Co-living Startup HubHaus announced a $10 Million funding round on Thursday.
Founded by Shruti Merchant and her cofounder Kerry Jones in early 2016, HubHaus seeks to solve the challenges of co-living management and make it easy for professionals to find community in shared housing.
The company rents out large houses, typically with five to 10 bedrooms, and then subleases out the individual bedrooms to renters starting with a six-month lease. People can apply to rent the rooms online and the company personally screens and matches prospective roommates together to start a housing community. HubHaus also provides furniture and must-haves for the common areas like couches and dishes, while leaving the bedrooms free for renters to make their own.
Two years after launch, the company now has more than 400 people living in 70 properties throughout the Bay Area and Los Angeles. To expand beyond California, HubHaus also plans to announce on Thursday that it has raised a Series A round of $10 million in funding from Social Capital, bringing its total funding to around $11.5 million.
“It’s a classic coordination problem,” said Social Capital partner Mike Ghaffary. “The odds that someone you can live with, who has a similar purchasing power, will be free in the same month at the same time in the same city and likes the same place to move in with you — it’s just hard. That’s why there’s a ton of demand.”
Ghaffary pointed to websites like Roommates.com that receive over one million page views a day from people looking to find individuals to live with. Coupled with rising rent prices, especially as more millennials move to cities, Ghaffary saw the opportunity for HubHaus to become the standard for co-living and make finding a place to live as close to as fast as a push of a button as possible, he said.
HubHaus isn’t the only company to see a demand for co-living nor come up with a solution to meet the need. Many other startups are experimenting with ways to squeeze more people into spaces while building the layer of community on top.
Co-working company WeWork had moved into the co-living space with its WeLive brand. Compared to HubHaus, WeLive buildings come move-in ready with fully-decked out bedrooms and common areas, complete with motivational posters on the walls. Stays at WeLive can be as short as a few days or go by the month. Other startups, like Starcity, are working on buying and renovating buildings to create more housing supply, a stark contrast to HubHaus’ model of leasing existing large homes from landlords.
“What we’re doing is pretty different. We’re not creating a dorm. Our goal isn’t to just create smaller spaces,” Merchant said. “We’re really making it their home as opposed to our space. You’re the one putting up paintings on the wall as you want it.”
HubHaus makes money by charging only a slight premium on the individual rooms. In addition, it often adds bedrooms using temporary walls or dividers into some of the extra living rooms or office space many of the large homes have, turning a five bedroom property into a six bedroom for example.
The advantage to landlords is that they only have to contract with one business for the lease instead of receiving five different checks. Plus, there’s no concern about turnover and missed payments since HubHaus is the one shouldering all of the risk.