On Friday, disruptive homebuilder Factory_OS—a San Francisco Bay-area startup that produces low-cost modular multifamily housing based on sustainable building, labor and community principles—announced that it has raised $55 million in Series B funding from a surprising clutch of tech and finance companies. Impact-driven asset management firm Lafayette Square Holding led the round, which also included investments from Autodesk Inc., Citi, Facebook, Google, and Morgan Stanley.
The Factory_OS investment marked the inaugural investment of Lafayette Square, founded just this month with the mission of becoming “the leading provider of impact-driven capital, financing disadvantaged communities, entrepreneurs, and diverse investment talent.”
Lafayette Square Holding Founder and CEO Damien Dwin—who previously founded and led small-and-medium enterprise investor Brightwood Capital Advisors—called it “meaningful and exciting” that Lafayette’s first investment is in Factory_OS.
“Our strategic partnership is a great first step in fundamentally changing the business of housing,” he said. “Looking at the industry from 360 degrees—from design and development, to financing and construction, to resident services and employment—is key to creating a sustainable model that elevates our communities.”
Acting on the belief that “housing should be built more like cars,” Factory_OS takes an “integrated, industrialized and tech-enabled approach” to removing barriers throughout the housing development process.
Ten-day turnaround
To date, Factory_OS has built nearly 1,000 units—including supportive, affordable, student and market-rate housing developments—in the Bay Area, currently the most expensive housing market in the U.S. Besides driving down production costs by 20% to 40%, Factory_OS can erect a 100-unit apartment building in less than 10 days, delivering housing over 40% faster than conventional construction can.
The company expects to cut costs by 50% over the next year as its partnership with engineering software maker Autodesk enables it to further integrate its design, technology and construction processes. That cost savings doubles the amount of housing that Factory_OS can create with the same investment.
“With a shared vision of improving construction outcomes through technology, we’re excited to build on our original investment in Factory_OS to improve the home-building process, from design through fabrication and supply chain management,” said Autodesk CEO Andrew Anagnost.
The capital infusion will enable Factory_OS to ramp up manufacturing in its second Mare Island facility; invest in robotic and other advanced technology initiatives for both facilities; expand into Los Angeles; and open a housing innovation center that will model technology and design advances as well as partner on research and education activities to spur industry adoption of housing innovations.
Working with the established production ecosystem to drive efficiency, quality and equity across the board is core to Factory_OS’s approach. “By retooling multifamily housing production from beginning to end, we’re supporting everyone involved with construction—architects, engineers, general contractors, union workers—to do what they do faster and more efficiently,” said Rick Holliday, CEO of Factory_OS. “We aim to have an impact on housing costs that goes beyond construction, so we’re also engaging with policy and finance players to create a comprehensive framework that everyone can benefit from.”
“Bringing innovation to the sector is vital, as housing instability has worsened amid the pandemic,” said Jeremy Johnson, co-head of Citi Community Capital. “By changing the way housing is built, we believe Factory_OS will bring more efficient and lower-cost delivery of multifamily units to the neighborhoods where we live and work. We’re proud to be a part of this effort and look forward to making homes more affordable for our communities.”
Labor
Factory_OS sees its workforce approach as essential to achieving its vision. Through its partnership with the Northern California Carpenters Regional Council, Factory_OS employs 500 union workers earning competitive wages and benefits. And through its unique training programs with the union and redefined construction process, Factory_OS has expanded the depleted construction workforce to make it more gender and racially diverse and more accessible to a broader employee base.
“As Factory_OS’s first partner, we’re excited to share the benefit of these companies’ expertise in finance and technology,” said Bob Alvarado, executive secretary-treasurer of the Northern California Carpenters Regional Council. “We embrace technology and are proud to work with Factory_OS to grow the workforce, enhance skills and productivity, and create new middle-class jobs with living wages and benefits.”
Factory_OS’s “strongly motivated” Series B investor roster includes Facebook, marking the latest in a series of Bay Area tech giants’ forays into affordable housing investment.
In 2019, Google–which is an existing Factory_OS investor–pledged to invest $1 billion to build affordable housing in the San Francisco Bay Area. As of July 2020, the company had reportedly allocated $115 million of a $250 million building fund (the remaining $750 million reportedly coming from Google’s own land bank).
Last fall, Facebook announced its own billion-dollar commitment to support expanded housing supply for essential workers such as teachers, nurses and first responders. Facebook plans to allocate the pledge as follows: $250 million to a public-private partnership with the State of California for mixed-income housing on excess state-owned land in communities experiencing housing shortage; $150 million for the production of affordable housing (including housing for the homeless) in the Bay Area, specifically through the Bay’s Future Fund; $225 million in land (already owned by Facebook) in Menlo Park to be provided for 1,500 units of mixed-income housing; $25 million for teacher and essential worker housing on public land for school districts in San Mateo and Santa Clara Counties, and other $350 million in funds for support of the aforementioned initiatives.
“Facebook builds and supports communities,” said John Tenanes, Facebook’s vice president of global facilities and real estate. “Our investment in Factory_OS—an innovator building technology to bring down the cost of housing construction—is part of our broader company initiative to help fund scalable and affordable solutions that will help to alleviate the housing crisis in California.”
