Zeehaus is a platform that connects homebuyers with equity investors to help homebuyers purchase a house without having to get a mortgage at a bank. The homebuyer pays up to 10% of the home price and one or several equity investors pay for the rest. In exchange, buyers pay a yearly “rent” to equity investors worth 2.5% of the price of the house. If we take the example of a $1.5 million house in San Francisco (where Zeehaus is based), buyers would pay equity investors $3,125 a month — far less than the $5,007 median monthly rent for a two-bedroom in the city. Zeehaus takes a 15% fee on monthly payments and manages the relationship between the buyer and the investor. When buyers have the cash or can afford a mortgage, they can buy back the house from the equity owner or sell it.
Zeehaus is currently raising on StartEngine. Zeehaus raised for the first time in 2018 at a $5 million valuation on MicroVentures. At the time, KingsCrowd rated Zeehaus a Deal to Watch. But since then, the company has had a very slow development and did not live up to our expectations.
A Missed Opportunity
When Zeehaus raised in 2018, it planned on launching its platform 60 days after its raise, around January 2019. But Zeehaus didn’t launch its platform until February 2023 — four and a half years after its initial promise.
This poses two major issues. First, it makes me doubt the execution capacity of founder and CEO Justin Lee — or at least, his capacity to project realistic milestones and understand the challenges ahead.
That’s one thing that could have been overlooked if the company had come back with a better business model and product. But that’s not the case.
Second, Zeehaus missed the best time to launch its product: the height of the COVID-19 pandemic. Between 2020 and 2021, both the number of investors and the amount of money put into alternative investments grew tremendously. If the company’s platform had been live during that time, it could have ridden that wave and brought some investors on board despite a quite unattractive offer. Now that the market is more bearish than it has been in a decade, Zeehaus is launching at a very bad time.
Difficult Growth Ahead
It will be tough for Zeehaus to grow in the months ahead. Justin does not have the same team he did in 2018 and is now mostly working with consultants. A reduced workforce is not ideal to launch a complicated two-sided marketplace.
Justin plans on approaching police departments and local governments to enroll police officers and teachers as buyers and help them own equity in homes in San Francisco, which could be difficult for them to do otherwise. This plan relies on the approval of third parties that are traditionally difficult to approach. It is risky and lacks a strategy that StartEngine investors can rely on.
Getting equity investors will be very difficult, and Justin knows it. He told me that Zeehaus is raising $10 million to buy a few houses, get buyers, and then have the time to sell back its equity to equity investors. This would be a good solution to solve the company’s “chicken or the egg” problem. Buyers need investors to get a house and investors need buyers, but the fast pace of the housing market makes it difficult to match both. Still, even with this solution, finding equity investors will be difficult and will require building trust with them.
Justin believes that once a few success stories are published in press releases, equity investors will want to invest in Zeehaus’s houses. But I don’t think that’s likely. As an investor, I want to see a growth strategy that has a clear plan to acquire investors. Zeehaus just doesn’t have that.
