment where you realized that you had something big and you could really do it - how did that Craigslist experience guide your development?
Shruti: Yeah, the thing with Craigslist is that it’s Craigslist roulette, so every time you’re moving into a place on Craigslist, you have no idea what’s going to happen. It could be you’re moving in with your future best friend. It could be you’re moving in with a serial killer. So, it’s not a good experience. Most people don’t want to do that. Most people do it only because they have to do it. They can’t afford anything else and some people luck out and find a great group of people, just happen to find a great group of people through Craigslist and then in addition to that, you also have this lack of convenience, which is you have to actually be in touch with the landlord. If anything breaks, you have to talk to the landlord. If you need furniture, dishes, you have to bring it yourself or squabble with the housemates or with this app, I remember, with all the housemates where we would split utilities every month and it was such a nightmare. Having to keep track of all that, it was way too much. We really wanted to streamline it because we thought - our philosophy was that if you can take away all of these pain points from shared living, people can just focus on the community and the group of people they’re living with and it can be an awesome experience.
Scott: It sounds like you built the payment stuff in there, and sharing all the bills - I mean, that’s one of the big friction points of having roommates is having to split that - and also it’s where people get into arguments and things like that, so if you made it possible for people to do all that through the app or through the website…
Shruti: Yeah, exactly and we do a projected amenities cost, so we say, “This is what we think your amenities are going to be…”
Scott: Oh, that’s really smart.
Shruti: Yeah. Prepay this amount. If it’s a little higher or a little lower, forget it. We’ll just eat the cost and then we may adjust it in the future. So it’s just a very simple experience.
Scott: I love that, I love that. You said the word “quality” which I really liked. Maybe talk about - because that is kind of the essence of taking something off Craigslist allows you to focus on the quality. How have you guys enhanced that?
Shruti: Well, a lot of it is just from removing the pain points and friction points associated with living in a shared house. It starts with the actual house, itself. So, making that process really smooth and really easy… So before anybody moves in, we have an inspector go out, we’re doing our own check, our house party doesn’t do it.
Scott: Oh my gosh, you have a whole inspecting process.
Shruti: Yeah, yeah. To make sure the house is in good condition. Every once in a while, we’ll miss one or two things, but for the most part, people aren’t moving in and it’s like “Surprise, everything is totally falling apart.”
Scott: Yeah. The shower doesn’t work.
Shruti: Yeah, exactly, and if something is not as right, we can set the expectation originally and you know going in, “Alright, it’s a little bit of an older house, this doesn’t work, and the hot tub in the back doesn’t work” and you know that from the get-go as opposed to being surprised after you move in. Most importantly, is in the roommate selection process itself. So up to the first 200 members, me and my co-founder were out there handpicking people who we thought would be a good fit.
Scott: Oh my gosh.
Shruti: Yeah, and it was so important and now what we do is we actually leverage these folks who are already living in our houses to go and show the new houses for us, so everybody -
Scott: That is so smart. I love that.
Shruti: Yeah, so everybody who is going and selecting the new group of housemates are all folks who are a really strong HubHaus culture fit, so they can pick other people who are also strong HubHaus culture fits and can join our community.
Scott: Wow, that’s brilliant. Oh my gosh. And then, in the terms of on the landlord side, you guys are the in-between right, you don’t own the actual house…
Shruti: Yeah.
Scott: Have you found that there’s some landlords who are just loving this and are signing up multiple houses, or how does that work?
Shruti: Yeah, yeah, so currently 5% of our houses are owned by landlords who have more than one house in our system. So landlords will often - we have one landlord, I think it was one of our first three houses, which we signed with him, and then a year later, he came back and said, “My other tenant really sucks, can you just take over this house for me? She hasn’t paid rent in two months.” And so once they start operating through HubHaus, they get used to getting a guaranteed check every month. They get used to having this really streamlined easy experience and they don’t want to go back. It’s like getting a property advisor for free.
Scott: Do they make more money in rent in a HubHaus house versus someone who is maybe a couple renting the place? How does their economics work out?
Shruti: So it’s roughly the same. So the main value that we’re adding on the landlord’s side is actually the convenience factor. If you’re a landlord and you’re dealing with us, you don’t have to worry about what happens if a check doesn’t come in. You don’t have to worry about what happens if a tenant runs off because we’re a company and not a family. You don’t think about what if they lose their jobs? What if they break something? What’s happening to my house?
Scott: And you guys work, say if one of the roommates splits town, or something like that, without paying the rent, you guys can charge their credit card or do something to make the landlord and yourselves whole…
Shruti: Yeah, and we have an insurance policy, but we essentially cover that risk. The landlords are guaranteed a certain rent payment every month.
Scott: Wow, that’s amazing. What kind of metros have you found, are you guys in and where are you going next? It makes so much sense. I’m old now, I’m 41, but when I was in my 20’s I always had multiple roommates, and even if it’s just your friends, even if you’re not looking for other people, this sounds like it makes a ton of sense because splitting the utilities, making sure nothing weird happens, everyone’s kind of in it together at the same level, that has a lot of value. Where are you guys now and where are you going?
Shruti: Yeah, so we’re currently in the Bay area and Los Angeles. We’re not in SF Proper or like Oakland yet. We currently range from south San Francisco down to San Jose. We’ll be expanding out our current geo, so we’ll be expanding into more cities in the Bay area as well as in L.A. Pretty soon, we’ll start expanding into other geos. We’re not completely sure where we’ll be expanding yet. We have some ideas.
Scott: Yeah, that’s great. Is there something about the Bay area or L.A. Which made those the perfect test markets or was it that you lived here, so it was easy to start?
Shruti: Yeah, and that’s really what it was. Our model works best in major urban areas, so there’s currently across the United States, 36 really large major urban metropolitan areas. We do best there because rent’s expensive. You’re attracting a lot of really young people from new jobs who are kind of like wide-eyed, don’t really know all that many people. There’s a lot of great companies. There’s often times a great culture in the cities, themselves, so we do best in urban areas and 50% of the population is located in these top 36 major urban areas. So, we wanted to pick an area which was a stereotypical urban area, so SF was great for that, and I also was living here. I knew the area really well and so we just happened to start here.
Scott: Have you seen landlords reconfiguring their apartments to accommodate your model? Maybe adding another bed- converting a living room into a bedroom, so three people can live somewhere instead of two people? Are you seeing that?
Shruti: Yeah, so our houses are five to ten rooms each…
Scott: Oh wow, I didn’t know they were that big.
Shruti: Yeah, so we’re going for really big houses. We’ve had some landlords do things like that. We had one person who was even interested in building a house for us. So, we’re going for these really, really big houses, and we have had - we had one person even approach us saying, “I want to take a house and do all this remodeling for you.” The issue with that is that they just have to go through a little more permitting, and we prefer to stay as far away from permitting and the government stuff as we can, but yeah, absolutely, there have been people interested in doing that things like that for us.
Scott: Are these houses that are “mansions” or are these - you use the example of Stanford, I know behind Stanford, there was always this friendly group of homeowners who’d always, kind of what you’re saying, like five bedroom houses that would always rent to Stanford students, and some of my friends lived there. Is that the kind of thing you’re going for? Berkeley Hill is maybe the same thing…
Shruti: Yeah, exactly, and often times these houses are really hard to rent out because when you’re at the point where you can pay $7-8,000 for rent, why not just buy a house and put down a mortgage?
Scott: Yeah, exactly. Do you have any funny, interesting stories about mov - it’s probably in the early days, especially, when you moved in somewhere and you’re like, “Oh my gosh, this person’s crazy,” or unintended things you just couldn’t see that you had to learn? What are some of those learnings along the way?
Shruti: Yeah, we’ve had a ton of learnings along the way, especially with our very early houses. We pivoted the model a lot with our first three houses. The biggest one was the utilities thing. With our first houses, we were charging them utilities after the fact. That wasn’t really a pleasant experience, getting a bill for $90 or $100 a month later. Then there was this back and forth, so after that we said, “Let’s set the expectation up front, tell you exactly what we think you’ll be getting, and then if we’re wrong, we’ll adjust it going forward,” as opposed to retroactively backtracking.
Scott: Well you probably have a lot more data now. You know what the utilities are going to look like in a ten person house, whereas at the time, there might have been the consuming terrible roommate who’s taking half an hour showers and using all the utilities and then wasn’t paying for it. Now you kind of know that kind of stuff.
Shruti: Yeah, exactly, and it averages out pretty well. You might have one person who is hogging up a lot of utilities. You also have one person who’s using very little, so it tends to average out pretty well to a per person rate.
Scott: Have you had any good love stories, like HubHaus marriages or dating relationships?
Shruti: Yeah, we had our first HubHaus marriage last year. Full disclosure, the couple was dating beforehand, but they moved in together and they got married a year later. Unfortunately, they moved out and they got their own - I think they bought a house after they moved out, but that was still super exciting to see. We’ve had a lot of HubHaus romances come up, especially at events. People will meet - It’s a great way to meet people, and naturally, one part of meeting people is meeting significant others, so that’s been pretty cool to see. We’ve also had a lot of really close friendships form out of HubHaus. Some people worked together on business opportunities and projects and all sorts of really cool things. We have folks out in L.A. Who are working on acting stuff together and projects like that. Up here, we have one pair who is working on a drone company together
Scott: Oh, that’s awesome. It’s cool to bring people together across that are romantic, their interests, working together. That’s really cool. Have you guys tested the concept in another country, because I could see this playing really well in a lot of different countries, not just the United States.
Shruti: Yeah, absolutely. So, it’s just about being narrowly focused right now. We’re starting in the United States. We want to be in every major urban area in the United States, and then after that we’ll be looking internationally to expand.
Scott: Have you tried a college town? I guess, maybe it started off with Stanford, maybe I’m answering my own question, but I could see this being amazing at San Diego State or Arizona State or UCLA or something like that. A big public school with lots of students, where housing is always tough.
Shruti: Yeah, absolutely. So, right now, we’re focusing on a slightly older demographic. We don’t age discriminate, but that’s just what we tend to attract. The average age is 28, so most folks are on their first or second job. They’re already professionals. They’re in the workforce as opposed to undergrads or students still. You know, we have people as old as 55, we have one girl as young as 19, but because we have a very specific HubHaus culture fit that we’re looking for, we just tend to attract people within a relatively narrow band. That being said, as we scale, one of the things we’ll be able to do is attract people who are from more diverse backgrounds. Especially as we collect more data on members, we’ll be able to segment out different types of the population and manage different groups differently, which is really exciting. It’s an exciting next step for us.
Scott: That’s really cool. Well, I love what you’re doing. What’s the future for you guys? Is it just block and tackling and go to a couple more metros or what gets you up in the morning and excited about the future?
Shruti: Continuing to build really strong communities. What really excites me about HubHaus and what gets me up in the morning is the fact that we’re bringing people together in a really meaningful way. I’m really excited to scale and offer to more people, but I want to make sure that we’re continuing to offer the same really meaningful experience for them.
Scott: That’s awesome. What about your team? How did your team come together, and I just know you. Do you have a co-founder or what’s the team’s background?
Shruti: Yeah, yeah. I do have a co-founder. Actually, most of our early employees all came from HubHauses, which is awesome, so our first employee actually lived with me at our first house.
Scott: She’s like, “This is a good idea. Let’s do this.”
Shruti: Yeah. We actually approached her. She was on the medical school track and she just saw us working on the startup and was throwing events for us and after a year, as we were raising our seed, she was like, “Can I join you guys full time?” We were like, “You want to? Are you sure? Yeah, sure.” I’m really lucky. We’re really lucky to have her. All of our team really fit a similar profile, so all of these folks are young. They really understand community. They understand what we’re building, but at the same time, they’re deeply experienced in a certain area. So, half of our employees currently live in HubHauses, but we have folks from areas such as - we have one girl who’s been doing property management commercially for ten years and used to manage Google buildings in Chicago.
Scott: Oh, wow, so that’s super valuable.
Shruti: Yeah, we have another employee who was earlier at Trulia and worked and saw their sales team grow, who’s working with our landlords.
Scott: Oh, so she probably knows what to look for in a landlord and what’s going to be attractive to them. That’s really smart.
Shruti: Exactly, yeah. So, it’s really a unique blend that we’re looking for, folks who get really excited by community, by building cultures at scale, but also are really good at something else.
Scott: I’m kind of curious going back to something that we talked about… Is it possible that the landlords can make more money doing a Hub - obviously there’s a balance, right? There’s supply and demand, so you don’t want the people who are living there to be paying too much, or they don’t want to be paying over market, but it just seems like this type of arrangement could actually yield more revenue for the landlords too. Landlords are very capitalistic people, maybe the most capitalistic people, and so they understand that and then they can start going and buying more properties and working with you more. It just seems like there might be some movement there.
Shruti: Yeah, so especially as we collect more data on what houses are really good. We want to be able to leverage that a lot more, so down the line, we’ll be able to identify what makes a super amazing house and then send that to landlords who may be interested in buying a house and then they can capitalize on that and make a little more money on that. Yes, so there are some landlords who are making a little more money than they would if they rented it out market, so it’s really about identifying what are these killer HubHaus homes and then sending investors who are interested to go and buy those homes for us.
Scott: Have you guys worked with any investors, cause I could see you having a special purpose vehicle where you raise money and eventually start buying the houses yourself and then you’re your own landlord, so to speak.
Shruti: Yeah, so because our focus is on community and building that at scale, everything else is kind of secondary, so right now, we’ve not run up too much against supply constraints yet. As we become more supply constrained, that will be an avenue that we push harder, and we have had interest from folks to do that, but it’s just not an area that we’ve pushed that much yet.
Scott: One of my friends was an early, I think was actually a co-founder of WeWork and they did all their stuff - his name’s Jesse Middleton - and they did all their stuff as partnerships with the landlords, so now they’re getting more complex and they have more financial resources and can buy stuff like that.
Shruti: Yeah.
Scott: Wow, that’s awesome. I love it, I love it. This is a really cool concept. Maybe you can reiterate where everyone can find you and if you’re out there looking for a roommate in what, San Francisco Bay area and L.A., Santa Monica, they should be looking at hubhaus.com?
Shruti: Yeah, exactly. Or if you’re looking to join us on our mission, we are hiring for a bunch of positions.
Scott: That’s right. Yes, yes.
Shruti: Yeah, so looking
Scott: Well, it sounds like the best team members start living in a HubHaus and then they join the team after that.
Shruti: Some of them do. Some of them have done the opposite. They’ve joined our team, they’ve buy into the job and then they’re like, “Okay, this community is actually pretty cool. I can wrap my head around this,” and then they’ll want to move in after a month or two.
Scott: What am I doing? Yeah, that’s awesome. Well, tell everyone where they can find you and what’s coming up.
Shruti: Yep, so you can find us at thehubhaus.com. We’re in the Bay area. We’re in Los Angeles. I would love to have you join our community. Would also love, if you’re interested in looking for next career opportunity, we’re always looking for community oriented folks to join our team and help us build this rocket ship.
Scott: Yeah, that’s awesome and HubHaus is spelled H-U-B-H-A-U-S dot com.
Shruti: Yeah, thanks for clarifying.
Scott: It’s like the German spelling of “house” I think or something.
Shruti: Yeah, and we call all of our houses H-A-U-S-E-S…
Scott: Oh, very nice.
Shruti: Yeah. Just adds a little bit of personality.
Scott: One quick question before we wrap up. WeWork has a way where I can drop in, I can have a membership to WeWork and get a lot of the benefits and then also drop in, have you guys explored that or is that something you offer already?
Shruti: That’s not something we offer right now because the emphasis is on community and long-term community. So much of that is about taking the time to build the relationships, but as we scale, potentially that’s an avenue we can go. We have a lot of cool things happening all the time. We’ve had people ask us, “Can we stay in the community and have access to the events even after I leave?” and “can I pay a membership fee?” But we just are trying to stay really narrow-minded right now and build one thing at a time.
Scott: Well, Shruti, thank you so much. HubHaus is amazing. Good for you for coming up with this idea. It sounds like it was like almost every other good idea. Mother of necessity, or necessity is the greatest invention, or whatever that saying is and then all of a sudden you realize what an awesome idea it was and good for you for working on it. You’ve been doing it for two years now.
Shruti: Yeah, it’s been a fun ride.
Scott: Wow, yeah. This is where it gets really fun, when you’ve figured it out and now you just grow and I’m sure some things will come out of the woodwork and surprise you, but I’m sure you learned most of the lessons already.
Shruti: Yeah, and I’m happy to be with such a talented team right now and I’m really excited for what’s to come.
Scott: Awesome, well thank you so much for doing the podcast. I really appreciate it.
Shruti: Yeah, you as well. Thank you.

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