The Pomp Podcast - #704 Building Beautiful Affordable Housing w/ Alexis Xavier Rivas

Starting point is 00:00:00 What's up, everyone? This is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Alexix Xavier Rivas is the co-founder and CEO at Cover, a company focused on using technology to build beautiful, affordable housing that everyone would aspire to own. In this conversation, we discuss housing, technology, first principles thinking, hiring, architecture, backyard homes, and much, much more. I really enjoyed this conversation with Alexis, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is OKCoin. If you haven't started building your crypto portfolio on OKCoin, there's no better

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Starting point is 00:03:47 purposes only. All right, guys. Bang, bang. I'm here with Alexis. Thank you so much for doing this. Thank you for having me, Pop. All right. Let's start with this housing problem. Obviously, I think a lot of people are waking up to the idea that the housing problem is really, really bad in America. How bad is it and what's driving the problem? Yeah. I mean, housing is super broken. I mean, we have like a shortage of 5 million homes in the United States. It's growing every year. And the problem looks like it's getting worse. And that's because there's a shortage of skilled construction labor. And the labor population is aging in construction. Got it. So basically, we have people who want to build homes,

Starting point is 00:04:26 they have to go get materials, and then they also have to get construction teams, human capital. And in the short term, maybe there's problems around the cost of lumber, whatever these products are but that hasn't been kind of a long-term uh problem that's more recent the really the long-term problem is that you've got this uh cost of labor and you're basically making the argument that there's two things one is they're getting older who have these skill sets and so they're becoming somewhat more scarce and that's driving cost up and as you drive up cost it becomes harder to actually build a home for something that's affordable price yes exactly and when you think about the construction industry in general how much of this is like what i would

Starting point is 00:05:05 consider like general labor. So somebody who is going to do a kind of rudimentary carpentry skills or lay bricks or whatever, versus an electrician or something that people might say, Hey, look, that needs more of an education, more of a kind of apprenticeship type education in order to be able to actually do that live on a job site without anyone there to kind of look over you. Yeah. Conventional construction is, is a lot of that skilled labor, right? Even, even a carpenter It takes years to get good enough to, you know, do a kitchen and it looks great. And so most of the cost comes from that skilled labor. And even the areas that are, you know, less, require less training and education, there's still an apprenticeship type approach, right?

Starting point is 00:05:51 Like laying foundations, form work, mixing concrete, all of that. You know, it's not rocket science, but it's not like you can, you know, watch a YouTube video and then go do it. Absolutely. When we look at the housing problem, there's construction. Walk me through what does that construction process look like? If we just want to build, let's just say that we're going to build a two bedroom, two bath home. How much does that cost the consumer? And then what does that timeline look like from the day somebody says go to it's actually constructed, somebody can move in? Yeah. So with the conventional process, it's extremely fragmented. And the first question that you have to ask is, what am I even allowed to build from a zoning standpoint? And that's where

Starting point is 00:06:35 you would either go yourself to the city, go start talking to people, spend hours just waiting in line. And then you might get the same answer. You're probably going to get different answers if you go on two different days and talk to different people. So that's the first part of the problem. Or you can hire a zoning consultant or an architect to go do that research for you and spend thousands of dollars. And what you'll learn from that is, how big can you build? Where on your property can you build?

Starting point is 00:07:01 And what can you build? What's the maximum number of bedrooms? All these restrictions, right? Height, all of those. And then from there, you go into the design process. And so conventionally, you do this design process, if you can afford it with a good architect and an engineer, or you go straight to the general contractor.

Starting point is 00:07:18 But this is an iterative and expensive design process, especially if you go with an architect and an engineer, which is what you need to get, you know, the super, super nice, super high end kind of home. It's an expensive process because you're going, you're going and you're doing iterations. And for each iteration, you're spending, you know, 200 bucks an hour. And so that adds up and that takes months. And then you submit the permits, you wait a few months to get your permits back. And then you work with a general contractor and that general contractor manages a army of subcontractors. These are the foundation, the crew, the framers, the plumbers, the electrician,

Starting point is 00:07:56 you know, the kitchen subcontractors. And they're managing that whole team until the project is done. The issue with that is that if one of those teams is delayed or they prioritize another customer over you, now the whole project timeline is completely screwed because everyone had allocated time for your project. Now they need to be pushed back because, you know, the framers can't, you know, or the painters can't start until the drywall's up, you know, and these dependencies. And so you have this timeline that goes way, you know, takes way longer, much more expensive than you thought. And, you know, the norm is that it's twice as expensive and it takes three times as long as what you expect. And it's actually true, which is crazy.

Starting point is 00:08:43 And when they do this, you got to go through the zoning process. Then you've got to go through this architect? Uh, and is that because people want something that's original or is that because literally there isn't just like, Hey, here's five plans. Just pick one of the five and then run with it. Yeah. I mean, you, you could go to your general contractor for, for most buildings and just for most homes and just do the designs with them. Um, but usually it's because you want something that's tailored to your needs, but also each property is different, right? You might have a 50 foot wide property. You might have a 30 foot wide property and those two properties, you know, It's just not going to make sense to build the same home.

Starting point is 00:09:18 And so once you decide, okay, this is the design that I want. Let's say you went through an architect and you've got the engineer and you say go in, let's say LA where you all are. Is that a six-month process, one-year process, five-year process? How long does it take from the second somebody breaks ground and they've got the zoning in place, they've got the architect plans, all that ready to go, to somebody who's actually moving into the home? So with conventional construction, that's typically for like a one-off home, you're not a professional developer, that's typically a one-year to two-year process from when you break ground. Okay. And what is the average price, do we think, kind of across LA? Let's say two-bedroom, two-bath. Is that $500,000, $200,000, $2 million? Where do we kind of come in at, you think? So this is where it gets tricky. In a city like LA, where land is expensive, housing is expensive, often people put more into the finishes. And so you are looking at at least $500,000,

Starting point is 00:10:22 but more often you're looking at a million dollars for the construction of a new home. Okay. So I would expect that in a place like LA. So let's just say a million dollars as a general directional. It's more expensive than other places in the country. There's also a lot of challenges in terms of zoning. Everyone wants to do crazy stuff and I'm sure that they're going crazy trying to prevent people from doing that stuff. But there's also like a very big homeless population. And is that in relationship because they're strict zoning and they won't allow for the building out of more homes? So for example, San Francisco, I think is kind of more egregious in that one of the big things people complain about is they say, hey, they won't let us build

Starting point is 00:11:00 up, meaning higher high rises. And also they won't allow us to build in certain areas. So what you get is a net negative amount of homes being built compared to what is needed. So you're actually building less homes than you need just to keep up with regular population growth. And because you're actually lagging so far behind, there is this constant delta between, hey, we already have a homeless population. They don't have a home. We can't build affordable housing fast enough. And so we're actually falling further and further behind the problem, which doesn't seem to have an end in sight is that similar in an la type area yeah it's it's it's the same core problem i mean the homelessness issue it's a it's a it's a complex issue that's

Starting point is 00:11:41 one big driver it's just housing is extremely expensive right and and there's and it's it's not getting better right now yeah well inflation and other things don't help either yeah but so probably only gonna get worse let's talk about cover um i when i first met you uh was blown away with just like hey look there's this problem and most people are gonna go solve that problem with what I would consider like an elementary view of, oh, we need to build more homes. Like, let's just go build more homes, right? And I'll build a construction company and it'll be amazing. You and the rest of your team have taken much more of what I would consider like a first principles thought process to what is the core problem that is limiting the production of more

Starting point is 00:12:18 homes and how do we solve that? And so kind of talk through like, what is that original idea for Cover and kind of how do you guys think about it today? Yeah. So I come from an architecture background, right? And, and I, from, I always wanted to build homes. Um, and I worked with my grandparents closely to build their home, saw the process from their perspective. And it was exactly what I said earlier, which was, you know, it took twice as it costs twice as much as what they expected and took three times as long. And it was shocking to me because they didn't want anything crazy. They just wanted a, you know, a nice home that was going to last long. It was going to be well-built, um, and that it was, you know, thoughtfully designed. They didn't want anything

Starting point is 00:12:58 crazy. And then I also saw that problem, went and worked for architecture firms, see what was going on behind the scenes. And what I realized was it wasn't just they had a bad architect or they had a bad team. It was a structural problem with how the industry was set up. And what that structural problem is, is it's fragmented. There's all the different parties involved. They're not working under one roof. They're not even working towards the same incentives, right? They're all charging hourly and saw that problem and started asking the question, you know, why aren't homes built like every other product in our lives? What do you mean by that? Built in a factory. Yep. Right. Like your clothing, your, your furniture, your electronics, right. It's all built in a factory

Starting point is 00:13:48 car. Um, and as a result of that, it's abundantly available. It's low cost. There's very tight quality control. And, you know, why aren't homes built that way? That's kind of the question that ran through my head. And so I started, you know, Googling and learned about this industry called prefab. I was like, oh, people are trying to do this. That sounds really cool. So I went and worked for a prefab company thinking that they had the solution to this problem. And what I learned was that while they were building homes inside of a factory, all they had done was taken the conventional home building process and replicated that same process inside of a factory. So they were still building, you know, with plumbers and electricians and carpenters, all using

Starting point is 00:14:27 conventional tools and materials. They were just doing it in the factory rather than on site on the land. And they would bring those pieces there and then construct them. But ultimately, it didn't really solve the time cost and like efficiency standpoint. It was more so just we're not going to do it on site. We're going to do it in a factory. So it appears like it happens faster, but not really yeah it it appears like it happens faster there's some efficiency gains by having you know everyone working in the same company it wasn't you know completely uh you know but the efficiency gains were marginal you're looking like you know 10 percent more efficient than conventional construction um which is good but that's not enough and so so i started asking the

Starting point is 00:15:09 question you know what would it look like if homes were actually designed from the start to be geared towards manufacturability from the start right to be geared towards the factory tooling the machine the process from the beginning because nobody had actually redesigned the physical home for that um that's that because because every product you know your car um it's the the design of the car is so that it can be manufactured incredibly efficiently and it's designed with that in mind from the start that hadn't been done for homes so that's kind of the the core insight That was the core insight. And at that point, I started looking at other companies, touring their factories, talking with people, learning about the space and realized nobody had actually redesigned the home from the ground up.

Starting point is 00:15:59 And so that's what we're doing. We're redesigning the entire home building process from the ground up to be geared towards manufacturability from the start. And I think one of the big differences, and this is where, yeah, one of the big differences is that unlike a car, unlike clothes or furniture, where it's the same product over and over again, because properties are different, because the sizes are different, homes have to have customization. And so then how do you do that customization at scale, right? That's a hard problem. And when you think about this, walk me through, okay, I buy a piece of land, I want to put a house there, or I've got land in my backyard, I want to put some sort of structure there. I say to Cover, hey, I would like to potentially work with you. What is that process from day one to, okay, now we can actually put furniture in and move in or use the structure? Like, what is almost like the customer journey, if you will, that makes this so powerful for them? Yeah. So, so the first step, right? When you, when you want to build, you can with at no cost, go on our website, type in your address. This is, this is for Los Angeles where we currently serve and immediately know up to how big you can build. And, and yeah, you can, you can immediately know up to how big you can build and what you can build. So just by typing in your address and telling us what you want to build. So that's the first step, right? We just make it simple. Then once you say, okay, great, you know, sounds like I can build what I want, pay $250.

Starting point is 00:17:36 And then we create three custom designs for you based on what you fill out in our digital design profile. And so that's a series of 50 to 100 questions about what you're looking for. So, you know, what's your budget? How do you want to prioritize between the bedroom spaces and the living spaces? How do you want your home to relate to the neighboring structures in terms of privacy? You know, all the questions that a great architect would ask. So we do that. Then you say, you know, I love this design.

Starting point is 00:18:07 You put down a $20,000 deposit. We permit it. Once we get the permits, we manufacture it. We do the foundation work. We manufacture the panels for our factory. We ship the panels on a regular flatbed truck. We don't need, you know, an oversized permit. so it's flat-packed, and then we install it on your property.

Starting point is 00:18:27 We don't need massive cranes that, you know, if you have a tree or if you have power lines, those will get in the way. We just, you know, carry them with carts and then lift them into place. And that install process today is a month. Got it. And so you're essentially taking the software process that technology companies have used forever in terms of creating systems, being able to use technology to do a lot of work rather than have humans do it. And it drives all this efficiency. It also, both from a time perspective and a cost

Starting point is 00:19:02 perspective. But let's go back to that example of like a two-bedroom, two-bathroom house or structure that you guys would build. What that looks like is from an installation time period is a month. From a cost perspective, what does that look like compared to, let's say, million dollar uh home in la yeah so you know a two bedroom two bathroom home you know we can do that for half a million dollars but it's going to be the type of which is which is actually expensive like in the that's a lot um but it's at the level of quality that would cost you with conventional construction around a million you know we're talking about sub-zero wolf appliances super high-end finishes everywhere you know it's like super clean design so we're starting off with a

Starting point is 00:19:49 high-end product um and we're making way easier and less expensive to buy that high-end product but it is still a very high-end product so i'm gonna say something which i don't know if is uh you're gonna agree with or not but uh after we talked and i looked at what you guys were doing um i decided i was gonna invest in the business but the reason i don't know if i ever told you this was like it seems like you're following the exact same model that a tesla would follow which is go to the high-end product build a great product it's expensive but as you build that high-end model you're basically using the luxury pricing to subsidize the creation of this entire system the back end the team the technology etc and over time you can actually drive down stream

Starting point is 00:20:33 in terms of you go from making half a million dollar homes to eventually you know i don't know 100,000 or less. And there's still some level of quality that is associated that people would expect to be much more expensive. But now you're able to do that because you've got technology team training, short time to install, like all these advantages that are going for you that you perfected at the high end of the market, but now you've kind of brought it down and almost democratized access to it to everybody else. Exactly. Okay. So very similar type of strategy that they followed now just doing it with prefabricated homes yes okay when we start to think about where you guys are today you've already built some of these homes you already

Starting point is 00:21:12 have some of them on display in certain areas in la uh talk to me about what those homes have inside of them right so are they two bedroom two bath on average like when i walk into one is there like a pool out back and there's like a rooftop or is it kind of what i would expect with hardwood floors and marble countertops, like just describe what these homes kind of look and feel like. Yeah. So these, you know, these homes are clean design, large floor to ceiling windows, large windows, sliding doors everywhere. Um, you know, every bathroom is well lit, bright, um, spacious. We pay a lot of attention, a lot of attention to the small details, right? So, um, how materials feel, um, how they integrate with each other and how do

Starting point is 00:22:03 we eliminate visual clutter so that a space that is actually relatively small, you know, say a thousand square feet feels much bigger than it really is because not all square feet are created equal. What do you mean by that? Well, I mean, you can have a 2000 square foot home that feels like a thousand square foot home because it's poorly designed and vice versa, which is what we're doing. Okay. And why is it that your team is so effective at doing this, right? Like what, what background or what thing do you know that other people may not have figured out in the prefab home sector or just in construction in general? Yeah. I mean, we have a, we have an insane team. It's, it's, it's, it's crazy team. These people have built, you know, they were at

Starting point is 00:22:44 SpaceX, Tesla, top tier architecture and construction firms, you know, did the Apple campus structural engineering for the apple campus in cupertino you know all of these all these different things um and we're pulling together this expertise from industries that haven't worked on this problem before and we're putting them together on the same team and we're and we're giving them a hard problem and they're solving it right um you know people that yeah yeah and those people come together how much of the team is what i would consider technologists in terms of they're either using some sort of software or technology platforms to do design and kind of cut down on a lot of the time or cost versus more of folks coming out of the

Starting point is 00:23:31 construction industry where they're more architects or actual, you know, installation teams, things like that. Yeah. The majority of the team is from the, on the technologist side. So people that worked at like Google, Amazon, SpaceX, Tesla, and are, you know, manufacturing engineers, mechanical engineers, software engineers, and they're figuring out, you know, okay, here's the problem. How do we automate? How do we design for manufacturability? How do we design tooling that makes this scale really well? Why can't the incumbents do this? Like, what you're saying isn't, nothing you're saying is like shockingly abrasive, right? Okay, we get the time down we get the cost down right we spend more time almost being thoughtful and thinking

Starting point is 00:24:14 kind of from first principles and then we build repeatable systems in order to uh replicate this literally over and over and over again and oh by the way we also happen to do some really uh kind of what appear to be simple things maybe i'm just naive uh if you type in an address we can quickly hit an api and say here's what you're allowed to build in this area here's what you're not allowed to build um it feels like none of that is like crazy or uh quote-unquote rocket science but nobody seems to be doing it so like what what is the uh the difference there like why you guys and not the incumbents so i mean yeah it as soon as i kind of understood the problem i agree it was it was like obvious right like this was the solution um i think for for someone that has

Starting point is 00:24:59 been building homes for decades right which is what these incumbents have been doing thinking of a way to build a home without drywall for example is just they can't think of it right they're so stuck in the conventional way of doing things um and then the other the other thing is actually that most of these home builders especially the large ones i mean there's so let me step back a sec there's your local general contractors right if which if you're in la and you're gonna tear down and rebuild the house that's you're gonna go to they don't have the resources to do what we're doing right we've we've raised venture capital dollars we've put together an insane team they just can't do that right you can't do this with two people it takes a team so

Starting point is 00:25:40 they can't compete and then when you look at the large home builders um you know the the build 10,000, 50,000 homes per year, they just, I mean, most of them aren't actually vertically integrated. Most of these large home builders are just working with other local general contractors to do this. And they want to do this kind of innovation, but they don't have the technology know-how and mindset. And is it something where once you show them how to do it, they can replicate it? Or is this like a, a difference in DNA, right? Like I think a lot about, um, in software, if you're building, I don't know, let's say a social application, you could pretty much call up almost every other social media company and say, Hey,

Starting point is 00:26:28 guess what I'm doing and tell them. And they literally be like, all right, sounds cool, dude. I got to go. And they won't do anything about it. Right? Like, like there is this element of, um, you know, if you look at all of the, uh, the rise of ephemerality in social media, Like somebody had to go do it, prove that it worked, and then everyone kind of was a fast follower and tried to copy it. If you look at things like newsfeed, right, sure, theoretically in hindsight makes a ton of sense. Somebody had to go do it, and then it made sense. And so I think that like it feels like what you're doing is very similar, which is almost the incumbents are in a little bit of like an innovation or innovators dilemma, right, where like the innovation is so counter to the way they think. it would violate everything they believe to go and do this and so that kind of boxes them out

Starting point is 00:27:12 from really kind of attempting to compete today yeah i think it yes yeah it's hard for these incumbents to you know they might understand it at an abstract level what we're doing right we're replacing um broken fragmented processes with vertically integrated process driven by technology. They understand that, but they don't really know how to build that technology because they don't have that in their DNA. They're not innovation-oriented companies. They're execution and volume-oriented companies. When you think about your progress to date, how many people do you have? How much money have you raised? And what are the milestones where you're like, okay, from the day we started to where we are today, here's the milestones that

Starting point is 00:28:02 we kind of checked off along the way yeah so so we just raised a 60 million dollar series b led by gigafund and we had you know existing investors founders fund valor general catalyst 50 years uh and you uh you know coming in as far as like milestones right the first step was just developing your product right and we did that with our seed round we developed the product we built a few of them for real customers we got some real feedback and we've continuously improved right and then uh with the series a which was led by founders fund and lenore actually which is you know the largest home builder in the country so they co-led the series a with that with those funds we took our install time down from 120 days down to 30 days we tripled the speed

Starting point is 00:28:52 um so those those are some of the kind of like high level milestones we're about 50 people now why is lenar the largest home builder in america investing in a startup that no one knows about in the home industry right that is it out of fear is it out of uh uh learning is it out of economic gain like what would you talk to me about like why you think the philosophically this is interesting to them i mean i think you said it earlier as far as you know the innovators dilemma, right? They see this problem in terms of, you know, home building hasn't changed in 100 years. There's got to be a more efficient way. They see the inefficiencies. They also see the labor problems, right? And this isn't just Lennar. This is all the large homeowners. They're facing

Starting point is 00:29:38 an issue in terms of not being able to meet the demand for homes, right? There's a 5 million shortage of homes. They can't meet that demand because there isn't enough skilled labor out there that can build those homes. And so we solve that by taking a huge part of the process and moving it into the factory where you can put efficiency tooling automation behind it and make the process faster. So we solve that core problem that home builders have. And then the $60 million that you just raised in the Series B, what are you going to do with that money? Where does that get you? A lot, a lot more, uh, R and D and, and, and like not, you know, theoretical R and D we're talking about building homes, testing them, uh, and, and getting them to be even faster, even more

Starting point is 00:30:24 efficient, uh, before we go and, you know, scale up and build a factory that can build 10,000 of these. And the idea is if we zoom out, let's say 10 years from now, uh, I want to build a structure, whether it's in my backyard or it's my entire house i can come to you i can answer my 50 to 100 questions you basically spit out back to me uh hey here's three potential things that we could build for you i say yep i like option two and in 30 days i go from all right here's the foundation has been laid to uh the actual property is ready to be moved in and inhabited or do we think we can get this down to 20 days 15 two days like walk me through kind of where you ultimately think you can get it to i think if we if we take out the regulatory constraints of zoning and permits okay

Starting point is 00:31:17 i think we can get it to under a month for sure probably around two weeks okay total and the regulatory approvals and all of that is there a world where you all can make a dent in that in terms of uh accelerating somebody getting uh approved i'm assuming and again uh i'm somewhat naive and ignorant when it comes to some of the zoning stuff in various cities. But if you're building the same size structure, right, you may change some bells and whistles or kind of what it looks like. But if you're essentially building maybe three types of the same thing, can you almost get the pre-approvals where it's, hey, if it's within the zip code and it's within this structure size, we already know it's just, yes, it's approved, it's approved, it's approved.

Starting point is 00:31:57 Or is there still going to be a highly bureaucratic process where it's kind of one-off and somebody has to go out to the property or do something like that? Yeah, I mean, there's a lot of things that we can do to simplify it. Even with custom designs, we can get our system approved and work with the cities. It really comes down to the local city governments wanting to work with us and wanting to build homes. because at the end of the day, you know, it's a local issue. So we can do that, and there aren't any kind of like first principles, like core reasons we couldn't do that. It's not like they're doing months of, you know, an engineering analysis on the permits.

Starting point is 00:32:35 You know, they're actually spending between two and four hours per permit, right? So even though it takes six months, they're not spending more than two to four hours on that. um you know this is where we want to work with cities to solve their housing issues by making the process more efficient and working with software maybe create maybe creating an api that that you know we can tap into on their end and all home builders can use uh to get instant approval i'm fascinated by this idea of private companies starting to put a dent in the bureaucracies of the kind of public organizations and not from a we want to do your job for you, but from a this would

Starting point is 00:33:16 make it easier for us and all of our peers and competitors to work with you. And therefore, we have the resources. You don't let us help and build something. A great example of this was recently Flexport. The CEO went out on a boat in L.A. and basically identified, hey, there are two or three you know things that probably make sense in normal times from regulation standpoint but if we were to change these i think that we could drastically accelerate uh kind of getting all of these ships into the ports unloading them and getting the supply chain kind of unscrewed up and i'm willing to volunteer my time and my team's time to go ahead and help do this and the regulations were things like they have basically like shipping containers or connex boxes

Starting point is 00:34:01 that can only be stacked too high. And he's like, hey, we should stack them four or five high. Again, there's good reason why it's only too high during normal times. Right now, we probably should increase it. And he took to Twitter, so his team didn't even necessarily build any technology or do anything,

Starting point is 00:34:14 but he was able to drastically create change by kind of bringing awareness to the issue. The second step of something like that is like to actually go build technology for them, right? It sounds like there's an opportunity, whether it's you or somebody else in the industry, to say, hey, look, one of the ways that would be much easier for us

Starting point is 00:34:29 to operate and kind of interface with you is through technology here is a thing that basically just take it for free so that we can kind of uh uh loosen up that bottleneck so that we can continue to move faster it's going to lead to more affordable housing more affordable housing solves a bunch of these social issues and therefore like this is good for the government and it's also good for kind of private industry and so like let's go forward is that like a general thing that you think is possible absolutely yeah absolutely what stops us from doing that right now i mean right now we're we're really trying to grow our our software team and our engineering team and we're focused on kind of

Starting point is 00:35:03 like you know the problems immediately ahead of us i see this as like certainly an issue down the road that we need to start working on now and building out that regulatory team and and just the team to engage with the city so that we won't spend months building this tool you know if you're a 2 000 person company you can dedicate a team of 10 to go work on something absolutely we're a 50 person company. We can't do that yet, but we will in the future. And we'll start those conversations with cities so that when we have this tool, we know that it's going to be adopted by, you know, at least half a dozen or more cities. And once you start to look at those roles that you're trying to fill, are there specific types of skill sets or experiences

Starting point is 00:35:45 that you're looking at? You're like, right now I have open jobs. Here's the exact people that I'm looking for. Yeah, there's, there is, it's, it's, it's, it's primarily engineers. Although There's also a lot of operations, production staff and so on, but primarily engineers, mechanical engineers that have worked outside of construction. So in places like aerospace, automotive, software engineers, and from a software engineering standpoint, it's, you know, people that can take, here's a problem, develop a set of requirements and actually build the whole, you know, either microservice or feature themselves. you know kind of deploy a test get feedback either if it's an internal product or an external product you know get feedback from the users and then go iterate kind of independently right so you're not you're not gonna have uh so it's really people that can operate without a team of you know product managers yep is everyone based in la or you have people remotely as well right now

Starting point is 00:36:41 everyone's based in la okay is that something that you guys are going to continue to kind of focus on is bringing people to la to make sure they all work together in one place yeah it's really important when you have such a big physical product. Yep. Yeah. Makes sense. Talk to me about this idea of execution is marketing. I saw a tweet from you recently. Uh, you were, uh, from my understanding, leaving one of the cover structures, uh, and there was somebody walking by who had no clue that you were affiliated with cover whatsoever. And they basically were like, wow, that house went up really fast. Uh, and in some way that's like marketing exactly what the value proposition is. Um, but you didn't spend any money to do it. It was just like, people saw how quickly

Starting point is 00:37:18 it went up like how do you think about that in terms of virality and customer acquisition and kind of like spreading the word of mouth yeah i mean we would much rather spend the limited resources that we have on on exactly that which is execution right and then having that do the talking for us from a marketing standpoint right people see what we're actually doing and they're impressed that's what we wanted that that's what i meant by that Mm-hmm. And when you do this, is there a belief that the majority of customers, these will be their primary homes or this will be more kind of like second structures on their property, right? So remote work is becoming much bigger. I've seen a ton of people on the internet

Starting point is 00:38:00 all saying like, hey, I need to build something in my backyard because I got to get out of my house and I kind of feel like I'm going to the office. It just happens to be the office in the backyard. Like how do you think that these structures end up serving people either from like a more full-time basis or more of like a office type thing on their property? Yeah. So today with the focus on backyard homes, it's a mix, right? We have some people that are building them for personal use, right? So just like an office, a workout space, you know, that kind of thing.

Starting point is 00:38:28 The other use case is people actually renting them out to someone else or having a family member live in them. So a mother-in-law or a parent or parents living in the backyard with them, right? Instead of moving into a retirement home, for example. So that's a big use case. And then the other option is actually for someone else to live in it and generate rental income and support their mortgage, right? You can build one of these, and now all of a sudden, you know, living on your home is less expensive. Because it'll pay for, you know, more than the cost of whatever the loan is to pay for, you know, the $250,000 backyard home.

Starting point is 00:39:05 It'll generate more rent than the cost. Absolutely. That makes a ton of sense to me. and so when you think about building this one of my big questions is always like okay cool sounds cool uh you got a small little house like why don't you live in one but you do i do so explain a little bit about like the idea of you being uh you know running this organization but you literally live in one yourself and like why that's so important yeah so so i moved into one it was two years ago uh the homeowner was like you know they built it to generate rental income

Starting point is 00:39:37 And then they asked us, do you know anyone that wants to rent it? And so, you know, I moved in, rented it from them because I was like, yeah, I want to test the product that we're building, right? I want to feel what it's like to live in a cover, right? And see what works well and see what doesn't, right? And improve it. So I lived in there for about a year. Then, unfortunately, they sold the house. So I moved into, you know, a regular apartment.

Starting point is 00:40:01 And then we had another cover client that came up and rented it. And so I moved into that one again. So I've now lived in two separate covers, um, and, and, uh, you know, seeing the difference in the improvements and, and where there's still room for improvement. Um, you know, yeah, yeah, it's been, it's, it's been, it's been, it's been really cool to actually, you know, it's, you know, a lot of companies have products where you can try them every day. Do you ever feel like, um, you're just giving people feedback on how to make your own home

Starting point is 00:40:31 better, right? Like, do you ever like message the team and you're like, Hey man, this doorknob or like, hey this corner and you're just just actually improving your own home which ultimately will improve all of the cover structures oh yeah that's that's a huge that's a huge perk of living in your product is that constant feedback and it's like it's things that you would not notice if you just walk through it for 30 minutes or even an hour right it's like little things i want to before we finish up kind of just look for it 10 15 20 years uh i will give you the benefit of the doubt that you're going to be successful. I'm quite literally financially betting on you being

Starting point is 00:41:05 successful. Um, what is the impact of cover being successful? Right? Like to me, this is one of those companies where forget what you think about construction or any other issue you want to cheer for the company because if it's successful, there's all these like net good, uh, kind of impact to a local community. So how do you think about, okay, if we're successful, here's what changes in a in a local economy yeah i think i think the the first thing is just that we we've raised the bar for the standard of of homes right their homes are higher performing they're more energy efficient they're you know affordable right so we've just raised the bar um and they're stunning sorry can i just read yeah go ahead yeah so the first thing is that we've raised the bar

Starting point is 00:41:55 right homes are stunning they're high performing they're energy efficient and the second they're more affordable right so homes are abundantly available there's no shortage of homes when there's a demand if you know a company opens up a big company opens a headquarters in a new city and now there's demand for 500 000 more homes we can meet that demand within a couple of years right we've changed uh that delay from the demand to the ability to produce homes and as a result of that we have a society and cities that are a lot more dynamic you see a lot more change housing is it's not you know 50 of people's income they have income to spend elsewhere they have income to go on vacation to go to college to support you know their kids and

Starting point is 00:42:39 their grandkids and we've just created a lot more financial stability by making something so basic like housing you know uh abundantly available and affordable and it feels like the affordability of this is only going to become more and more of a conversation as we get this kind of wealth divide in the country, right? And there's all kinds of monetary and fiscal policy nonsense that's going on, whatever. But everyone can come together and say, having more affordable housing is a net positive. How we get there is in question, right? And how much regulation should be in the way versus not highly debated. But really, you guys kind of stand outside of what I'd call the kind of political disagreements. And you just said, listen, you guys figure out what

Starting point is 00:43:21 the rules all are like we're just going to build affordable housing we're going to be really damn good at doing that and when you guys want us to go in somewhere like we can do it we can do it fast we can do it cheap and ultimately this is a net positive for your local community so like you know you kind of should be cheering for us to win here more so than uh uh trying to stop us from doing this absolutely yeah um last question i have for you is have you talked to local politicians or anybody in terms of them uh saying hey we want to actually make this successful like we want to help you guys? Yeah, we have. We've had state senators come to our factory for the free zoning lookup tool launch. And we've engaged with local politicians and members of the city. And there

Starting point is 00:44:03 is support for what we're doing. Yeah. Where can people go to look at the actual designs of the structures or learn more about the company? Yeah, they can go to our website, buildcover.com. Okay. And where can they find you on the internet? They can find me on Twitter or Instagram, Alexis X Rivas. Okay. And when people go there right now, you're only available in LA, but is there a plan or a timeline when you will move outside of LA or are we just sticking with LA for the moment? Right now we're sticking to LA. Um, that's because we're focused on solving, you know, the whole process and the product first before scaling. Uh, but then we're going to scale fast everywhere. Got it. I, uh, I'm really cheering for you to be successful. I think

Starting point is 00:44:49 this is like a no brainer, both from a, here's the mission of the company, but also to, again, I got to just go back to, there's a very kind of deeply rooted first principles thinking that goes on here in terms of, okay, the problem that we're trying to solve actually isn't going to get solved by just going faster, doing what we're already doing. How do we build a scalable system that we can then replicate not only in one single geography like LA, but then if we want to bring this national or international how do we do that right yeah exactly it's it's kind of putting in place the core parts and the core gears of the machine before you can turn the machine on and start pumping them out yeah um all right go follow on twitter alexis x revis uh or instagram and then

Starting point is 00:45:31 buildcover.com uh but i appreciate you coming here and doing this we're definitely gonna have to do this as you continue to grow i feel like this is not gonna be the last time we have this conversation thank you pom thanks for having me

The Pomp Podcast - #704 Building Beautiful Affordable Housing w/ Alexis Xavier Rivas

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