A relaxation of laws on the construction of accessory dwelling units (ADUs) in the United States has opened up opportunities for companies that build such structures.
Chalet is one such company. The San Francisco-based startup has developed software and a marketplace that connects homeowners who want an ADU with contractors who can build them. And it just closed $15 million in a Series A funding round led by proptech-focused venture capital firm Fifth Wall to grow its business.
Alex Czarnecki, Founder and CEO of Cottage, was inspired to start the business after growing up in the Bay Area, where housing prices are among the highest in the country. As longtime residents of the Bay Area, her parents sought additional income in her father’s retirement. So they considered building an ADU that they could rent out to local students. The practice is not uncommon. Many Bay Area residents are turning to ADUs as rentals to generate additional income since state laws eased.
“What followed was a nightmare of more than a year and a process around feasibility, permits and construction,” recalls Czarnecki. “The The complexity of the process, the opaque prices and the difficulty of finding the right contractor were the inspiration for Cottage. »
Czarnecki points out that Cottage is not a prefabricated home builder. Instead, he describes the startup as a SaaS marketplace for homebuilding, starting with custom ADUs. By digitizing the design-build process, Cottage says it saves owners months of time and thousands of dollars, while providing its contractors with a “predictable pipeline of projects and time-saving tools” .
“We match contractors with homeowners and provide them with software tools to make them more efficient,” he told TechCrunch. “There are better results everywhere.”
For now, Cottage partners with “qualified” small to medium sized residential general contractors. As it helps owners with architecture, design and permits, projects are essentially shovel-ready for contractors, the company says.
Czarnecki started thinking about the company in late 2019 and launched it in late spring 2020. So far, she has completed “hundreds” of projects and expanded from the region of bay in Los Angeles, where the company achieved market-level profitability in four months. , according to Czarnecki. The startup also plans to launch in San Diego soon, followed by five to six other markets over the next year.
“These are relatively small houses but they have quite an interesting impact on housing supply,” Czarnecki said.
Cottage only advertises to owners and charges them a fixed fee to manage the entire pre-construction process.
“We consider it money that they would have spent working with an architect or a project manager,” Czarnecki said. “And, charging a flat fee is not traditional in the industry.”
The arrangement works well for contractors, he thinks, as Cottage offers them projects so they have “a 4x higher success rate than typical projects they source themselves.” “.
“They are controlled, designed and authorized,” added Czarnecki. “They’re entering a stage where they have a longer timeline in their pipeline visibility so they can take on new projects.”
Going forward, he sees opportunities to monetize the other side of the market, sourcing general contractors with projects and providing them with software tools, then taking a percentage of the trading volume.
“Many lead generation services charge 5-8% for project sourcing, but they don’t get as much value as they would with us,” Czarnecki added. “Eventually, we will be their operating system.”
The founder touts a light business that doesn’t require a factory or warehouse like some ADU suppliers.
“We connect owners to fragmented providers,” he said.
1Sharpe Ventures, DivcoWest Ventures and existing investors Susa Ventures and Base10 Partners also participated in the funding, bringing the total raised by the company to just over $20 million.
The company plans to use the new capital in part to increase its workforce from 30 to 50 or 60 by the end of the year. It will also invest the money in building features so that its offering is “useful to GCs for all types of projects and all methods of supply, not just our supply”.
Ultimately, Czarnecki said Cottage could branch out into other types of projects while capitalizing on the fact that “a lot of markets are changing ADU laws.”
The California legislature changed the laws in 2017 to make it easier to build accessory dwelling units (ADUs). Then, on January 1, 2020, the State of California made it significantly easier to add additional housing to single-family home sites. Cities and local agencies must quickly approve or deny ADU projects within 60 days of receiving a permit application. The state also now prevents cities from imposing minimum lot size requirements, maximum ADU dimensions, or off-street parking requirements.
“We don’t just do ADUs,” Czarnecki said. “The skills around building a cast for homeowners and building a network of suppliers and contractors who can do those projects that could apply to other types of renovations or construction.”
Dan Wenhold, partner at Fifth Wall, thinks Cottage offers a new, more efficient way to owners to design and build ADUs.
“The entire Cottage model is incredibly unique. From the ability to design a custom ADU online to having an organized group of contractors available to complete the project, it’s beneficial to owners and builders,” said Wenhold, who joins the board of administration of the company in connection with the investment of his company. “Owners benefit from a streamlined construction process while contractors have access to a pipeline of projects.”
Notably, Fifth Wall is also an investor in another proptech, Homebound, which in February raised $75 million in a Series C funding round led by Khosla Ventures in its efforts to help solve housing shortages through its technology. The company’s self-proclaimed mission is to serve as the “next generation” homebuilder to enable “anyone, anywhere to build a home.”
“Both companies are working to advance the technology of the built world and dedication to innovation is exactly what we seek in our investments,” Wenhold said.
Over the past year, a number of other startups focused on the ADU build space have also raised venture capital funds.
last July, TechCrunch reported that startup Abodu raised $20 million in a Series A funding round led by Northwest Venture Partners. Redwood City, Calif.-based Abodu, which builds pre-engineered ADUs, was founded in 2018 to serve as a “one-stop-shop” for building an ADU, or as some describe it, a house in a backyard. -court. He also says he helps landlords get permits.
Also last July, TechCrunch covered Mighty Buildings, an Oakland-based startup that builds ADUs and other housing that raised $22 million. This company said it is focusing on building innovation with a 3D printing method. And Villa, a startup founded out of Atomic’s venture capital studio, raised $15 million last August.
Meanwhile, based in Austin Action Kiro is a seeded startup that is set to deliver “hundreds” of its structures, which the company describes as “modern shelter, crisis response housing, and consumer housing deployed within hours.”