Vallejo's Factory_OS gets strategic investments to pursue solutions to affordable-housing crisis
As Factory_OS rolls out hundreds of premanufactured housing units from its plant on Vallejo’s Mare Island, the company has received a “strategic investments” from San Rafael-based software giant Autodesk and global bank Citi.
The deal is intended to “address the growing affordable housing crisis in the San Francisco Bay Area and beyond,” according to the announcement Wednesday. An Autodesk spokeswoman declined to specify how much funding the nearly 4-year-old startup received. Factory_OS reported it raised $22.7 million in a federal regulatory filing.
But it’s part of a record level of investment pouring into private construction-technology companies in the past few years, including millions that went to another Vallejo-based modular construction company earlier this year, according to the Wall Street Journal.
The investments expand Autodesk’s existing involvement in helping Factory_OS make its processes more efficient, fund a research lab on industrialized construction, and backs a planned plant that would build housing quickly for natural disasters and other emergencies, according to the news release.
“Autodesk and Citi are playing a critical role in our continued growth and expansion,” said Rick Holliday, CEO of Factory_OS, in the announcement. “We’re proud to stand alongside two companies that share our vision for transforming the construction industry, and care deeply about addressing the housing crisis that exists not only in our backyard but also in urban centers nationwide.”
Autodesk CEO Andrew Anagnost wrote on the company blog that Factory_OS “is dramatically improving the way to design and build affordable housing.”
He noted that the Solano County company is building multifamily housing 40% faster, 20% less expensive and with 70% less waste than traditional on-site construction of units.
After the opening of the Vallejo plant early last year, the software company announced that April that Factory_OS had become an Autodesk Entrepreneur Impact Partner, a software donation program that gave the startup engineering support to digitize its modular construction process and incorporate more lean-manufacturing principles in streamlining design, fabrication and supply-chain management.
The new investments will fund the creation of the Factory Floor Learning Center in the Factory_OS plant, the announcement said. To be led by University of California, Berkeley’s Terner Center for Housing Innovation, the learning center is set to be built in two sections of the 267,000-square-foot factory.
Factory_OS on its website said that it would be renting the space to the center for $1 a year and dedicating a portion of its profits to it. The company committed to making all findings and solutions developed there publicly accessible.
The training and seminar space would be on a roughly 5,000-square-foot mezzanine built overlooking the factory floor, so visiting UC Berkeley architecture and engineering students could see concepts in action, Holliday told the Business Journal on Thursday. The factory penthouse, where periscopes were finished for submarines built in the shipyard of yesteryear, would be public education space.
The new backing for Factory_OS also will help start the process toward creating a “rapid response factory.” The second facility would “explore additional machining techniques and to meet the demand of quick turnaround housing,” according to the announcement.
The company has an option to lease a 110,000-square-foot building behind its main factory, Holliday told the Business Journal. Planning for the second plant is scheduled to run for the next six months then shift to capital-raising to have it operational in 2021.
Just after the main facility opened, Holliday told the Business Journal that a pitfall in past housing manufacturing efforts was pouring too much into automation too quickly. But the company is now in the position to take that leap, Holliday said.
“The reason why I want to take the building in the back and push ourselves there is we don't want it to deplete from the momentum we've developed in the existing factory,” Holliday said. “If we start developed some systems that are more advanced and sophisticated, that we think can inform the first factory, we'll bring them in sooner than we would have otherwise. And I think we kind of want to have it both ways: We want to be able to have a very, very active, forward-leaning program and a very pragmatic existing program.”
Born in 1953, Holliday likened this two-factory approach to the U.S. space program, which was planning to land people on Mars while it was striving to launch astronauts into orbit (Gemini missions) and to reach the Moon (Apollo missions).
“The existing factory are more like Gemini, and the factory in back is more like Apollo,” Holliday said.
Having the UC Berkeley learning center in the factory is intended to accelerate innovation, he said. Autodesk’s connections with the professionals in the built environment and manufacturing and Citi’s links to the world of project finance could help further Holliday’s vision of Mare Island as a must-take 45-minute ferry ride across the bay for professionals attending conventions in San Francisco.
“It’s going to be an easy way to educate the world out of Vallejo,” Holliday said.
Originally eyeing Oakland as the factory site, Holliday was pointed to Mare Island by the carpenters union that now staffs the factory floor. At the time, Blu Homes was winding down its modular housing operations in the Vallejo building.
New York-based Citi is funding Factory_OS through its Spread Products Investment Technologies, or SPRINT, initiative. It’s an effort by the New York-based company’s ICG division, which formed in 2018 to invest in new-technology partners, and Citi Community Capital, which finances affordable housing and community development projects. In 2018, Citi reported over $6 billion in lending for affordable rental housing projects and was recognized by Affordable Housing Finance magazine as the country’s largest affordable housing lender for the ninth consecutive year, the company announced earlier this year.
The Citi connection already is helping Factory_OS scale up in project size, Holliday said. Negotiations are said to be in advanced stages with Munich Reinsurance Company for bonding.
Holliday told the Business Journal in May that Factory_OS produced about 300 units in the preceding 12 months and had $200 million in orders on the books, equivalent to around 1,000 apartments. That includes employee housing to be delivered to Google on the San Francisco Peninsula in September, four projects for San Francisco public-private ventures and an affordable-housing project in Truckee for a Sacramento-area builder.
That that time, he said sizable additional funding was coming and estimated it would allow for the hiring of 100 more employees, on top of a boost in technology. The company currently employs 175, including a second shift of 20 that stocks the factory to keep the first shift more productive on the construction line, Holliday said. The addition of more workers to have a full second production shift is set at this point to happen in the first half of next year, he said.
Anagnost wrote that 60% of that workforce haven’t worked in construction before.
Construct-tech ventures got $6.1 billion last year, up from $352.1 million 2016, according to CREtech figures cited by the Wall Street Journal on July 2. The paper said this year is expected to bring even more backing, and investment bank Goldman Sachs has been among the most active funders in this space.
In April, Goldman Sachs’ Urban Investment Group led an $11 million round of investment in iMod Structures, which is operating from another large former naval shipyard building across the street from Factory_OS.
Jeff Quackenbush covers wine, construction and real estate. Contact him at firstname.lastname@example.org or 707-521-4256.
This story was updated July 11 with comments from Factory_OS CEO Rick Holliday and July 19 with the amount of funding received, as reported in an SEC filing (hat tip: CrunchBase).