We are excited to announce our investment in DEN, a platform that makes it easy and affordable to build a beautiful home from the ground up.
A few months ago, we shared our views on the housing market. The United States is in the midst of a housing crisis. It is a five alarm fire. By our estimation, we are under built by over 6 million units, a hole that will take a decade to fill. The consequences are an affordability crisis plaguing the average American and threatening US productivity.
Many venture investors today will tell you they are “bearish on housing,” citing high 30-year mortgage rates. We see things differently. We believe that undersupply is a more powerful force than interest rates, and that there is a generational opportunity for companies who can build affordable, high quality housing faster. DEN is a great example.
DEN began as a bootstrapped passion project of Founder and CEO Mike Romanowicz in the early innings of the COVID-19 pandemic. An idea for the times, the DEN instagram quickly became a lightning rod for design enthusiasts and DIYers.
When James and I first met Mike, he pitched us on a business selling kits for ADUs. While the designs were stunning, we gave him the feedback that ADU kits would be a tough business to scale, with challenging margins and a small market. When he came back a year later with a digital plans business doing over $1M in annualized revenue, our jaws were on the floor. Over the ensuing weeks we collaborated on a plan for the next leg of the journey — evolving DEN into a platform that can deliver affordable, high quality, custom homes at a massive scale.
Conventional wisdom says that building custom homes costs twice as much and takes twice as long. Mike and his team at DEN have proven that simply isn’t true. By making beautifully designed custom homes more accessible to the average American, we believe DEN can play a major role in accelerating housing development starting in rural and semi-rural areas, like New York’s Hudson Valley where the company was founded.
During our diligence process we spoke to a general contractor in New York who has already built one DEN and plans to do 3 more. Because DEN homes take 40% less time to build, he can make nearly twice as much as doing any other custom project. “I hate to say it’s easy, because construction is never easy,” he told us “Something always comes up, but with DEN it’s minimal.” We spoke to a DEN owner from the Blue Ridge Mountains who was considering building two more as rental properties. “I saw beautiful homes on Instagram but before DEN, I never thought that they were for people like me.”
While there is no doubt carnage in the public markets today, companies like Compass, Better Mortgage, and OpenDoor all have one important thing in common: they’ve never built a house. The cure for high prices is more houses, not more transactions.
At Gutter Capital we are proud to back mission-driven founders who are rolling up their sleeves and getting to work on the critical problems facing the United States today. Mike and his team are doing exactly that, and I am proud to be joining the DEN Board of Directors and supporting them on this next leg of the journey.
Do you have an idea that could accelerate the rate of housing development in America? We’d love to hear about it. Contact hello@gutter.cc and we’ll be in touch.
