A Reflection on My Past Home Technology Theses
by Chris Langford, Partner
I have often told the story when I first meet someone professionally that I have been “accidentally” involved in the housing industry for nearly two decades. Out of business school, I joined a boutique investment bank in Florida during the housing boom of the mid-2000s and by virtue of the times I worked on M&A and financings of homebuilders, building product distributors and specialty contractors. It was a great way to learn the inner workings of each industry by themselves and also the inter-connected nature of the industries across the value chain. From there, I moved to Charlotte and spent nearly a decade at Lowe’s where I was fortunate enough to hold leadership positions in Business Development, Strategy and Corporate Development before being tasked with building Lowe’s Ventures.
Our goal at Lowe’s Ventures was to use capital from the parent company to gain access to first-hand learnings from people who were building the future of homes and retail. The allure of investment from a large strategic got me access to 100s if not 1,000s of brilliant minds each year working on every facet of innovation surrounding the home. It was from these conversations where my “real job” started; stitch together the learnings from these disparate conversations and experiences into a digestible narrative that predicted the future of these two major industry clusters and developing actionable strategic options that the company could take to capitalize on these futures.
To do so, I developed a strategic construct from which to gather, synthesize and report these findings back to the mothership. In today’s VC nomenclature, these were my first theses on the Future of the Home. My original framework focused on what I deemed “the lifecycle of a home” and included four stages: homebuilding, transacting for a home, maintenance and improvement and the consumption of housing. As I look back on my theses through the lens of a nearly complete first fund cycle, two things struck me:
- My training as a strategist and banker enabled me to perform quite admirably on predicting major trends
- It was time to refresh them with an eye towards what I felt would be the most investable trends for the NEXT fund cycle
The Past Theses, How They Fared and A Key Learning For Future Prediction
As I mentioned before, I used a “lifecycle” of home framework in an effort to simplify the collection, synthesis and ultimate reporting of data. This ended up being both a feature and a bug. The feature aspect was that it was easy to report and it was relatively easy to categorize startups under this framework. The bug was that it created a very rigid viewpoint that limited other POVs that were just as important (i.e. viewing a home by occupant type, location or use). While serving as a strong way to ensure limited overlap in theses or strategic options, it often oversimplified things or limited our ability to articulate more complex themes. As such, the process for developing my new set of theses (to be described in my next post) was modified.
Previous Homebuilding Thesis: Automation and digitization of the jobsite would shepherd in an era of strong productivity gains in homebuilding that will drive greater access and affordability. Yikes. This one was a bad miss. I overestimated many things here ranging from builders’ willingness to change to VCs willingness to fund things with greater capital intensity. I expected that robots would be prevalent on jobsites, a much larger share of homes would be built offsite and labor and land use optimization tools would have reduced the cost and time to deliver new homes. Got this one wrong. (Rating: 1 out of 10)
Previous Transactions Thesis: Homes will increasingly become liquid assets and the shrinking discount for lack of marketability will make people more nomadic while also increasing institutional appetite to own housing assets. Nailed this one. Liquidity has four major components: time, cost, certainty and the ability to produce interim dividends. All four elements of liquidity have created unicorn companies and several major institutional asset managers have gobbled up homes. Hard to say if a more nomadic population was created as a result of this or just benefitted from it when COVID hit but some of that has panned out. (Rating 9 out of 10)
Previous Maintenance and Improvement Thesis: Greater access to data, content and labor will make owning a home easier than ever before either through the enablement of DIY or the simplicity of “Housing as a Service” models. This one is a solid mixed bag. Access to inspiration and DIY content has grown and the ability to find and book contractors has increased substantially and both categories produced several unicorns. However, I would have expected more progress on several fronts from aggregation and utilization of home data to intelligent home systems and ultimately to fully outsourced home management services. I’m still hopeful that this is just on the horizon but the challenge is that no matter how much technology you throw at much of this it is often a human problem. (Rating 6 out of 10)
Previous Housing Consumption Thesis: Flexibility in housing will be a highly desired trait but the current housing stock will require substantial re-imagining to accommodate. Another directionally correct prediction but with mixed detailed success. The pandemic has absolutely spurred desire for flexible housing as more people are using homes as offices, gyms, doctor’s offices and entertainment venues than ever before. However, I was soundly wrong in predicting a greater desire for co-living in urban environments or for transformational innovations in senior living and aging in place. In the end, this segment produced limited direct investment success with wins only as you moved more tangentially in home exercise equipment or video conferencing. (Rating 6 out of 10).
So What’s Next?
The housing market is the largest asset class in the world and as VCs turned their attention to this sector in the last decade it has produced many exceptional investments (AirBnB, OpenDoor, Thumbtack and Hippo just to name a slight few). But there is so much work to be done to make building, buying and owning a home easier. The next decade will deliver AT LEAST as many unicorns and I still believe the potential to create the world’s most valuable company lies within the sector.
So what’s next? I’ll do my best to predict that in my next post. Stay tuned.