Homebound started helping people rebuild after their homes were destroyed by wildfires in California in 2018.
But over time, the company realized that its digital general contracts and “personalized” housing services could also be applied to non-disaster situations, especially in regions with high inventory shortages.
And today, the Santa Rosa, California-based startup announces it has raised $75 million in a Series C funding round led by Khosla Ventures for its efforts to address those inventory shortages with its technology. In addition to equity, homebound also secured on “hundreds of millions” of Goldman Sachs debt† The increase brings the company’s total assets to $148 million since inception.
Homebound’s self-described mission is to serve as a “next-gen” home builder to enable “for anyone, anywhere to build a home.”
Until last April, the startup was solely focused on helping homeowners deal with the challenges and complexities of rebuilding after California wildfires. But in 2021 Homebound extended to Austin, Texas, its first disaster-free market, aiming to learn from those remodelings and apply the same “streamlined, tech-assisted build process” to make custom homebuilding an option for local homeowners.
The move went even better than expected, according to CEO Nikki Pechet, who co-founded Homebound with Atomic managing partner Jack Abraham.
“We realized that what we were dealing with in Austin and other markets across the country was a different kind of disaster, namely a historic housing shortage exacerbated by record migration to some cities across the country that are experiencing some of the worst housing shortages. shortages in the country already embarking on this migration,” Pechet told TechCrunch. “While we had a plan and roughly what we were going to do, we could never have imagined Austin’s insane acceleration or what we could accomplish in what has definitely been the biggest 10 months in the company’s history. †
When Homebound launched in Austin, it knew it had to be able to acquire real estate that it could convert into owner-occupied homes. It also realized that at the pace it was scaling, it needed to double its tech investments. So it went out last year to pick up a $50 million Series C. It ended up with $75 million, plus hundreds of millions of dollars in debt to fund his real estate purchase program. Using machine learning and data, Homebound aims to buy land in mostly off-market transactions.
The business starts by helping a potential homeowner identify land they want to build on, or by helping them find a lot in the inventory Homebound has already built up. From there, through its platform, it can help with everything from architectural plans to design to actual construction. Homebound offers a range of plans that people can choose from, with varying levels of customization.
Construction costs for a typical single-family home in the Austin area start at about $500,000, depending on the size, complexity of the home, lot size, and location. That excludes land costs. Some people also choose to build second units on existing properties. As the Austin housing market has essentially exploded, so has the demand for new homes.
“In most cases, people can build a new house for less than they can pay for an existing house just because of the dynamism,” Pechet says. (Note: The starting figure was originally closer to $300,000, but the city has seen a 46% increase in median home prices since Homebound came on the market).
Homebound’s sweet spot, she added, builds homes that cost between $500,000 and $1.5 million (again, minus land costs).
The construction industry has long been plagued by inefficiencies and productivity problems. And while the industry has never seen such a capital flow, there is clearly still room for improvement.
Homebound believes the “full-stack integration of technology into every stage of the home building process” addresses issues plaguing the industry, from inefficient labor productivity to disappointing customer experiences.
Homebound declined to disclose stats for revenue growth or its valuation, saying only that: other existing investors — including Google Ventures, Forerunner, Thrive, Irongrey and Fifth Wall, plus Deer Park Road, former Amazon CEO Jeff Wilke and real estate developer Stephen Ross — also participated “substantially” in the Series C financing. Pechet said the company’s existing backers were eager to reinvest because Homebound “has done all the things we said we were going to do”.
The startup says it will use its new capital to quickly scale into new markets in the US — starting with Dallas, Houston and Denver — and continue to invest “heavily” in building its own technology platform to “address the drastic imbalance between to fight supply and demand” that exists in cities.
It says: “The result is more efficient projects that are 80% faster through pre-construction, 10% faster during construction and 8x more efficient during the architecture and design phase with an average cost saving of up to 30% compared to other local custom builders.”
Homebound currently has just over 200 employees and also plans to use the new capital to conduct “mass hires across the board.”
“This is a difficult category to build a business in,” Pechet said. “People want to work for companies that matter. But with a housing shortage of 5.5 million, this is necessary. And we expect that one day this will be a multi-billion dollar business.”
David Weiden, founder and president of Khosla Ventures, told TechCrunch that it invested in Homebound for two reasons: the team and the market.
“Nikki and Jack are wonderful founders that we are happy to support,” he wrote via email. “Construction is huge in terms of financial, social and environmental impact with significant opportunities for innovation to disrupt and improve it in myriad ways.”
“And while there are many participants in the building ecosystem, Homebound has a relatively unique approach in terms of breadth and harnessing of technology,” Weiden added. “The value of their approach has been proven and demonstrated by the scale they have achieved so far in a fast and capital efficient manner.”