Cover’s approach to building is certainly intriguing, but their commitment to building better homes is even more impressive. 

Cover announced today that they raised $60M in a Series B private financing round led by Gigafund, with participation from Valor Equity Partners and Founders Fund. All three of these firms were early investors in well-known disruptors SpaceX and Tesla. They round also included General Catalyst and Fifty Years, both being existing investors in Cover.

Cover is a Los Angeles-based startup, founded by Alexis Rivas and Jemuel Joseph, which is leveraging highly sophisticated software and manufacturing technology to address persistent inefficiencies in the residential construction industry. In short, they are taking on the housing crisis head on.

The funds will be primarily used to expand into a new 100,000 square foot factory to produce more of their modular building panels, as well as to fill out their team.

Cover is not the only startup attempting to revolutionize construction, but their view of the market is consistent with other competing building solutions, which is a good thing for the housing market and for future homebuyers. The enormity of the industry inertia that needs to change will require several viable approaches from many angles. Though Cover’s approach to building is certainly intriguing, we are more impressed with their commitment to the end of goal of building better homes.

We are optimistic that the combined efforts of construction disruptors like Cover will ultimately bring about significant improvements in efficiencies (e.g. construction times; energy efficiency; sustainability; personalization; safety and durability; design; etc.).

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Cover’s Market Opportunity

Like other similarly well-financed innovators in the residential construction space, Cover has a deep understanding of the issues that have plagued the residential construction industry for several decades and the opportunities that they present. A common declaration being used by entrepreneurs in the building space is that the construction industry has not changed in over 100 years.

The bold strategic plan that Cover is following is to reinvent the prefabrication/modular building industry to deliver hyper-efficiencies on par with other industries, such as automotive and consumer electronics. The end goal is to chip away, in dramatic fashion, at the shortage of over 5 million affordable homes in the US.

Cover is addressing the following inefficiencies in residential homebuilding:

  • High Costs
  • Unpredictability
  • Long Construction Times
  • Schedule Overruns
  • Shortage of Professional Labor
  • Complexities

Here are a few macro trends that have been impeding the inventory levels of affordable housing in the US:

  • Aging Construction Workforce
  • Declining Numbers of Workers Entering the Trades Professions
  • Cost of Housing Outpacing Wages
  • The Construction Industry’s Resistance to Modernization

 

Cover’s Approach

All prefab companies, both old and new, contest that by building in a factory, they can better control costs, quality, labor supply, and scheduling. With innovations related to material sciences and component assembly, the quality of the end product has quickly become a non-issue, which had been a persistent image issue for the industry.

Cover is keenly aware that the marketplace wants quality customization, but with quick construction/assembly, as well as predictable pricing and schedules.

Cover’s emphasis is creating technical solutions that integrate intelligent software that can quickly design a personalized structure that can then be built to spec reliably (e.g. cost, accuracy, scheduling, etc.). They are taking a “Lego” approach to their modular building using paneling technology for flooring, walls and ceilings that can be easily assembled on site, without requiring a crane.

Cover Panelized Building System

Cover Panelized Building System

One example of their ingenuity is running all wires and plumbing through the ceilings for easy access, thereby making home maintenance easier and less stressful. This shift away from traditional construction that can be problematic will certainly be an attractive feature.

We also like Cover’s approach to customization, as it is not just about personal aesthetic preferences and layouts, but also being adaptive to the location for both optimized energy efficiency and comfort. For example, choosing window placements in coordination with the geographic orientation and path of the Sun will improve the home’s energy performance and ambiance.

Cover has stated that they have improved their on-site time-to-completion (post completion of the foundation) from 120 days to 30 days, a 4-fold improvement. Similar to other modular builders, Cover will be focusing on smaller ADU-like structures (single-story units up to 1,200 square feet), before branching out into larger and more complex configurations. The current price-per-square-foot (including all fees, foundation work, permits, etc.) is ranging between $416 and $500, for units ranging from 400 square feet to 1,200 square feet.

 

Cover’s Challenges

Several of Cover’s challenges apply to their competitors as well, as there are a few big unknowns facing disruptive builders like Cover, such as:

  • Will enough of the construction and architecture industries adapt and adopt these new methods of building homes?
  • Will local jurisdictions be supportive to these efforts and provide incentives to help smooth learning and growth pains?
  • Will the reliability and durability of these new structures prove out over time?
  • Will homeowners enjoy living in these new types of structures?
  • Will these disruptors be sufficiently nimble to adapt to unforeseen setbacks and imperfections?
  • Will these disruptors be able to hire, on-board and retain all of the requisite staff to achieve their goals and out innovate the competition?

When comparing Cover to Boxabl, one area of concern we have for Cover is their plan to manage and implement 100% of the finished product, e.g.: on-demand personalized design, constructing in-factory modular components; delivery; local permitting; site and foundational work; and on-site assembly & finishing.

Though we understand that this approach to vertical integration will enable Cover to offer reliable pricing, maintain high-quality standards and hold to consistent time schedules, this approach will either hinder geographic expansion or increase the need to maintain a large workforce across the country.

Conversely, we like Boxabl’s plans to partner with existing builders that can use Boxabl’s foldable structures as a new structural option for their residential clients. Helping existing construction companies to benefit from one’s disruptive solutions will help fuel adoption and reduce resistance to change.

 

Closing Thoughts

Though there are many innovative companies competing within the prefab/modular space, especially in the ADU market, the overall opportunity is huge. Demand for the best of these offerings appears to be larger than current production capabilities, hence the increased levels of investment.

Regardless of how this sector shakes out in terms of adoption levels and market shares, we are really excited about the types of innovation that firms like Cover will be introducing to future homeowners. Progress to date has already started to change the mindsets of what homebuyers are expecting from newly built homes. Prefab features and concepts that make us look forward to the future include:

 

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