Ep. 70 How I Raised It with Steve Glenn of Plant Prefab 10.22.2018

Welcome to How I Raised it, the podcast that goes behind the scenes with entrepreneurs who've raised capital. We uncover the tips, tricks and techniques they use to get investors to write a check. Strap in and turn it up. Hi, welcome to another episode of How I Raised it produced by foundersuite.com today I have Steve Glenn of Plant Prefab. How's it going, Steve? Good.

Great to be with you.

Thanks for taking the time. We're going to do a quick one today, so I'm going to go fast straight to it. What is Plant Prefab? What do you guys do?

We build. We design and manufacture custom, high quality, sustainable single and multifamily homes.

And I was looking at the website, there's some beautiful examples on there. Maybe describe for the audience what these look like. I could do it, but you probably do better justice.

Well, you know, we do custom projects so they look like whatever the clients need them to look like. We've done. There really are two kind of entities. One is Living homes. It's our design studio and we focused on modern design by a bunch of world class architects, people like Ray Cappy and Kieran Timberlake. So those are modern. They tend to be more modern, kind of almost reflected California modernism. Open floor plan, a lot of glass, indoor, outdoor. But again, those are living homes designs. If you look at what Plant's done, there's a much greater range of design. So you can go to livinghomes.net and see living homes projects. And then Plant Prefab has both Living homes and other projects by architects like Toby Long and others.

But these are pre made sections of homes. And just from a somewhat cursory glance of the website, everything is a rectangular shape. Right. I'm assuming it's coming in shipping containers. And so then they're assembled, they're made off site and then assembled on the home site. Is that correct or am I Mostly.

We don't do shipping containers. They're modules and they're built. So modules are like big Lego pieces. They're sections of the home. They tend to be much wider than a shipping container, which is 8ft wide. Ours tend to be 12 to 14 to 16ft. They can be 60ft long or less. The homes we do are rectolinear, but they're definitely not squares or rectangles. They have double height spaces. They have spaces that come in and come out so we can put together the modules. Because again, the modules are custom made, they're not shipping containers. So they're not the same shape. They vary based on the project, they're built in a controlled all weather environment or factory in Rialto, California. One of the reasons why there's this can be a better way to build is in parallel to the site work we're building. Sorry, in parallel to what happens on the foundation, we're building off site. So normally in a traditional construction process you have to first do all of the site work, the utilities, the grading, the foundation before you can start the framing, electrical, plumbing. With us, while the site work is happening, we're working off site on the vertical so we can build in half the time. Modules are built in the factory from one to three months depending upon the size of the project, and they're shipped in a day and installed in a day.

Interesting. And are they fairly reusable, the modules reusable amongst different clients, or is each customer getting a fairly custom set of modules?

Custom.

Okay, interesting. Yeah, very cool. Well, we want to get to fundraising, but where'd you come up with this idea? What were you doing before this? Where'd the idea come from?

Well, my background's in technology. Worked for a number of startups, founded or co founded. Worked for Apple, worked for Disney. But my first love growing up was architecture. I wanted to be an architect. I had books on Frank Lloyd Wright and legos and blocks. In college I did a summer design program and learned that I really had neither the talent nor temperament to be an architect, unfortunately. But I learned about developers and one guy in particular, Jim Rouse, who, who really became my first professional role model by example. I never met him, but he helped me to appreciate that if you actually care about the quality of the built environment, developers are much more important than architects because they set the agenda of what actually gets built. So I concluded someday I should become a developer because I don't have talent to be a good architect, in my opinion. But the world could use more responsible developers. So that's how this came about. He also kind of turned me onto the concept of being a social entrepreneur. So that too was important to me to try to wed profit and purpose in what I was doing.

Let's touch on that for a minute. So I guess the purpose is these are more affordable, more eco friendly. I mean, kind of give us how this is a social good, social benefit.

Well, a bunch of things. We're focused on the urban market. The world's becoming more urbanized, people are moving to cities. And for those of us who believe there is increasing and increasingly bad climate change, the only way we'll be able to deal with that meets Increasing population is that cities have to become denser. People have to get closer to jobs, to transportation, to services that will massively reduce the overhead, ecological overhead required for commuting and suburbs and urban sprawl. When you're building in cities, you've got the biggest set of challenges in terms of costs and neighborhood disruption. So Prefab can be an important part of the solution by building faster, for less cost, high quality, less neighborhood disruption. So. So that's part of it, our area of focus. The other part is so Living Homes. Our first home is the first home ever certified LEED Platinum in the history of the program. LEED is a green building certification program. You get points for things that make your homes more energy or water or resource efficient. And based on those points, you can get certified or Silver Gold or Platinum. Platinum is their highest level. And we've done more platinum level homes than almost any other design firm. So that's the other part. We're creating very healthy, sustainable homes. And that too is really important because buildings as a category use more energy and are responsible for more carbon emissions than all of transportation as a category and all of factories as a category.

That's interesting. Very cool. Very cool. And how many homes, if you're able to say, have you guys built so far? How many are out there?

So with Living homes, which we started 12 years ago, I think we have 40 some homes, 40 some units completed, plants, a new. We outsourced our production for the first 10 years to different factories. So plant is our first factory, and we shipped our 26th unit last month.

Just really quickly on the connection between Living Homes and Plant Prefab. Living Homes was the predecessor company that split, spun into Plant Prefab or what?

It was a predecessor company that set up Plant two and a half years ago. We're one company.

Okay, understood.

Great.

So let's talk about raising money for Plant Prefab. I have in my notes you raised a series A from Obvious Ventures, is that correct?

Well, among others, actually. Obvious did our seed round and then they did their pro rata and we had a number of new investors. Including Amazon.

Yeah, so both these are sort of unusual investors. I'm not too familiar with Obvious Ventures, although I've seen. That's EV Williams, Venture arm. Right. I've seen him in my backyard in the Presidio a few times at the Starbucks. How did you connect with these investors?

Well, Obvious was in our seed round. One of their founders, James Joaquin, was my freshman year roommate. So I know James for a long time and he and his wife Zam are personal investors in living homes from way back. So that's how that connection happened. And then others who invested were introduced through various people, including Amazon. Obvious Invest introduced us to their corporate. So many works with corporate ventures at Amazon and they're very aggressive in terms of the technology and partnerships and relationships they're developing for smart home technology technology that can be enabled by Alexa voice. So yeah, we spent some time with them and it made sense for them to become an investor.

Yeah. Is that a strategic investment in the sense that you'll be weaving in their technology into your homes? It sounds like you probably will be. Is that a. Yeah, well, we have.

Already and will increasingly be doing that. Yeah.

Was it hard to raise money for a prefab manufacturing home? Manufacturing business is a little bit of the, you know, outside what you typically see in Silicon Valley, you know, yeah.

It was definitely hard to do it from the traditional venture capital groups, but once we connected with folks who focus on real estate, it became much easier.

Was the pitch more about like the sustainable, you know, housing or more on construction or, or you have enough technology?

Construction tech? Yeah, yeah, no, we have a, we have a technology story, but, you know, the venture capital guys are not used to, you know, the industry is happy with a 20% gross margin, 10% net. You know, that the more tech focused VCs like that just. That sounds like you're dead. So that's an issue. You know, they don't just haven't spent much time in construction, it's just new. There was lots and lots of interest from a bunch of the traditional DCs we spoke to, but. But just not much experience doing investments there and some confusion about what makes sense, which you would expect from someone who's just not so experienced with a particular market. No blame.

Yeah. A question some of our viewers might have. When you're raising money from a strategic investor like an Amazon, does that come with strings attached, for lack of a better term, where you are required to use their technology? I mean, it sounds like you are happily. But, you know, how does that typically work? Like, did you have to negotiate some arms length?

Yeah. No. I mean there are lots of different strategic types of investments. So the quick answer is it comes in all forms. We have two strategic investors. Amazon is the only one we've announced and neither one of them comes with any very specific requirements about what we have to do. And I think that's smart on their parts. I mean, these initiatives, at least in my experience, typically are led by venture groups in Those companies and those venture groups have a responsibility to ensure that it is an appropriate investment. That is, it has some possibility of making a venture like return. That is, a number of them will fail and some will do well and at least one out of 10 will do really well. But typically they're not going to get involved unless they see some opportunities for synergy between the companies.

Yeah. Do you have competitors that are funded? I mean, when I think of prefab, of course you sort of think of the old definition of prefab housing, which is mostly trailers and modular homes you would find in a trailer park. But I'm assuming there's kind of this new wave of prefab companies that have emerged. I feel like I've seen a few around there. Do you have a lot of funded companies?

No, not a lot. Particularly when you say funded and particularly when you're talking about more than seed funding. But I think that the one that's kind of raised the most and most well known is Katera. They've raised 800 million. They're focused on the large multifamily space. Absolutely not our focus. They're not doing small projects like we are, so we're really in different lanes. And they're also very much a development company. So a lot of that money is focused on specific development projects. And there again, that's not what we're doing.

Yeah, interesting. So where does this funding take you? Does it just help you have the working capital to fulfill demand or does it take you into new markets, different segments? You know, we're going to build out.

Some technology, we're going to kind of staff up, we'll be opening other factories in time. We'll be doing some fun sales and marketing stuff. So. All the above. Yeah.

Interesting.

Cool. All right.

I know you have a hard stop in like a few minutes. Any interesting anecdotes or tales from. From the funding trail or anything you would do differently if you were approaching this all over again?

Yeah, I mean, they would have sought out folks who came more from the real estate world, private equity guys, the real estate focused firms. I would have sought them out and spend not so much time with the traditional VCs. But, you know, look to the degree that people like us and Kinterra and other others do well, the traditional guys will get into this. There was a lot of interest, just not so much experience. So I suspect that will change in the next few years.

Is that a concern? I mean, you have these huge home builders, of course, and if they see a little clever upstart like you guys starting to take some real market share. Do you wake up in the middle of night ever thinking about KB Homes or whoever the incumbents are? Is that a threat or you guys are in totally separate, totally different.

Again, it's like Katera. I mean, those guys don't do individual homes and small construction projects. Small, multifamily in cities. That's just not their focus. So, no, I don't spend any time concerned about them. And we're rounding air to them. So, yeah.

Yeah. Interesting. Great. Well, any other tips for folks in the housing home. Home market? Any tips you'd like to extend or have we covered everything?

I mean, the main one is just think carefully about who you're talking to about money. I mean, I think you'll have a harder time with the traditional VCs right now. But again, check back in a year or so. Let's see how we and some others do. So. Yeah. Cool.

All right. Do you live in your own product? Do you live in your own.

I do, yeah. I live in the first one that was designed by Living Homes, which was built by Ray Cappy. And again, first home ever certified LEED Platinum is installed in eight and a half hours. If you go to either plant prefab or livinghomes.net, i think maybe. Well, I think both. It's like one of the. It's the first home you see in a sequence that kind of scrolls by.

Where do you have it? What city are you in?

Santa Monica.

Santa Monica.

Awesome. Yeah.

Cool. All right, Steve, I'll let you go. This is fun. Thanks for it. And if people want to learn more, it's just plant. Plantprefab.com or livinghomes.net those are the two URLs.

That's it. Thank you.

All right, keep up the good work. I like these homes.

Thank you very much. Thank you very much. Let me know when you get this online.

Okay, thanks.

All right, Appreciate it. Bye.