These Houses Won’t Build Themselves – Transcript

Evan is a young man who dreams of houses built by robots. But he’s not some silicon valley disruptor looking to replace human labor with AI-powered machines; he’s a contractor and builder himself, all too familiar with the inefficiencies in traditional construction. Now he wants to turn his dream of robot-assisted development into a reality, and he’s turning to Marc to find the best way to fund this vision - starting with the building of his own home.

SpeakerTimecodeTranscript
Marc0:04A lot of the funding solutions are predicated on people getting something back and so, that's what I'm trying to understand what the end game is here. Is there some way that someone who does either give you, or loan you, or invest in you, money, that there's a pot of gold at the end of this rainbow?
Marc0:19Hey everyone, I'm Marc Randolph and welcome to That Will Never Work. I've been an entrepreneur for a long time, Netflix, which I co-founded, it was actually my fifth startup. And since leaving there, I've had the opportunity to work with scores of early stage companies and talk to thousands of aspiring entrepreneurs from all over the world. On this podcast, I speak with folks who are at every stage of building their own businesses, whether they're leaping from side hustle to self-employed, or are already generating revenue and ready to take things to the next level, my goal is to draw out their biggest challenges and then try to nudge them a little further down the path toward realizing their dreams. If you've been told, "That will never work," as much as I have, you've come to the right place. Together we'll prove the naysayers wrong.
Marc1:11Today's guest, Evan, is another young self-starter with a dream, houses built by robots, and he's approaching it from a unique perspective, that of a contractor who builds houses for a living. As such, Evan has seen all the ways in which the construction business is ripe for disruption. His solution, put his money where his mouth is and build a robot enabled spec house. Now he just needs to get the right partners involved to help fund the effort. Let's listen in.
Marc1:47Evan, thanks so much for joining us today. I'm curious to hear what you're up to. So, I think the best way to start would be for actually you to give me a quick idea what you're working on and maybe what you want to chat about today.
Evan1:58Yeah. Absolutely, Marc. Well, thanks again for having me, really appreciate it. I'm 27 and for the past couple of years, I've worked in large regional construction managers throughout New England. There's a couple of things that I've noticed. It requires a lot of human interaction. There's not a lot of things that have been automated yet. There's a lot of softwares that are coming out and there's a lot of hardwares that are coming out, but the hardware has not really been adopted by construction managers yet. And so, what I'm thinking is I see a real opportunity to start a construction management firm, a building company, focused on using this robotic technology and actually designing buildings and then building them with robots. I think people are going to have a real uphill battle trying to get some of these robotic machines into buildings that are designed for more traditional construction methods.
Evan2:50So, what I'm trying to do is start with one prototype house to just prove this concept of building with robots. I've been working with a company called Apis Cor, who has figured out a way to 3D print concrete. What we're trying to do is 3D print a concrete house to prove the concept of robots working on job sites alongside humans and see if that's something that could work. Now, the thing that I wanted to talk to you about and the issue that I'm running into on this prototype house, is the funding. I am carrying this project through design, through engineering, through permitting. I've already bought land. All set with that. I am going to get to a point in the spring or summer of 2021, where I have a permit, I have a full design, I'm ready to go, Apis Cor is ready to go, but I'm not going to have any money to actually build the house.
Evan3:44I'm going to be able to get to that point and then I'm not going to be able to execute. So, I've been looking at a couple of different options, everything from National Science Foundation grants to angel investors and venture capital firms, to the third option, which is the route that I'm taking is just working myself and trying to build enough capital to self-fund the project. So, I really just wanted to talk to you and see what your thoughts were on government funding and grants versus private funding versus self-funding. Any route that I take is going to take a significant amount of effort to accomplish. So, I just wanted to see what your thoughts were.
Marc4:22Wow, well, this is certainly different and I certainly can appreciate what you're trying to do here. This is a crazy segue, but out in Silicon Valley, there is something called the Winchester Mystery House, have you ever heard about that?
Evan4:36I have not, no.
Marc4:37Yeah. It was a house built by the air to the Winchester rifle fortune and she was told that the house was haunted by the ghosts of everyone killed by a Winchester rifle, and the only way that she'd be able to keep the ghosts out was that she could never finish construction. She had to be working perpetually. And so, what this house is, is basically never stopped construction, so it's got all these weird staircases to nowhere and additions that go ... Because she never stopped building. [inaudible 00:05:07] I'm telling you that crazy story is because that's how I feel sometimes, because for some reason I am constantly doing construction projects of one type or another, and even just half an hour before I was talking to you, I was on the phone with a contractor about a possible new project that I'm thinking of taking on.
Marc5:26So boy, do I feel the pain in contemporary construction methodology, which amazingly enough seems like it's still done the way it was back in the 1400s, with maybe you have air compressors which drive the nail guns, but you're still holding things together with nails. And those nail guns are still being manipulated by humans who are using measuring tapes and all these old fashioned techniques. So, I get it, but what I don't get is what's the point? And I mean, what's your point? Because the old saying goes, if you're not really clear where you're going, you're never going to get there. Is the idea for this to be a new construction company, is this to own some kind of IP, what's the end game here for you?
Evan6:11My end game is to own and grow a building company that eventually gets to a point where I have a raw piece of land and I show up with an 18-wheeler or a type of truck, and out of the back rolls a bunch of robots that will completely do all of the work autonomously. I'd love to get to that point and the reason that I'm starting with a house is just to really take that stepping off point and just start with one robotics company and then snowball it and add more and more.
Marc6:42So, I really liked the fact that you're taking the incremental approach. That's exactly right. You got to walk before you run, but what will be the ultimate advantage of this company? Will you be the low cost producer? Do you anticipate these are better built houses? All of the above? What do you think will be this company's main premise once you have it going, once those 18-wheelers are being dispatched, a couple a day, all over the country?
Evan7:06Initially, I don't think cost is going to be a competitive advantage for us just because it's going to take so much money to get this first house off the ground. But eventually, I think it could be, and it's not necessarily costs just because of the cost of materials. I think it's actually the cost savings because of the speed that we will be able to build buildings at. Just to give you an example, what I'm doing with Apis Cor is all we're going to try to do on this first house is 3D print the walls. Everything else is going to be the same. The roof is going to be prefabricated. Trusses are prefabricated, rafter systems, or whatever you want to call it, all the finishes are still going to be the same.
Evan7:42But they estimate that they could 3D print all of the walls for a 2000 square foot house in a weekend, which is crazy fast for just building walls and they're on-site, they're in place. They're ready to go. So, if we show up and we have a bunch of slabs ready to go, we could complete five or six houses in a week and then just come in and put the roofs on and go from there. I completely wandered away from your question. I'm sorry. I forgot it as I was snowballing in my mind.
Marc8:11No, no. You were actually hitting it and help me understand the problem here. So, eventually this leads to you having a company which can build houses faster, cheaper, and more consistently. And eventually, you end up having this dominant position in the construction business. I'm asking these questions because in terms of, as I am thinking about the long question that you asked at the beginning, which is funding, a lot of the funding solutions actually, believe it or not, are predicated on people getting something back.
Evan8:41Sure. Right.
Marc8:41And so, that's what I'm trying to understand what the end game is here. Is there some way that someone who does either give you, or loan you, or invest in you, money, that there's a pot of gold at the end of this rainbow? You're saying one pot of gold is that eventually they've invested into this construction company, which now has this dominant competitive advantage because it can build houses faster, cheaper, and more consistently than contemporary, and all of a sudden you have more work than you can handle.
Evan9:07Right. And I think that the house market, I think that is probably the five to 10 year play. If you're talking serious returns, 20, 25, 30 years down the line, I think robots in construction have the potential to completely change the entire construction business. I mean, we're talking about change the way things are designed, standardizing everything so that the robots can come in and just further take advantage of their speed and the way that they build, and just really change everything about the industry.
Evan9:38I mean, I don't know how much you know about construction contracts right now, but it seems like just from my own experience, there's almost a little animosity between architects and owners and construction managers and subcontractors, because there's so many different interests involved. And so, what I'm trying to do is put all of these great robots and architects and engineers under one roof and create a company that not only designs, but also engineers and also builds, and also completes the work themselves, under one roof.
Evan10:09So, I think houses could be a good entry point, but down the road, I mean, we could do low-income housing, large commercial buildings, and then even farther down the road, you talk about ... I know this is crazy, but it definitely comes up, what if we sent these robots to other planets? And then, you start talking about building on other planets and you just get totally outside the realm of possibility, but it's true.
Marc10:30All right. Back to earth, Evan, back to earth. What I want you to talk me out of is this conception I'm getting, that this is a passion project, or is this really a concrete best next step toward your construction company of the future?
Evan10:48No, I think-
Marc10:48As opposed to throwing things like, "I want to change the way the world builds. I want to change the way architects..."
Evan10:55Right.
Marc10:56Those may be objectives too, and maybe they'll win the Nobel Construction Prize, once they offer one, but to what degree is this a change the world mission versus a, I want to have this company in a number of years?
Evan11:09I don't think those two things are mutually exclusive. I think you can have both of those eventually.
Marc11:14Well, to an investor they are. An investor goes, "If you want to save the world, all power to you, let's go found a foundation who shares your belief." The one that says, "I want to have the construction company," the investor goes, "That's awesome. I'll give you money for an X percentage of it, if I believe that your plans are realistic." Which is why one may produce the other. In other words, if you can build a successful company, it could change the world. Or if you change the world, it could lead to making it easier to change the company. But you would better know, in my opinion, what your primary motivation here is in the long game, but more importantly in the extremely short game, about you're about to build a house and this house is going to cost more probably than a normal house, and you had better have a very strong reason for why you're doing that. That's why I'm trying to press you a little bit on this.
Evan12:01Got it. Got it. I will be completely honest with you, I am only building the house to start a company. The house to me is not really the relevant thing here. The house to me is just the stepping off point to get the snowball rolling. If I look at why I am actually doing this, I eat, sleep and breathe construction every day. I work with a local carpenter in town every day. This is what I do. I see a lot of productivity issues in construction, and I think I can address it, and I think I can do something about it.
Evan12:31There's a lot of people in construction who struggle with physical and mental health because of how monotonous and strenuous the work is, and I actually have a personal experience. I've struggled with mental health myself, so that is very close to my heart, and that is something that I'm passionate about helping these people as well. And then third, I just think this is really cool and I think you could make a lot of money using robots to be faster, to build higher quality buildings and eventually bring the costs down and be competitive on all three of those elements of a construction project and really just grow. I mean, the sky's the limit.
Marc13:11Okay. I have some thoughts about this. So, I'll answer the question in a minute about some thoughts about financing. Let's go back to there in a second. But the big point I want to make for you, is this one about being clear what you're trying to do, or more specifically, if you were saying, "I am a multi-million dollar eccentric and I'm building this house and here's why I'm doing it." I would say, "All power to you. Do what you want." Howard Hughes wanted to build the largest wood built plane in the world and he had the money to do it, and he could care less whether it was going to be commercially viable or not. You're saying, you are not in that situation. You need some people to help you make your dream come true. And people who give money to people like yourself do so because the money aligns with their own interest.
Marc13:59That's why I keep saying you really need to maybe not even be clear in your own mind, I don't even care, but you've got to be clear externally what you're doing and why you're doing it. And I don't care about those, but what you want the money for, and then what the return on that is. And there's kind of a black and white decision here because if you say, "This is a demonstration project," the money can come from someplace else. And everyone who buys into your mental health arguments and the future of work, et cetera, you'll be going out and pitching foundations. And all these people who do good work, who are saying the profit motivation is not the only reason to do things in the world, and that's fine, we can talk about how to approach those, and generally that's a nonprofit approach.
Marc14:41But the other one, if you're saying, "The reason to give me X hundred thousand dollars," or whatever the number ends up being, "to build this house, is because this is the first step toward a company." That you're basically making this implicit promise that if you give me money now, I'm going to give it back to you times 10 or five or something, in the future. And then, you have to draw that path between here and there. Here's how much money it'll eventually take. Here's what the next step is. And that just requires some planning and some ability to get someone else to believe that investing the money now to build the walls of this house will eventually give them equity in something that returns the money back to them times X. And then if you said, "Oh no, that is the plan." Then we would say, "All right, let's examine step one. Is this the right step one?"
Marc15:33So, I think with anything, any company has to do this, they've got to be very clear when they go out to ask for money, what do I want this money for and what's the promise? And if you're doing it on a for-profit basis, it's very, very transparent, people who give you money are doing it to get a return on the investment. And you've got to demonstrate that will happen here. And since that will clearly not happen on the sale of the house, or maybe it will, that would be a straightforward one. If you could say, "No, this is purely, the money you put into this, we'll get back when we sell the house," that could be a model or it could be some combination. You'll get the money back when you sell the house, plus you'll have equity in Evan Robotic Co or whatever it's called when you launch it. So, you could put something together that way.
Marc16:17I think you've got to be pretty dialed in. So, here's another thought and I have a third thought, so sit tight. It strikes me that the person who is the big winner here is Apis or Apis, what did you call the name of the company? Apis Cor?
Evan16:32Apis Cor. Yep, Apis Cor.
Marc16:33They're the big winner here because they're the ones who are saying, "We need to demonstrate that there is a viability here. We need to demonstrate to the world that we can build these walls faster than anybody else." And I'd want to understand why you're the one footing the bill for this, rather than them? Why they aren't donating their services on this project?
Marc16:53I don't know the details and there's obviously cost of materials and all of that, but I would be hesitant to have you do all this work to raise the money, just to give it to them, so that they can demonstrate how viable their robotic wall building equipment is. All right. And then the last one, and then we'll throw it back to you and we can dig into any of these that sound interesting to you. By the way, just to give myself an order of magnitude, how much do you need to raise to build the house?
Evan17:19So, I'd probably need 100,000.
Marc17:21Ah, pocket change. No, I'm kidding.
Evan17:25Not for me.
Marc17:26No, no, I totally get it, but you're not saying $10 million. It's not ridiculous.
Evan17:31No.
Marc17:31And is that just for the wall piece of it or is that for the entire?
Evan17:34I could do the whole thing for 100,000.
Marc17:36Okay. Another question, how much more expensive is it doing the robotic way than it would be if you did it the normal way?
Evan17:43The house that I'm building is right on par. I'll just give you the numbers. It's about $150 a square foot. A higher-end house in New England, an entry-level higher-end house is probably going to be anywhere from 200 to $250 a square foot. And then, obviously it just goes up from that.
Marc18:02So, in other words, even though this is the first time you're doing this construction with the wall company, it's going to be cheaper than it would be if you were doing it conventionally?
Evan18:08Correct. Again, this is all theoretical. We really don't know until we get out there but that's what the estimate is showing.
Marc18:14Well then why can't you do conventional financing, like a construction loan?
Evan18:18I don't have enough money to put a down payment. I'm spending all that I've got on the design and the engineering and the land.
Marc18:25I see. Okay. So, this actually cuts straight to the point here. This is a much more straightforward proposition. This doesn't necessarily have to do with robotics and building the dream company of the future. This is basically, "I'm going to build a house, I'm going to sell the house and I'm going to make a profit on it. And I think I'll make more of a profit because of this cool construction technique I'm using, and therefore, I'd like to borrow money, which I'll pay you back when I sell the house." Would that be the basic argument for somebody?
Evan18:54That's it.
Marc18:55That's more straightforward. The good news is I've coached you into taking the most straight forward approach. Forget all the robotics mumbo jumbo, a little bit of it, because that's just confusing the issue. In the back of your mind, you could go, "I'm really building the robotics construction company of the future," but when you go and talk to someone else, you go, "No, basically I'm building this house. My total construction cost is going to be a $300,000. We're going to sell it for $500,000. And in fact, I think I'm going to be even better because I've designed this to use a more modern, faster, cheaper construction technique." That's the straightforward thing, is don't confuse people. This is a house financing deal.
Marc19:33So, I can give you that as very, very informed Marc Randolph and startup entrepreneur advice, but then I'm going to go, "I don't know shit about construction financing, so I have no idea how you would go about actually raising the money, except ..." All right, now I'll go into this last piece. One of the things you clearly can do here is build a number of different options for fundraising this. I think obviously, the most obvious one is a clear investment that you may have to be more generous than you normally would. A, because of your position as not having a big track record building houses on your own, also, because there is some risk in the fact that you're using a newer construction technique, but nonetheless, you pursue whatever people do normal when they're trying to do a building investment.
Marc20:20Even if you have to do something dramatic, like putting up some kind of security deposit on the value of the land or whatever else you have locked up in it. But the other thing is to find other people who have a common interest in achieving what you're trying to achieve, and this could be where the spinning the story comes in. So, one person who should kick in is Apis and I don't expect them to put in half, but I would think that if you're a persuasive young man, you can get them to do something. Even if it's as simple as discounting a little bit further in exchange for all the promotional work you're going to do.
Marc20:57Number three is, you have a tremendous amount of other subs on this job. All of them are going to appreciate getting a reputation broadly disseminated about how progressive they are as contractors. And they should be kicking in to help you achieve your dream, by doing something at a discount. All the people who are your suppliers, the people who are contributing, the insulation, the fixtures, roofing material, they should kick in. The closest analogy I can come to how you approach this, how you use this vision you have to make a conventional deal sweet is, you know how, I think it's Sunset Magazine, every so often does their ... I forget the word for it. It's their chosen design houses. Sunset Magazine is a big magazine for the West Coast and they build two or three houses, which are their show off houses.
Marc21:55And I think that all the contractors who do this, do it either at cost or at a discount or a sub cost, because they get featured. And you have these spectacular houses, which lets GROHE show off the latest technology in auto-showers, and lets the furnace company show off the cool things you can do. So, if you can make this house into way more, this is not a house, this is a vision. You can then get people bidding against each other to work for you and not bidding on simply a price basis, but bidding on a what this does for their reputation and what this does for their ability to be shown, to get reputation. And that requires that in addition to going out and raising money and being persuasive, that you go out and get yourself some publicity. That you make sure every single person in the building industry knows you're doing this, that you try and get yourself onto Good Morning America and everything in between, as this vision of the robotic houses of the future. I was just reading the company that does robotic sheet rock just came out of stealth.
Evan23:00Yeah. Canvas.
Marc23:01Yeah. I'm not sure where in the country they're located.
Evan23:04They're in San Francisco.
Marc23:05Maybe they'd come out and do this house for free and jointly share in the incredible promotional bonanza that you're going to heap onto them, as well as who else is doing robotic plumbing, have them come out. I mean, maybe you're right, maybe you don't want to complicate it too much, but I'm saying it's building a constituency of people who share your dream and are willing to pitch in to make it real.
Evan23:27So, let me ask you this, because I like that approach a lot where it's like you get a lot of people involved who believe in it, they have the latest technology in their given field, and then we kind of make it this whole innovative house.
Marc23:37But you're saying, "Maybe that's too many things going on at once. I just really want to wrestle this wall building because that's tricky enough." And I think if you're asking me that, you're right, it is too tricky. Mostly, I think you do want to stay conventional. You want people to want to help you economically because of your end game. That this is not, "Help me build a house to make money on it." This is, "Help me build a house to demonstrate how powerful this can be." The way you started at the beginning with me, with this vision, but with these fundamental economics, which is, we can do this all together and we're not going to lose money on it. We're going to sell the house when we're done, but we're all going to do well.
Evan24:17:00Right. And we're all going to get the publicity and the press and all of that. And that was my question, I don't want to put the cart too far before the horse and get everybody all ramped up like, "Oh, we're going to build this awesome house, whatever, whatever." And then, the first one is bad process or shaky or whatever. And I'm not necessarily afraid of that, but it's more just, I don't want to come out and boast and say, "Oh, look at his house, look at this house, look at this house." And then, not be able to back it up.
Marc24:41:00No, that's a very legitimate concern. So, that gives you some things to think about, which is how comfortable are you spinning the reality distortion field? And then, making sure you achieve it, and that's a very powerful economic engine. Or you go, "No, I need to do this quietly." But then unfortunately, it's going to require, "Conventional" financing, where you find an investor in your locale, who believes that you can actually build a house for less than you can sell it for. I mean, I hate to have someone experimenting on two axes simultaneously, because you're already taking enough risks, building the walls, using robotics.
Marc25:24:00But maybe you do something where you say, "How about this guys..." I know that for example, when you build a house on spec, people all contribute different aspects of the job. Someone contributes the land, someone might contribute the general contracting, someone contributes to the other thing, with the expectation we're going to then split the money when we're done. Maybe you can do some version of this as a spec house where people ... All the subs have an equity share in the final product, rather than having to you put the cash up front.
Marc25:54:00Because again, you have this wonderful vision that ... I'm going to put words in your mouth and so you can certainly spit them out when I'm done. But you can say, "Because my long-term vision here is building a construction company using all robotics, I don't need to make money on this house." You need to sell it for more than you paid for it, paid to build it, but you don't need to be the one who reaps all the profit. You can use the fact you're willing to share the profit with other people, who are willing to make your dream come true.
Evan26:22:00Right. Yeah. I mean, that's true and build this first one just to get on the map and get out of the gate and then build a couple more, maybe do a development, then a bigger building. Yeah, I completely understand your point.
Marc26:33:00Yeah. I think this is kind of cool, Evan. So, I really applaud what you're trying to do. And now that we've come all the way to the end, I'm willing to retract a little bit, step a little bit back from my don't confuse people with the vision piece. Because if you choose to, you can use the vision as a way to perhaps make this project fundable. Because as I said, people invest in things they believe in, and you might be able to convince people to invest in this. Either external investors or the people who you would be paying money out to, in exchange for the promotion, that this house becoming a showpiece would accomplish.
Marc27:10:00And listen, I know that believe me, every single cool idea has people who say, "That'll never work." And I am living and breathing proof that that is the case. So, even though people are, I'm sure saying that to you, keep plugging away. I love the fact that you've gotten as far as you can. And sometimes all these things that everyone says will never work, sometimes they actually do.
Evan27:30:00Clearly. Yeah. I totally get it. So, hopefully we can figure something out here in the next couple of months and start building over the summer. I think that would be pretty neat.
Marc27:38:00I hope so. And listen, great luck to you. And the only thing that I'm going to ask you to do is, some point in the future let's touch base again, because I really want to hear how it went.
Evan27:48:00I'd love to. I'd love to. Thank you very much.
Marc27:53:00Look for pain, it's the best way I've found for coming up with new ideas, and some of the best of these ideas are hatched by people in the trenches who are finding themselves banging their heads against the walls, unfinished walls in this case, because they see clearly how things could be done faster, cheaper, or more efficiently. Evan's decision to make his dream a reality is a good one and he even sells me on his larger vision throughout the course of our conversation.
Marc28:25:00That's why I urged him to either seek funding from more traditional investors who don't care if the house is built by robots, by people, or by kangaroos for that matter, so long as they see a good return. Or, to bring his subcontractors and suppliers in on the project and have them cut Evan some deep discounts in return for being part of a future-focused construction effort. I'm looking forward to hearing how he gets it done, and based on his attitude, I'm pretty certain he'll find success in whichever direction he chooses.
Marc29:01:00Well, that's all for today, but before we go, I do want to thank Evan for entrusting his business to me for a bit. And I look forward to hearing back from him in a few months to see if my advice helped. But if you want to discuss your business challenges with me, I would love to hear from you. Just visit me at marcrandolph.com or call me at 1888-MARC-POD. That's 1888-627-2763. Together, we'll figure out your best next steps.
Marc29:35:00In the meantime, if a 30 minute podcast is too much for you, you can check out my short form ramblings on Twitter @MBRandolph or see it all prettied it up on Instagram @thatwillneverwork. Of course, you can check me out at LinkedIn at ... Oh, shit, you can figure that out yourself. Thanks again for listening. If you like the podcast, don't forget to smash that like button and leave us a review at Apple Podcasts. If you didn't, well, thanks for listening to how I Built This. No, I'm kidding. I'm kidding. This is the That Will Never Work podcast. Thanks again, and I'll see you next time.