Apartments become Silicon Valley’s hot new thing
Real-estate startup Juno plans to build its projects using techniques familiar to car makers
California’s housing crisis has turned housing development into an obsession for tech giants such as Google and Facebook. Now, more venture-backed startups are getting into the game.
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The latest is Juno Residential Inc., a San Francisco-based company co-founded by Apple and Tesla veterans and backed by Khosla Ventures. The firm, which was founded quietly last year and is to be launched officially on Tuesday, hopes to make the building of apartments more efficient by using mass-production techniques such as those employed in automotive and electronics manufacturing.
(Credit: Juno and Aidan Kim/Ennead Architects)
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Most developers view apartment projects as one-time ventures, each with their own architect, contractors and building materials. In contrast, Juno wants to essentially mass-produce branded apartment buildings across the U.S.
Juno’s buildings will have the same components and basic designs, although some elements, such as building size, facades and lobbies, will vary and look different at different properties. The idea is to make apartment development quicker and less costly in the same way car or smartphone manufacturers save time and money by using assembly lines to make identical products.
The firm, which has raised $11 million in venture funding to date, has yet to start its first development. Co-founder and Chief Executive Jonathan Scherr said the company plans to form partnerships with local developers and is looking at cities including Seattle, Los Angeles, Denver and Salt Lake City. Aside from Khosla, investors include Canaan Partners, Vertex Ventures and MetaProp, among others.
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Juno also hopes to make its buildings more environmentally friendly by using timber instead of steel and concrete, adorning facades with plants and skipping natural-gas-based heating and appliances. The company hopes its use of organic materials will appeal to renters.
Mr. Scherr, who previously worked at fintech company CircleUp and whose father is a retired developer in Boston, said he saw real estate as an industry “that was both massive and very much in need of a different way of thinking.”
The company’s other co-founders are B.J. Siegel, former senior design director for real-estate development at Apple Inc. ; Chester Chipperfield, former global creative director at Tesla Inc. ; and Marshall Everett, a former managing director at developer Advance Realty Investors.
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Juno isn’t the first startup that wants to make the construction supply chain more like manufacturing, and others have run into difficulties. Modular construction companies assemble entire rooms in factories, but the industry has been slow to grow.
Katerra Inc., a California-based company that has raised more than $2 billion in venture funding from investors including SoftBank Group Corp., hopes to make construction more efficient by assembling more building parts in factories, but has run into delays and cost overruns at some projects and recently cut 7% of its staff.
Juno hopes to avoid some of these pitfalls by not making any components itself. While it will handle design and oversee development, it plans to outsource the actual manufacturing of building parts to others, the way technology companies often outsource manufacturing.
Not having to spend time and money to build its own factories will also allow the company to grow more quickly, Mr. Scherr hopes. “We are treating our supply chain like Apple treats its supply chain,” he said.
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The company’s suppliers won’t assemble buildings off-site. Building entire rooms in factories leads to high transportation costs, said Mr. Siegel, who was instrumental in designing and building Apple’s global network of stores.
Instead, the company is taking the IKEA approach: It will ship flat, standardized building components that can be easily assembled on a construction site. “We decided very purposefully to not ship air around,” Mr. Siegel said.
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But the strategy has its own potential pitfalls. The company has yet to prove that its concept works. Meanwhile, the recession has made it harder to finance new construction, lenders and mortgage brokers say.
Still, Zach Aarons, a real-estate investor and co-founder of venture-capital company MetaProp, which invested in Juno, said the startup’s pitch that it can build nicer apartments for less money is likely to appeal to potential development partners. And the recession hasn’t changed the fact that U.S. cities have too few apartments.
“They are still building something where demand is off the charts and supply is massively constrained,” he said.