- When Alexis Rivas and Jamuel Joseph launched Cover, they recruited top engineering talent and created a "Henry Ford assembly line for homes" by manufacturing their own components, such as wall panels.
- Delian Asparouhov, a principal at Founders Fund, was initially captivated by the idea, but needed some convincing first before deciding whether his firm should invest.
- After visiting the LA-based homes and speaking with experts in the home-construction world, the VC said he was convinced Cover was one of the most innovative startups in the space.
- Here's a look at how the Cover team won over investors and scored $10 million in Series A funding.
- Visit Business Insider's homepage for more stories.
When Henry Ford started using an assembly line, he cut the cost of making the Model T car by more than half.
Alexis Rivas and Jamuel Joseph, the cofounders of Cover, took a page out of Ford's playbook when they launched their LA-based home construction startup in 2014: The two architects recruited engineering talent from Tesla, Honda, Apple, and SpaceX and created a "Henry Ford assembly line for homes," Cover CEO Rivas told Business Insider.
Cover manufactures its own standard building components such as wall panels; then its software produces home designs for each client based on combinations of the pre-made parts, the company says.
"If Apple were to make a home, this is how they would do it," said Cover board member Delian Asparouhov, a principal at Founders Fund, the VC firm that co-led Cover's $10 million Series A round in July 2020.
In an interview, Asparouhov said that when he first heard about Cover in summer 2019, he was captivated. But he still needed some convincing before deciding whether his firm should write a check.
Asparouhov said that some venture-backed construction companies hire "a couple software engineers" and leave the heavy lifting to traditional contractors, like electricians and plumbers. Sure, there might be some cost cutting, but no "huge jumps" in innovation, the VC added.
There can be major challenges for software companies that try to bring tech-like efficiencies into the physical world of fields such as construction.
Katerra, a Softbank-backed construction company that has raised over $1 billion in venture capital, also manufactures parts for homes (like entire walls) off-site. Their methods reportedly reduce costs, even though they employ traditional contractors, like carpenters, plumbers, and electricians. The startup has faced a number of bumps along the way, including layoffs and leadership shake ups.
In September, Asparouhov traveled to LA to get first-hand look at Cover's houses, which are generally smaller than Katerra's projects.
"It was a courting process, not a one-day turnaround," the VC said.
Asparouhov said he was struck by each house's slick design. The appliances "fit perfectly into the walls and cabinets," and the temperature is controlled by water pipes in the walls, so "you don't feel any draft," the VC explained.
When the CEO of Lennar, one of the largest publicly-traded home construction companies, told the VC that Cover was the most innovative home construction startup he'd ever seen, Asparouhov said his team was ready to invest. Lennar co-led the Series A round.
Prices for construction of a Cover home range from about $80,000 for a studio to $350,000 for a two-bedroom house, the company says. A 600-square-foot unit would run about $230,000.
"Our founder Peter says that Silicon Valley has focused on bytes, not atoms,"
VCs have come under fire for not funding the production of badly needed physical things, such as houses and medical equipment.
"Our founder Peter says that Silicon Valley has focused on bytes, not atoms," Asparouhov said, referring to Peter Thiel.
Cover aims to use software's bytes to assemble a home's atoms.
The startup built software that can take a client's wish list into account and generate customized floor plans, Rivas said. This makes it easier to "purchase the right materials and manufacture the right parts," he said.
The most innovative aspect of the project, Asparouhov said, is the physical building system.
Rivas said it's like putting together life-sized Lego blocks: The walls, floors, ceilings, and windows come from the company's factory to be assembled onsite.
Rivas said the measurements are precise, down to about 5/1000s of an inch, so Cover homes do not need drywall or baseboards to cover up "imprecise jagged edges."
To build a Cover, Rivas said, you don't need to hire traditional skilled laborers, like electricians: If someone can assemble a car, then they can probably assemble a Cover, the CEO added.
Most customers are buying Covers for their parents, in-laws, or kids, Rivas said. The startup, which plans to expand outside of LA, has attracted interest in other US cities and internationally, he added.
As the startup grows, Asparouhov said Cover will have to "use capital effectively."
"Covid makes things a little trickier since companies like this tend to rely on debt to pay for equipment and materials," he said. "The world of debt has definitely dried up a little bit."
Asparouhov said that, while Cover currently serves a higher-end market, he's optimistic Cover will win over a wider range of customers and start building larger homes.
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