The Existential Crisis Plaguing Tech’s Cohabitation Incubators

In 2021, dot.LA reported on the invasion of the startup live-in incubator. “In the Hollywood Hills, a collective started by two twenty-seven year-old entrepreneurs is helping seed-stage companies land funds and build up their products,” wrote Katherin Abando. “Across town, a roving launch house focuses on building biotech entrepreneurs. Another is trying to foster breakthrough products in augmented reality.”

Fast forward a year. The collab house model—which often touts itself as an educational program for tech entrepreneurs to live together and develop their companies—is facing an existential crisis, with at least one of the examples lauded in the article facing multiple allegations of fostering a culture that led to sexual assault, harassment and in one case, retaliation against a member of the house.

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The distinction between Launch House and other live-incubators has been well described. In 2021, dot.LA reported that unlike veteran accelerators like Y Combinator, Launch House founders Jacob Peters, Michael Houck, and Brett Goldstein weren’t promising entrepreneurs any investment. Instead, the draw was, “schmoozing, advice and social media exposure.” And their idea was based on Peters’ belief that, "Universities are no longer going to be the aggregators of great talent. It's going to be small, niche communities that start in houses."

If that’s going to be the case however, there needs to be a serious reconsideration of how the collab-house model operates when the heat is on. Earlier this month, Vox released an investigation into Launch House, a “professional social club” for tech founders, which among other activities, hosts members at a luxury property in Beverly Hills. Since that report, some existing investors in the startup and its venture fund have issued public statements supporting the alleged victims and denouncing the alleged behavior of Launch House. Others have taken the stance that the reporting of the story itself was exploitative, blaming the media for its “handling” of the news was itself insensitive.

Launch House, meanwhile, confirmed to TechCrunch via spokesperson that it is initiating its own independent, third-party investigation. Company CEO Brett Goldstein published a public memo in response to the allegations in which he stated that claims in the Vox story pertain “to a period over a year ago when we were a very different company.”

This isn’t the first time Launch House has faced complaints of workplace misconduct. Late last year, Business Insider reported about a “wild party” at the Launch House mansion in May 2021 as well as a COVID outbreak the year before.

Should anyone be surprised that a tech incubator full of young people living and working under the same roof, with dreams of being tech entrepreneurs, is prone to cultivating an unsafe workplace environment?

In 2017, Y Combinator was in the news for similar indiscretions. At the time, the incubator—known for launching Airbnb, Coinbase, DoorDash, Dropbox, Reddit and Twitch—was facing their own set of allegations of sexual harassment in the workplace. The startup ostensibly dealt with the situation by issuing apologies and having two high-profile venture capital investors resign. Nonetheless, a year later, according to a survey by Y combinator, one in five female founders who passed through the influential Silicon Valley startup incubator still reported having been sexually harassed or assaulted by investors.

Nearly half a decade later the tech incubator model is still suffering from the same issues that might be obvious to anyone who looked beyond the promise of community. Despite the various cautionary tales of toxic tech startups whose founders end up being played by Joseph Gordon-Levitt, Jared Leto or Amanda Seyfried, many of these incubators have yet to take the very basic step in becoming a legitimate enterprise. Live-in incubators aren’t hiring live-in Human Resource departments…or any at all. And that’s a big problem.

Chien-Chi Tseng is a Collegiate Associate Professor of Technology Entrepreneurship at Virginia Tech who used to develop incubation centers across Taiwan university campuses. According to Tseng, the incubator model should adopt an approach to HR no different from a standard company.

“Like the clients it serves, the incubator must be based on a solid customer need and provide a strong value proposition,” Tseng told dot.LA. “The common thread among all the successful incubators is that they are run as businesses with the customer being the companies they serve.” In the case of Launch House, that’s the young individuals who are trying to create a successful startup who are also living under their roof.he live-in incubator, Tseng believes, warrants a paradigm shift in how it thinks (or more often, doesn’t) about HR. department.

“To better approach the work format of live-in incubators, HR teams cannot decide their success based on a single parameter,” Tseng told dot.LA, one that takes into account a "narrow but diverse set of metrics." Those metrics can range from an incubator's financial health to the number of acquisitions and IPOs; the support provided to its members both in the form of funding from investors to more ephemeral benchmarks, like mentorship engagement. It also needs to be able to swiftly address a myriad of new issues that stem specifically from having colleagues living together: screening applicants not just on the strength of their pitch, but their background checks. Due diligence is a foundational necessity in this process, yet seems to be a low priority for young incubators…until they find themselves in hot water.

To that end, Launch House promised during a private town hall that they are building an industry-leading safety and security program for co-living experiences. The details of the program, however, have yet to be divulged.

With that said, Launch House is hardly the only live-in incubator house reckoning with issues arising from a co-living experience. More recently, a leaked contract from Hype House — one of the most famous and longest-running content houses in Los Angeles — revealed a series of extremely restrictive rules that participating influencers have to follow. “You’re giving up all rights to any claims you have,” said one Los Angeles based lawyer who has represented influencers and others in the entertainment industry. “Everything. All known and unknown future claims, which is excessive.” Far from investing in human resources, Hype House invested in the opposite: lawyers and publicists. This sends a message to the community that optics are more important than fixing systemic issues.

A request for comment sent to four different LA-based live-incubators asking how they’re triaging their approach to HR received no responses.

Currently, the live-in incubator environment makes up a small fraction of Los Angeles tech entrepreneurship. As Vox noted, “Programs like Launch House, which often require members to pack their bags and move to a new city with just a few weeks’ notice, are only feasible for a very specific group of people: young, hungry digital nomads with the freedom to figure it out as they go along.”

But that number is growing, propelled by a new generational ambition: over 30% of Gen Zers living in Los Angeles want to be influencers. With the rise of the “creator house” and an ever-expanding network of live-in startup options, there’s every reason for the collab house model to consider a more robust approach to mitigating the dark side of building “community” in tech. Otherwise, the issues plaguing Launch House today will continue to be the industry standard.