Dec 26, 2022
#GoodMarkets_05: Modular Housing
Original Publish Date: Sep 20, 2022 on Revue
“By dint of building well, you get to be a good architect” — Aristotle
TL:DR 💚
Many may think of mobile homes (‘manufactured homes’), or Lego-block like cottages on wheels (‘tiny homes’) when learning first about modular homes (also ‘pre-fab homes’ / ‘panelized homes’). Modular homes rely on robotics, and are manufactured in chunks indoors and offsite. Many aren’t aware of the advancement in the market at scale for modular housing, nor the previous failings (see Katerra backed by Softbank [raised $3B in funding]). Of of small number startups who have entered this capital intensive space, very few at scale have fizzled out.
This market is focused on efficiency, utility, and design at an affordable price, and it’s not just for the suburban dweller — it’s for everyone in all wealth brackets. And with inflation soaring in the US expected at 7% in 2022, and the housing market being bought up by institutions; this solution is clearly a way forward. The offsite and manufactured home market has existed for three or more decades, and may now more than ever, see it’s time to scale internationally.
Multi-family residential is the next in this wave of sustainable housing, but according to the research above by Forbes Business Insight, commercial will account for 41.3% of a $107.21B market expected by 2026.
A growing number of modular home manufacturers are currently shipping internationally and domestically in the US. Even DWELL (the magazine) is getting into the modular home business.
Modular Home Market
From 2005 to 2009 we saw a dramatic drop-off in modular and panelized construction in the overall market. This may have been due to rapidly increasing demand going into the Great Recession where modular facilities weren’t ready to scale at such massive speed. Post housing-bubble, it appears that the trend has largely continued — with an exception of panelized construction seeing moderate pickup in the proportion of overall US builds.
Impact & Opportunities
Traditional home construction is responsible for over 500M tons of waste in the US annually, whereas modular homes may only have a few dumpster bins at some offsite manufacturing facilities, according to this research by Matt Ferrell.
Net-Zero modular homes in California are an emerging opportunity space, with smart systems (water, waste, renewable energy, HVAC). Materials and transportation are adjacent verticals I’m closely watching. Personalized and adaptable homes are another area to watch.
Some notable trade-offs of modular homes are researched well here:
Advantages
- Strong structure
- Shorter construction time
- Higher quality of the building
- The speed of implementation
- Acoustics
- Lower risk of damage
- Contractor’s benefits
- Price
Disadvantages:
- Lifespan
- Heat accumulation
- Fire resistance
- Construction limitations
Adjacent Verticals (Prefab and 3d Printed Homes)
Other verticals which are adjacent to modular homes are pre-fabricated buildings, which are also a large market — with less focus on sustainability, and more on utility. Prefab market may reach $150B in next 5 years, according to ReportLinker.
3d printed homes have been entering the market over the past 5 years or so. One notable company focused on sustainability is ICON — utilizing concrete and robotics to print single story residential homes — they have raised a total of $451M from funds such as Vulcan Capital, Oakhouse Capital, Citi Ventures, along with Tiger Global.
Another startup using 3d printing, is Mighty Buildings, that recently crossed Series B, raising $101.8M in total from Y Combinator, Gaingels, and Khosla Ventures.
Recent Exits and Closes
The modular housing space has been heating up rapidly since the 2008–2009 housing bubble, with some key players on their way to the public markets. If the housing market in the US maintains it’s high growth, and the public markets open up before — we could see some sizable exits in the next year or two. A less desirable alternative could be Private Equity outside of an IPO for a few listed below, if there is rapid consolidation.
- Description: Building smarter cities — starting with fully autonomous and modular smart houses.
- Location: Los Angeles
- Verticals: Clean Energy, Hardware, Industrial Design, Internet of Things, Smart Home
- Diversity: Black / African American Founded, Black / African American Led
- Top 5 investors: Backstage Capital
- Total Raised: $205k
- PreSeed close $205k (2021)
- Founded in 2019
- Description: Autonomous Self-Sustainable Homes
- Location: Seattle
- Verticals: 3D Printing, CleanTech, Construction, Energy Efficiency, Green Building, Internet of Things, Residential, Smart Building, Smart Home, Sustainability
- Diversity: Women Founded
- Top 5 investors: European Bank for Reconstruction and Development, Horizon 2020, Max Gerbut
- Total Raised: $6.6M
- Venture Round close $4.3M (2022)
- Founded in 2017
- Description: Real estate company that reduces the cost and time required to create and operate new multi-family housing.
- Location: Seattle
- Verticals: Building Material, Construction, Property Management, Real Estate, Smart Home
- Top 5 investors: SeedInvest, VU Venture Partners, Kapor Capital, LAUNCH, Vulcan Capital
- Total Raised: $30.4M
- Series A close $23M (2019)
- Founded in 2016
* Note: Proud to say Blokable is part of my personal Angel portfolio. They are highly focused on affordable housing.
- Description: Start-up tech home builder that specializes in designing modern homes that improve the living experience.
- Location: San Francisco
- Verticals: Architecture, Home Services, Interior Design, Property Development, Smart Home
- Top 5 investors: East Ventures, DNX Ventures, Quest Venture Partners, Mistletoe, NTT DOCOMO Ventures
- Total Raised: $31.8M
- Series A close $5.5M (2021)
- Founded in 2016
- Description: Prefabricated design and construction company dedicated to sustainable construction, materials, processes, and operations.
- Location: Rialto, CA
- Verticals: Architecture, Construction, GreenTech, Smart Building, Sustainability
- Top 5 investors: Obvious Ventures, Western Technology Investment, Anchorage Capital Group, 10X Capital, Asahi Kasei
- Total Raised: $38.6M
- Series B close Undisclosed (2022)
- Founded in 2016
Thanks!
Copyright 2022, All rights reserved, by Zecca Lehn via @posi2ive. No advice given here (e.g., financial / legal / business / other). All views expressed represent those of the author personally at the time of writing, and not those of any external business entity nor organization.
