The relaxation of laws regarding the construction of assisted living units (ADUs) in the US has created opportunities for companies building such structures.
cottage is one of those companies. The San Francisco-based startup has developed a software and marketplace that connects homeowners who need ADUs with contractors who can build them. And it closed with $15 million in a Series A funding round led by technology-focused venture capital firm Fifth Wall to grow its business.
Cottage founder and CEO Alex Zarnecki was inspired to start the company after growing up in the Bay Area, where home prices are among the highest in the country. Since his parents had lived in the Bay Area for a long time, he sought additional income after his father’s retirement. So they wanted to build an ADU that could be rented out to local students. The practice is not uncommon. Many Bay Area residents are turning to ADU in the form of a lease to earn extra income as laws have been relaxed in the state.
“What followed was a nightmare and over a year of feasibility study, permitting and construction,” recalls Czarniecki. “ The complexity of the process, non-transparent pricing, and the difficulty of finding the right contractor provided the inspiration for the cottage.”
Czarniecki emphasizes that the cottage is not a builder’s prefabricated house. Instead, he describes the startup as a SaaS-enabled housing market starting with custom ADUs. by digitization The cottage says the design and construction process will save homeowners months and thousands of dollars, while providing contractors with “predictable plumbing and time-saving equipment.”
“We match contractors to private homeowners and provide them with software tools to make them more efficient,” he told gaming-updates. “There are better results everywhere.”
Cottage currently works with small to medium sized local “qualified” general contractors. Since it helps homeowners with architecture, design and permits, the projects are essentially ready for contractors, the company says.
Czarniecki started thinking about the company at the end of 2019 and launched it at the end of 2020. To date, it has completed “hundreds” of projects and has expanded from the Bay Area to Los Angeles, where it achieved market-level profitability in four months. According to Zarnetsky. The startup plans to launch in San Diego soon and in five to six markets next year.
“These are relatively small houses, but they have a very interesting effect on the supply of housing,” Zarnecki said.
The cottage is advertised exclusively to homeowners and charges them a flat fee for the entire pre-build process.
“We believe this is money they would have spent working with an architect or project manager,” Zarnecki said. “And charging flat fees is unconventional in the industry.”
This plan works well for contractors who believe the cottage comes to them with projects, so they have “a 4x higher win rate than regular projects they find themselves.”
“They have been tested, designed and approved,” Zarnecki said. “They enter a phase where they have plenty of time to open up their funnel so they can take on new projects.”
In the future, he sees opportunities to make money on the other side of the market by hiring general contractors for projects and providing them with software tools, and then taking a percentage of the volume of the transaction.
“Many lead generation services charge 5 to 8% for finding projects, but they don’t get the same value as we do,” Zarnecki said. “Ultimately, we will be their operating system.”
Founders A company with few assets does not need a factory or warehouse like some ADU suppliers.
“We connect homeowners with segmented providers,” he said.
1Sharp Ventures, DivCovest and existing investors Susa Ventures and Base10 Partners were also involved in the funding, bringing the total raised from the company to over $20 million.
The company plans to use some of the new capital to increase its workforce from 30 to 50 or 60 by the end of the year. All sorts of projects and sources, not just our sources.”
Overall, Czarnecki said that Cottage could start using other types of projects, while capitalizing on the fact that “many markets are changing ADU laws.”
In 2017, the California legislature amended laws to make it easier to build assisted living units (ADUs). Effective January 1, 2020, the State of California has made it easier to add additional housing to single-family homes. City and local governments must approve or reject ADU projects within 60 days of receiving a permit application. The state now prohibits cities from enforcing minimum lot size, maximum ADU size, or street parking requirements.
“We don’t categorize ourselves just to make ADUs,” Zarnecki said. “The distribution efficiency of homeowners and the network of suppliers and contractors found in these projects may apply to other types of renovations or construction.”
Dan Weinhold, partner at Fifth Wall, says Cottage offers a new, more efficient way: For design and construction education for homeowners.
“The whole cottage model is incredibly unique. From being able to develop customized online training to having a supervised group of contractors available to complete a project, it benefits homeowners and builders alike,” said Weinhold, who sits on his company’s investment board. “Homeowners enjoy a streamlined construction process while contractors have access to a portfolio of projects.”
Notably, Fifth Wall is also an investor in another technology, Homebound, which was launched in February. Raises $75 million Series C funding round To its efforts to solve the housing shortage with its technology, led by Khosla Ventures. The company’s self-proclaimed mission is to serve as a “next generation” home builder so that “anyone, anywhere can build a home.”
“Both companies are working to improve the technologies of the artificial world, and our commitment to innovation is what we see in our investments,” Weinhold said.
Over the past year, several other ADU-focused startups have emerged that have also raised venture capital funds.
last July gaming-updates reveals startup has raised Abouda $20 million Series A funding round Led by Norwest Venture Partners. Aboodu, a Redwood City, California-based company that makes prefabricated schools, was founded in 2018 to serve as a “one-stop shop” for building schools, or backyard homes as some have called it. He also says he helps homeowners get permits.
Also last July, gaming-updates spoke about Mighty Building, an Oakland-based startup that builds ADUs and other homes that raised $22 millionI say that the company is focused on innovation in 3D printing manufacturing. And startup Villa, founded by venture capital firm Atomic, raised $15 million last August.
Meanwhile in Austin Kiro action Recent presentation winner SXSW is a startup that will provide “hundreds” of its structures, which the company describes as “state of the art sanctuaries, crisis housing and consumer housing that rolls out within hours.”