SpareRoom Founder - I turned down an offer I couldn't refuse, plus how we fix rental market crisis | Rupert Hunt

0:03The rental market is in the worst state we've seen it for the 20 years we've been in business. I mean, just over the last 10 years, to put it in perspective, we've got the least amount of rooms available, or at least that was the case last year. And over that period of time, the number of people looking have tripled. So it really is a crazy discrepancy of supply and demand. Welcome to Secret Leaders. Today, I'm joined by Rupert Hunt, the founder and CEO of Spare Room. The business originally started in 2004 as a London-focused rental website, but later pivoted into what we know Spare Room as today.

0:44Now the UK's largest flat sharing website, Spare Room brings together people every three minutes. After launching in the US in 2016, Rupert's love of connecting people and bringing them together is what drives his work today. So, Rupert, we're here to talk all about it and your personal journey. Welcome to Secret Leaders. Thank you. Okay, Rupert, tell me a little bit about your background. Tell me a little bit about growing up. Why do you think some of that unique early experience in life took you to doing this? Well, I grew up on a farm. My dad was a butcher and had livestock on the farm and a slaughterhouse.

1:22So I sort of, I guess I grew up around entrepreneurship. I was also really into music. And actually, one of my sort of earliest experiences I remember was kind of combining the two. My dad used to have peacocks on his farm and I used to collect the feathers and sell them to a local flower shop and buy myself Beatles albums with them, which I always assumed was down to my love of music. But I guess it's also where my entrepreneurship came from. That actually is a relevant point though, right? Your love of music is kind of the thing that connected you into this world of entrepreneurship. So take me through that.

2:00Yeah, so I suppose my journey really began doing pop music degree at university of all things. Through that, I met my bandmates who I later moved down to London with to try and make it big. And I also had a optional module in the final year on web development, which started my love and fascination of the internet and building web businesses. and yeah we moved down after graduation and um had a real struggle trying to find somewhere to live you know back then the process was um you know the main place to find uh flats was in a classified ads newspaper called the loot that came out three times a week um you'd queue up at the newsagent waiting for them to come out and you'd you know trawl through these very basic text-based ads.

2:56Is it still going? I don't know, to be honest. I doubt it. But yeah, it used to be, I don't know, I can't remember how many characters they were, but very short, just text-based ads. So no photographs, no maps. And there'd either be a plain text ad or a bold ad, which I actually stole that name for the bold ads on Spare Room. And they're still called that today. What would often happen is you'd call them up and by that point, they'd be gone. and our budget was you know so low um we could barely afford anything and we ended up in bromley by bow which at the time um was you know a bit of a desolate wasteland really and very yes very dicey um i just remember the sort of walls surrounding the flat had like uh shards of glass embedded in the cement to you know keep out intruders and we certainly didn't dare go in the local pub for fear of getting knifed.

3:49But yeah, that was my first sort of introduction to sharing in London. And yeah, although at that point, I hadn't come across sharing with strangers. And that's not something that was on my radar at that point. It was actually my girlfriend at the time who, I suppose, accidentally introduced me to that because our early days as a band in London were a little bit rocky because you know although I'd like to like to think I'm a great flatmate these days I was kind of a bit of an archetypal bad flatmate back then in some ways because a I wasn't very tidy and and b I had a girlfriend who came for the weekend and then never left um which is quite a classic thing for you know housemates to fall out over and yeah we certainly had some friction over that you know and I was trying to encourage her to to go and find her own place to live but you know she was more skint than I was at the time.

4:44And it was at that point, we sort of, the flat sharing came a bit on our radar. I think someone maybe, I don't know if someone told us about it or we saw it in the loot, but, you know, it was the only thing that was in her price bracket. So, you know, but she was of course saying, I don't want to live with strangers. And at that point I was thinking, yeah, I'm not sure I like the sound of that either, but I guess you've got no choice. And I still remember the sort of first viewing she went on and her sort of, you know, telling me this story and and how yeah how eye-opening it was uh she went to some viewing in greenwich and this guy answered the door and and you know brought her inside and introduced her to all these flatmates who are busy preparing food for dinner and then went through quite a formal process you know sort of deciding whether or not they were compatible and going through house rules and you know she didn't move in there but it was it was quite a surprise so yeah my uh our experience trying to find a whole place to live inspired what became Spare Room eventually, a website called intolondon.com.

5:46And originally that was intended as a place to find property lettings and sales. You could advertise privately or agents could advertise. And I spent many months coding, perfecting these very cool features. And I think it was on the last afternoon before I launched it, I bolted on a very simple flat share notice board inspired by my girlfriend's experiences trying to find a room to rent. And to my sort of surprise and dismay, that was the bit that got all the, you know, started to get traction while the rest of it gathered dust. It took me a long time to kind of come to terms with that. I think for quite a while, I was, you know, still determined for that side of things to take off.

6:37And it was just because I hadn't spent the right amount of time on it. I hadn't done the right thing. But ultimately, I realized that that was where the demand clearly was and where I was taking hold of a niche. And so I sort of kept optimizing it, developing it, and eventually canned the rest. And then when I moved back home, in order to spend more time on the business without the expense of living in London, I then launched Spare Room as the national version of that. Okay, so with the very concept in itself, there's some sort of irony that just to launch the business, you've moved back in with your parents and used their spare room.

7:17But when you're actually trying to get traction for a business like this, in the early days, you've got no people, no money, you've spent a long time squirrelling away to get it live. like how did you get it out and noticed by people like what was your personal plan in getting this concept to become essentially famous obviously over time you know with enough grit some things do take hold but Spare Room has got to one of those sort of statuses in the UK like it is famous right it is known you obviously should be very proud of that but it's not really a foregone conclusion at this point so how did you get the name out there how do you get the concept out there.

7:57And more to the point, how did you get people to not find it weird? So it was a challenge because I didn't have any money. And I often say that if I had have got funding, I don't believe I would have been successful because I think it would have been just too easy spending someone else's money on advertising that doesn't work. Whereas I had to be sort of creative and resourceful, you know, and sort of leverage what I could to grow. And there was all sorts of things I used back then to try to do that some of which you know might have some relevance today some not so much seo i guess was perhaps the big foundational one you know it's something i had you know learned in my day job and had become pretty good at that but also for instance the loop newspaper i just talked about we used to resell branded ads in there in such a way that we got it we got our costs covered by our advertisers who we would upsell an advert in the loot to.

8:57And they would get a better deal than if they bought a bold ad directly with the loot. But we would have our logo on every single advert. So over time, we were kind of getting our brand better known, the loot in that area in their own newspaper, which I think was good. And also publicity, I think, was an important part of our growth. In fact, the first person I hired had this incredible idea. She was the girlfriend of a family friend. And over a drink and sort of meeting this new girlfriend, she told me this incredible idea for speed flat mating, which was speed dating for your flatmates. And I tried to convince her over this beer to come and work for me and we would do it.

9:41You know, I said to her, I'm not 100 % sure I'll be able to pay you. I can sort of see that now the money's starting to come in that maybe by the end of next month I'll be able to pay your wages but you're gonna have to take a bit of a leap of faith and thankfully she did and she's still with the business today but yeah that was an exciting time we so we tried to pull this event together and ended up with I think six people and we'd done we'd spent what seemed like a lot of money back then because I didn't as I said I didn't have much money I was maxing out credit cards I think it was 125 pounds on a freelancer doing a press release and we got the Enfield advertiser there, I think it was.

10:17They're the only ones who answered. So to us, it was like already a flop before we'd even started. But the attendees enjoyed it. There was a nice little vibe, even though there wasn't many people. And this journalist was very interested and actually spent a lot of time asking questions and ran the piece. But we thought nothing else of it. And we sort of, maybe we've run more, maybe not. But then a week later, a journalist from the Times called up and said, when's your next event? And I was like, when's our next event? And we said, oh, Thursday. And so we sort of quickly cobbled together this event in Islington and managed to get, I think it was about 12 people there this time.

10:58And we were on the front cover of the property section of the Times the following Saturday. And after that, it all sort of blew up. We had an oversubscribed event in Tooting with something like, I think it was 30 or 40 people there. I think there was two TV crews, several radio stations, there's like seven journalists all show up and just me and Gemma there trying to run the event and answer all their questions. So that was, yeah, an exciting moment and definitely helped with word of mouth and sort of getting the brand out there for sure. So I guess taking this journey further, you launch in the US in 2016 and you, I guess the first question is, you know, why?

11:38Like, Do you feel like you had saturated the whole of the UK market and sort of taken it as far as it can go? And then it's off to pastures new. And also, how do you launch in a competitive market like that? You know, is it a completely different beast where you've gone from nobody, but also no competitors, no awareness of a solution to a problem to then launching in the USA when obviously I assume there are a variety of concepts that you'd be competing with? Yes, it was a very different experience. And yeah, the reason we launched there is, yes, we'd sort of become the number one in the UK. And we could see that there was a big market over there, but also the sort of incumbent site serving that market wasn't doing so very well.

12:24And, you know, it's Craigslist, who is still the dominant place over there. And they, you know, suffer from, you know, being scammed all the time. And, you know, as you probably know, a website that hasn't changed since 1992. So we could definitely see where we could serve the market better. But yeah, it was a big challenge, as we perhaps sort of knew it would be. And we did try to repeat some of the successful things from the growth in the UK. For instance, we launched speed room mating there, as we called it there, because I don't know what a flatmate is. And yeah, we had some decent coverage from that, actually.

13:02I think we actually probably had more coverage there, really. However, it didn't quite have the same impact in terms of speed of growth. But SEO has been a big part of it. And yeah, it's definitely taken quite a while to get to the point that we are now, where we're the sort of the leading dedicated roommate service. One of the things I did was I moved over there in 2017. That definitely helped sort of focus things and get things moving better. I also advertised for roommates on SpareRoom.com to sort of get some publicity around that. Where did you move? To the West Village. I rented a very nice apartment there.

13:48Yeah. So you rent a nice apartment there and then you basically use spare room to try and bring in new people. And then how would that work? Would you try and do short term rentals so that you got to cycle a few more people experiencing it? the trouble is that because we're we're about longer term residential lets it probably wouldn't have worked that really to do it uh you know even though you might have got a little bit more publicity out of it i think it wouldn't have been quite on brand because i guess that's more airbnb's territory the shorter term stuff so yeah i lived with them there for how long was it six or eight months i can't just remember now but yeah it was yeah very interesting experience so what was your like moving forward so you've you've grown through the uk become the number one, moved overseas, realized actually, okay, same lesson everyone learns about America.

14:37This is a lot harder than I first anticipated. I'll have to go over there and try and understand the market myself better. And that was in 2017. It's now 2023. So you're still in the business. You're still the founder CEO. So what, like, what is the state of the business now? Like, how would you describe it? You know, what's his positioning in the US, UK? What are your growth opportunities? how are you feeling about it all still because you know it's been a long time yeah i mean it's been 20 years and uh you know i've definitely had my my dips in enthusiasm i guess but uh there's always some new challenge and yeah at the moment we're in the uk we're still the number one and in the us the number one dedicated service but probably not the number one place to find roommates because craigslist still holds that crown so we've still got work to do over there we're also starting to explore how ai can potentially help with uh getting better matches because i think that's sort of that's what excites me the most i think is it's about creating happier flat shares because it is you know it's such an important decision and one that could you know can be two extremes and anything in between you know if you get it right it can be such an incredible experience um you know i absolutely love my current housemate and we can all very well but unfortunately I've never had a really bad experience but even not amazing is just not so good and I've certainly heard some horror stories if you get it really wrong.

16:09Okay, so I guess I'd love to come on to some lessons that you've learned over your journey because there are not many CEOs of household brands that have been there for 20 years still were motivated or just disciplined enough to be continuing and enjoying the journey. I'd love to know what your most challenging experience has been over the last 20 years. What's something that you really reflect on as a difficult moment or a difficult decision you had to overcome? So I think one challenge is when we sort of became, we'd sort of achieved our goals of becoming the place to find a room. And the other thing is we really wanted to legitimize the market and sort of bring it out of the shadows.

16:49You know, in the earlier days, it was never even talked about in the press. And I think we really achieved that. But I did find it a bit of a struggle for a while, sort of motivating myself and others, like, what's the next goal? You know, it's definitely more exciting sort of getting somewhere than once you've actually reached it. And what got me out of this was I decided to use my own site for the first time and get housemates. You know, I'd only ever lived with friends, as I mentioned earlier. And, yeah, I advertised on Spare Room and also went to our events and got a couple of housemates. And as a sort of learning experience, it was, you know, so much more powerful than I ever imagined in terms of, you know, giving me insights into what was working, what wasn't in the business.

17:37But what was really surprising is just how much I loved it. And, you know, the realization that living with the right people is better than living on your own. And I've lived with, I think, 17 people since then in the last 10 years from ages 5 to 50, believe it or not. and yeah and uh it's something i'm sure i'll continue to do but anyway this sort of definitely gave me a new perspective on the business and a new purpose which is just sort of yeah about creating happier flat shares and promoting the benefits of sharing you know because i know for some people it's obviously a financial necessity but you know there are some real positives to doing so.

18:18But everyone sort of aspires to living alone, which I would argue is not the way to be. Well, just to give you a story that you might appreciate. I appreciate I've just interrupted you halfway through your story, but it did spark a thought. You said everyone aspires to live alone. And you said, you know, happier flat shares and sort of promoting happiness. My father died just over 10 years ago and my I moved back in with my mum for a while and then it was time for me to move back out again and she didn't really know what to do because she just wasn't used to living on her own and she'd grown up obviously the last you know 25 years etc had been with other people in the house so we actually convinced her to go on spare room and initially obviously as you imagine a you know lady in her late 60s you know mid 60s not the first thing that she would think to do and was you know a lot of the but but who and how will I know and oh I'm set in my ways and all of these things anyway the very long story short here is she's had flatmates from spare room like for pretty much the last decade really like ever since and she's honestly it's been transformational for her.

19:38They've not all been perfect. And she's got lots of funny stories from it as well, which is actually also part of the entertainment. There's a sort of roll the dice angle where obviously you meet them first, but over the long term, it's been transformational for her happiness, her resilience, her ability to sort of get back to being her best self. And she's made some amazing friends. And, you know, what's lovely about it is quite often it's been younger people so people in their you know mid-20s to mid-30s who are sort of coming to London for whatever job it might be as you might imagine often from overseas but also from other parts of the UK and she's just struck up these really lovely friendships and it's so so so sweet and I mean you've got like literally a lifelong customer out of my mum because she just can't really imagine not she can't she couldn't imagine living alone it's been 10 years now as your customer.

20:30So that's a fantastic story. Yeah, I know. And I was really excited to talk to you because I was excited to tell you this story, but my mom didn't want to be alone. Like she did. She thought maybe she did originally, but she really didn't, but she also wasn't ready to meet someone else. And this has just been such a great way for her to just adjust to other aspects too, which is feeling safe, safe in her home as well. Right. Like having someone that she does trust there rather than being alone. There's all these other aspects to it. So when it comes down to loneliness, when it comes down to happiness.

20:59There's that sort of experience there that I think might fall outside of what you think your typical customer is, but actually a really important use case for it. Yeah, yeah, absolutely. And actually some of the biggest growing or fastest growing age groups tend to be this sort of, yeah, 50 plus, 60 plus. So it's, yeah, great. So in terms of other challenges I've had, counterintuitively, a couple of them were offers I've been made on the business in the past. One in particular, which was an offer I couldn't refuse. And I spent many months soul searching and trying to figure out what I wanted to do because to friends and family, it was a bit of a no brainer.

21:42And actually a little aside here is I'm using my friend's flat, who was a friend I met through this offer. The company offering introduced me to him as a sort of testimonial of selling to them. And what I actually wanted to ask him was, what's it like after selling? What are you doing with your life? And we ended up becoming really good friends, but I sort of realized that we had different needs and outlook and so on, and it sort of helped me arrive at my conclusion and actually refuse them. but yeah and I've always struggled with this idea of an you know an exit strategy you know when I was in the band we dreamed about making enough money to carry on being in the band so you know it seems odd to you know get successful and then get out of it interesting so Spare Room is the band in this case right and so for you it's a bit like if you don't have an idea of a different band you'd like to start then why would you leave the one that's bringing you so much joy yeah exactly and it definitely has scratched a lot of the same itches that that music does for me you know it's a creative pursuit and it's you know it impacts people impacts people's lives and as we said just before about the impact of sharing and how you know it can be the source of you know real happiness so for clarity you turn down I'm presuming a multi-million dollar or pound offer.

23:14I'm sure you don't be specific, but I will fill in some obvious gaps here. Life-changing is usually in those kinds of realms. Plus you're a hundred percent shareholder, right? You've got no investors. Yeah. Well, actually 95%. So that first employee I gave 95%. I think 95 % is enough to connect some decent dots without forcing you to say anything. So life-changing amount of money. And then the question sort of becomes, well, okay, what would I do with that much money? The question that I'd have to you though, is obviously most founders do an earn out, right? They stay at the company quite often.

23:51So why wasn't that an option that you were interested in considering anyway, and sort of have your cake and eat it too, if you will? Yeah, good question. And certainly an earn out was part of the deal, as you'd expect. I guess it just, I mean, one of, I've always loved being independent. I think it means that we can focus 100 % on pleasing the customers, not investors. I just think it'd be a completely different dynamic if someone else owned the business and I was answering to them. I don't think I would enjoy it as much and I would be fearful of Sparum's future. It's not that I didn't trust them and their intentions, but you just don't know who might buy the business off them in the future and so on.

24:31Yeah. Okay. That makes sense. So you decide to remain in control. Part of that, I guess, decision is therefore around how you make money in your life, right? How incentives work and what entrepreneurs should aim for. So what is your view on that? Because you're right. You're completely right. Most founders I speak to do build a business, not with a sense of exiting it, but bloody hell, give someone 10 years inside the same business. And that thought does start to percolate, of course, and especially even more so if you have investors. So the question becomes, if that's the normal route, what do you think should be more perceived as the quote unquote normal route?

25:12I mean, this isn't going to be a popular opinion amongst other business owners, I suspect, but I don't, for instance. Thank God, we don't want everything sounding the same now, do we? Yeah, I don't agree with some of the tax incentives that are given to entrepreneurs, like Entrepreneurs Relief, Capital Gains Tax. I think it feeds this culture that's developed of getting massive investment, growing fast, selling fast, or blowing up fast, rather than trying to build a sustainable business for the long term and actually making a profit. Not that I don't think entrepreneurs should be rewarded for their efforts, but I think there could be other ways of doing so, you know, through running the business because, you know, incentivizing to sell business kind of, you know, whether intentionally or not favors big corporations because that's generally where the business goes and where the money comes from.

26:10And what we find is a lot of this wealth then disappears from local economies and gravitates to London or to, or abroad. My dad often talks about his days running his butcher shop and how in those days, these towns outside of London, my dad was from Stockport, was sort of thriving independent of places in their own right. And all these sort of successful local businesses like butchers, bakers, candlestick makers, and they would all sort of support each other and keep the money circulating locally you know like the successful butcher might buy a new car from the local car dealer and so on and he sort of talks about in the sort of 80s as supermarkets started to take hold and would you know buy out these local businesses and of course that wealth then moves out of the area and yeah these areas just become less and less independent and more like sort of yeah just sort of satellites of London, really.

27:15And while I think this trend has been reversing to some extent, you know, I think there's definitely obviously a drive in recent times to buying local and to favoring purpose-led artisan-style businesses. I think there's still a long way to go. And, you know, these incentives aren't helping. I mean, to go back to my offer, the reason why it was, you know, it really was a no-brainer from a financial decision because you're generally given an offer based on a multiple of your profit. So on the face of it, you think, well, okay, so I'd have to work in the business that many years to get that organically, which is already a long time.

27:53And that's if you actually stay in business, which is a big if, you know, in the world of the web, a lot can change in a few years. But it's not as simple as that because, you know, for every pound of these profits that they're giving a multiple on, you then would pay corporation tax and income tax and actually would take several lifetimes to actually accumulate that organically. So yeah, I just feel that it would be more sensible to incentivize on the running of the business rather than the selling of it. I think that would be, you know, good for everyone. What would that look like? As in, do you have a practical example of what an incentive like that might be?

28:31So if you were to lobby government, because I think there's really interesting opinions that you have there but like everything right you know in startup land it's uh cool don't come to me with problems come to me with solutions so i think i agree with your i agree with your assessment i think it's fascinating but what would be a better alignment well i don't want to pretend that i have all the answers to this i mean we've been lobbying government government about the rental market which i i feel like i can uh say with more confidence but i mean i guess uh it could be around you know well there's obviously the corporation income tax, but whether that would be the way to do it or not, I don't know.

29:09I'm afraid I can only come with the problems really on that front rather than the solutions. Okay. So not your area of expertise, fair enough, but we're not talking to a government tax expert in fairness. We are talking to a rental expert. So where does your lobbying sit? What can we do about the rental market? That is a huge problem. It's probably a broader problem, more interesting to a bunch of people as well. So what are the problems? And more importantly, Rupert, what are the solutions? Yeah, the rental market is in the worst state we've seen it for the 20 years we've been in business. I mean, just over the last 10 years, to put it in perspective, we've got the least amount of rooms available, or at least that was the case last year.

29:50And over that period of time, the number of people looking have tripled. So it really is a crazy discrepancy of supply and demand, which of course has pushed rental prices up to just stupid heights. And it means that tenants are having a terrible time, even finding something, nevermind affording it. And the reason for this is, I think a lot of it has been government legislation changes. We've seen landlords leaving the markets since 2017, when some changes came into force and and we're sort of graduated over a number of years. And so, yeah, supply has slowly been drying up. And according to our user base of landlords, there's more still to leave yet.

30:39So I think the problem may get worse before it gets better. So we've been putting together some research and pulling out data from our database to go to decision makers, policy makers and government to try to find some solutions for this. I think the key two areas that we see is, first of all, leveling the playing field between residential lets and holiday lets. So whether deliberately or accidentally, the market is now incentivizing landlords to move to holiday lets over residential lets, which is just insane because we've got a rental crisis not a hotel room crisis and so and then the other area I think the quickest fix from our perspective is to try to convince more homeowners to take in lodges there are 26 million empty bedrooms in England alone at the moment and if we if we convinced just three and a half percent of them would create a virtual city the size of Liverpool for instance and if we convinced less than 2 % of them we would redress this supply demand imbalance and force rents down to where they were before all this began.

31:58So yeah, so we've just been starting that now and hopefully we'll have the same success as we had back in 2015 when we managed to increase the rent-a-room scheme allowance for homeowners as an incentive for them to take in lodges. I guess one challenge we have though with it is that many homeowners, even though So it's a time of rising financial pressure from whether it be utilities or mortgage rates. There's still preconceptions about sharing. Who am I going to get in? And will I lose my privacy? And these are all the same questions that I had on my mind when I first did it 10 years ago. And yeah, all I could say is try it and you'll see that they aren't true and you'll have a great experience.