Can Veev put a dent in the housing crisis?

SAN FRANCISCO BUSINESS TIMES

May 17, 2023

Sarah Klearman

The single-family home at 2701 West Winton Ave. in Hayward is unusual for a number of reasons — the most obvious of which is that was built inside of a 250,000-square-foot warehouse. But even more unusual, and arguably most significantly, it was built in three weeks.

In mid-May, Hayward construction technology company Veev cemented the launch of its single-family home division with the official unveiling of the three-bed, two-bath home at its headquarters.

On May 9, when a Business Times reporter and photographer toured the house, it had already been outfitted with kitchen cabinets, appliances and even, in one of its bedrooms, a sheath of colorful wallpaper – indistinguishable, save its location, from a new-construction home you might wander into during an open house. Furnishing the house was to be completed in time for a May 17 media event.

The move represents a change in strategy for the 15-year-old company, which was founded by Amit Haller, Dafna Akiva and Ami Avrahami.

Akiva, the chief revenue officer, says Veev has set out to create what Akiva describes as “a category that doesn’t exist” — essentially, a manufactured home that feels nothing like a manufactured home.

How Veev began

When Haller founded Veev in 2008, he was considering retirement. An Israeli immigrant, he had sold one of the world’s first Bluetooth chip companies to Texas Instruments for $50 million in 1999, and he had taken up real estate investing. Veev, formerly Dragonfly Group, began as a development company, in its early days building luxury properties in Northern California.

Luck and timing — Haller got in on the back half of the Great Financial Crisis — meant that his investments were successful, but that his planned retirement was going poorly. He was already tortured by the archaic, legacy system that was the construction industry in the United States: Homebuilders were repetitively bogged down by bureaucracy, material supply and labor issues, greatly lengthening the time it takes to get projects out of the ground.

Even today, Haller says, single-family homes take an average of seven months to complete in the United States, meaning developers and builders must try to predict what demand for their product might be like months or often years into the future.

He began thinking about how to fix the system: Was it about materials? Labor? The bureaucratic process?

“Every time I’d think, ‘I’ll fix this, and it’ll be better.’ Then we would hit the next wall, the next wall,” Haller said. Eventually he came to a realization: They would have to take on the whole system.

“Because if you just fix half of it,” he said, “the other half will bite you.”

And thus the modern version of Veev, the tech company, was born.

How Veev homes work

Veev builds its homes out of what it calls panels — essentially a building block containing plumbing, electrical and other important infrastructure that makes for a plug-and-play construction process.

Veev’s panelized system allows Veev-brand homes to be built in about six weeks, as much as seven times faster than conventional construction methods. It’s a concept the company says could easily revolutionize construction — and housing — in the United States and beyond.

“Many times, in the construction industry, if you want better, cheaper, faster, they’ll tell you: You need to choose two of the three,” Haller said. “We managed to get exceptional quality, and we managed to build so much faster than others. We are at price parity.”

The fourth leg of the stool, if you will, is sustainability: Veev says the construction of its homes emits about half as much carbon as traditional construction.

The company is vertically integrated, meaning it houses its own design and production arms, responsible for producing its proprietary panels. It calls the finished materials high-performance surfaces.

The panels are made of a combination of aluminum trihydroxide, a kind of oxidized aluminum, and high quality acrylic. It takes about 90 of them to build one single family home.

Veev expects its factory to produce enough panels to build between one and two homes a day once it’s operating at full capacity.

Veev’s panels are inspected and receive certifications from the state before they’re shipped out to a given construction site, where they can then be assembled with minimal labor. Veev estimates putting the house totether takes as few as five workers, Hampton said, compared with 10 or more for conventional methods.

Veev’s new strategy

Since its inception the company has raised nearly $650 million in funding, according to PitchBook.

“Veev will fundamentally change the way we build and experience homes in this country,” Noah Knauf, a general partner at San Francisco-based venture capital firm Bond, said in 2022, when the firm led Veev’s $400 million Series D fundraising round.

But it’s not been all smooth sailing. In the fall of 2022, less than a year out from its Series D, Veev laid off roughly a third of its workforce — it now has about 250 — saying the move would help it achieve its strategic goals. The company declined to disclose additional financial details.

Among other investors backing Veev: LenX, the venture arm of homebuilding giant Lennar Corp., and Brookfield Growth, owned by the same parent company as development giant Brookfield Properties.

Lennar announced in 2021 that it would partner with the startup on a project it described only as a 102-unit attached home development in Northern California, saying at the time the project, Veev’s largest undertaking yet, would break ground in early 2022.

But Veev pulled out of that project in November of last year, Haller said, to focus on single-family homes.

“That’s where the biggest housing crisis is,” he told me.

I asked him why: It’d been Haller, after all, who described single-family homes in a 2018 interview with the Business Times as “not scalable, particularly in the Bay Area.”

He said the company now sees its single-family product as a building block, a step on the ladder toward denser types of housing. The Lennar project, he said, was pulling its focus away from that pursuit. Lennar did not respond to request for comment.

“In order to solve the housing problem of America, we need to make sure we’re building a scalable company. … This is the best way for us to do that, to focus first on the single-family home,” Haller said. “We totally subscribe to the value of multifamily, townhomes, higher density.”

How to get a Veev home

Veev does not sell its homes to the general public. Its business model is focused on contracting with homebuilders for bulk orders. The homes are delivered to the builders’ sites, and the builders sell the homes as they normally would, at prices based on market conditions and locations.

The company declined to say how much it costs to produce panels for one home, but said sales prices likely wouldn’t differ between one of its homes and a home built using conventional methods in the same location.

Veev said it has “multiple contracts” with midsize and large builders and developers in California and Texas, though it declined to identify specific clients.

The company has already produced roughly 160 single-family and multifamily units, including a 90-unit emergency shelter in San Jose (delivered in 90 days) and a six-unit townhome project in San Carlos. The San Carlos units, completed last year, took some three years to deliver, and each sold for between $2.35 million and $2.55 million, according to property records — not quite an expedited timeline, and affordable housing by no stretch of the imagination, even for pricey San Carlos.

But Veev again points to the fact that it considers itself a tech company, and like other tech companies, improvement takes time and iterations: Think what Apple has done with the iPhone. The company, Haller said, considers those San Carlos units part of Veev 2.0, whereas its single-family division will be the production of Veev 6.0. The idea is that the time savings Veev is now capable of securing for the builders it plans to work with could translate into cost savings that would eventually be passed to homebuyers.

The company, which was previously working out of 50,000 square feet in Union City, moved into its Hayward headquarters at early this year; its manufacturing operations only set up shop there in April. Once the factory is running at full steam — anywhere from a year to two years from now — it will anchor Veev’s eventual expansion into other kinds of residential products, and into other markets in the U.S. and, someday, beyond.

For now, though, the company will turn its focus to single-family homes in California — beginning with the one inside 2701 West Winton Ave.

• Step 1: Veev produces panels, the building blocks for Veev-brand homes, in its production facility in Hayward from a combination of aluminum trihydroxide, a kind of oxidized aluminum. The panels are complete with plumbing and electrical infrastructure, and receive approval from the state while still off-site.
• Step 2: Veev’s panels are trucked to construction sites overseen by homebuilders who purchase the homes.
• Step 3: The panels are assembled on homebuilding sites and finishing touches — kitchen cabinets, ceilings, other finishing touches — are added.

• HQ: Hayward
• Founded: 2008
• Funding:$646.53 million
• CEO: Amit Haller
• Investors: Bond Capital, Lennar Ventures