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Home Is Where the Innovation Is

If a man from 1987 stepped into a time machine and emerged in 2017, he would find the modern world fantastically different in many ways. Mobile computing means that he has the world’s information and entertainment at his literal fingertips. The cars on the road may be familiar to him, but now, he can also magically hail a car on-demand or pay ludicrously low prices to get from place to place by sharing rides with one or two other passengers. He finds malls and retail stores collapsing, with commerce transacting in wonderfully weird ways.

But the minute he steps into his home, he finds many things to be eerily the same. Houses and neighborhoods look similar. Most home furnishings, CPG products, and renovation products are still bought at specialty or big-box stores. Housing still is a household’s largest expense, and it is as hard (if not harder) than ever to afford a home.

While internet disruption has transformed most facets of everyday living, one of the last to really be redesigned has been the home.

While some important companies have been built in this area, we have yet to see the kind of tectonic shifts that are bound to come. We have great ways to find and shop for a home thanks to Trulia and Zillow, but most people still use agents on both sides of the transaction. Wayfair and Houzz are changing the way consumers find and shop for furnishings, but ecommerce is underpenetrated in this category, and the promise of VR and AR to create a step-function change here is still a little ways away.

But it’s coming. We think that as great as these companies may be, the opportunity to come is 10X greater in both economic impact and the change in everyday people’s lives. In particular, we are thinking about a few specific opportunities and problems.

Redesigning Homes: The Biggest Opportunities

Affordability

The first is the challenge of affordability. In popular urban clusters, housing prices seem to have spiraled out of control. Even in a low-rate borrowing environment, first-time home buyers are extremely cash strapped and home ownership among those aged 25-34 is at an all-time low.

What tech-enabled solutions will arise to address this problem? Will homes themselves be refactored? Will different financial solutions emerge to make ownership more attainable? Or will there be a shift away from home ownership altogether — and what will need to be developed to support that shift?

Construction & Renovation

The second opportunity is around renovation and construction. These are industries that have been relatively untouched by software until recently. It’s interesting to note that Home Depot is a $180B retailer that has not seen significant threat from internet disruption. The company is trading near its all-time high and has outperformed every other large brick-and-mortar retailer over the past 10 years by a wide margin.

(Source: Google Finance)

We think it’s inevitable that this vertical will undergo the same digital transformation as every other major commerce category and we’ve made two investments behind this thesis (Paintzen and Renoviso) and will be expecting to do more around the construction and renovation space in the years to come.

CPG Purchasing

The third opportunity will be around CPG purchasing and conveyor-belt businesses. The biggest existing retailers like Walmart, Target, Costco, Walgreens, and others rely on CPG purchases to drive consistent, repeat traffic into their stores. CPG brands invest significant effort to design packaging that stands out in these environments and supply chains that support this distribution model.

However, as each and every home begins to have a handful of reliable, conveyor belts into the home, the nature of these businesses will change dramatically. We are already seeing this happen with our portfolio company Grove Collaborative, which is increasingly rethinking the form factor of CPG products. Because their products no longer need to physically stand out in shelves, they don’t need to be filled with air, water, or other fillers to artificially create size and bulk. Also, CPG companies are the largest brand advertisers on the planet, and it will be fascinating to see how this will change as product consumption patterns and media consumption patterns continue to shift.

The Purpose of Housing

The fourth opportunity is around the question of what exactly our housing is optimized for. It’s fascinating to think that most homes are highly similar and redundant. A few bedrooms, a few bathrooms, a kitchen, living room, and dining room that sit mostly empty most of the workday. Seems like a waste, but that’s because we have bought into a vision of a house that is optimized to be a completely self-sufficient, personal space.

But what if housing were optimized for other things? The easiest example is around community. Would consumers opt in to a housing product that looks radically different, relies on shared kitchens, shared common space, shared storage areas, and personal spaces that are configured very differently? Experiments like this have existed for years, whether it’s newer attempts like Common or Roam or cohousing communities that have existed in Denmark for decades. Are there other dimensions around which housing may be optimized to either satisfy the needs of specific populations or solve meaningful societal problems? And as self-driving cars become mainstream and reshape urban planning, will housing design change even more?

As I’ve said in other posts, these are the opportunities and problems we are thinking about, but entrepreneurs are on the front line seeing things that are a few steps ahead. If you are a founder who is looking to use digital technologies to redesign the way we live and how the housing industry operates, please have a conversation with us. We think this is one of the most important opportunities of our lifetime.

Rob Go

Thanks for reading! Here’s a quick background on who I am: 1. My name is Rob, I live in Lexington, MA 2. I’m married and have two young daughters. My wife and I met in college at Duke University - Go Blue Devils! 3. We really love our church in Arlington, MA. It’s called Highrock and it’s a wonderful and vibrant community.  Email me if you want to visit! 4. I grew up in the Philippines (ages 0-9) and Hong Kong (ages 9-17). 5. I am a cofounder of NextView Ventures, a seed stage investment firm focused on internet enabled innovation. I try to spend as much time as possible working with entrepreneurs and investing in businesses that are trying to solve important problems for everyday people.   6. The best way to reach me is by email: rob at nextviewventures dot com

    • Todd Massedge

      Interesting post Rob. Do you think it’s easier to disrupt the verticals right outside of the home? Things like the process of finding the right people to renovate your home (always a pain to do) and even things like the home buying process (building a platform to connect Realtors/buyers with suppliers, etc)? It’s only a matter of time before those two are disrupted.

      • robchogo

        These have been slow to change I think because of the physical nature of those types of categories. But that seems to be changing

    • Paul Asack

      Rob, excellent post. I’m very curious to see how a technology like Matterport shakes up the Real Estate market years to come.

    • Jay DeVivo

      Great post, Rob. Some interesting ideas on alternative ways to optimize housing I never considered. I am interested in opportunities around aging in place. We now have all of the tech components to allow the vast majority of seniors to live independently until pretty darn close to the end. There are several different approaches that can work and I think all of them will result in a higher quality of life for seniors at fraction of the cost of assisted living and skilled nursing. Despite the huge market opportunity, there doesn’t seem to be lot of activity in this space. What do you think are the impediments? Is this a space you guys have any interest in investing in?

      • robchogo

        Interesting, this seems quite related to Frank’s comment above. I’d be interested in learning more about this. We’ve looked at some software and device companies targeted as supporting the lifestyle of seniors, but actually haven’t thought of it in the home category. Definitely interesting food for thought.

        • Jay DeVivo

          Frank raised a number of good points. The upshot is that if the physical home is not designed to accommodate people with physical limitations (e.g. “roll-in” showers, adjustable kitchen counters), the tech doesn’t help much. I have been looking at this space for some time as both a potential investor/entrepreneur as well as an adult child trying to figure something out for my parents. Surprisingly, very few 55+ homes are ADA compliant, and most have 2 (and sometimes 3!) floors.

          The optimal solution really requires both a real estate component and a tech component. I think that’s what makes it tough. Developers tend not to be futurists and are not likely interested in deploying a technology solution that requires ongoing management. VCs are futurists but don’t invest in real estate. Maybe a solution can be found in a partnership between a real estate developer and VC-backed tech company?

          • Frank Otenasek

            Rob & Jay: Like Jay, I have personal, professional & commercial interests in this. I’ve recently helped aging parents move out of their own long-time residence into supported housing — in one case, a high-end CCRC; in another case, a single-family home with a UD-enhanced in-law suite, where an adult daughter became the caregiver. Neither option is perfect; both options are costly (personally, professionally, financially, emotionally) and difficult for the older adult, and the entire family. I’ve become acutely aware of the paucity and deficiencies of good housing options for older adults, particularly those on fixed incomes who can’t afford a high-end SLC but don’t qualify for Medicaid-funded LTC.

            As an outgrowth of the activity & hype in the broader digital health market, there is growing interest and support for startups aiming to improve the care and quality of life of seniors — meetups, accelerators, conferences, demo days, (some) angel & venture funding. Its still early days in this emerging market, and many of these ventures seem to struggle with a handful of hurdles: designs that frustrate rather than facilitate seniors; balancing the clinical, commercial, technical & practical; solving stakeholders’ real, painful problems; ease of use and ready integration into the workflows of providers or caregivers and the lives of older adults; providing value to the the beneficiary and the buyer (frequently not the same party); developing a sustainable revenue model.

            Most of that activity does not seem to be focused on remedying the deficient home environment for older adults. Startups trying to re-purpose IoT smart home devices, wearable activity trackers or passive sensors for older adults who are aging-in-place or residing in an SLC stumble over the same hurdles.

            The Senior Living Community industry is preoccupied with their own market challenges — rising cost per residence; staffing shortages, costs & turnover; falling occupancy; accommodating older residents with higher acuity care needs, etc. Multi-family developers trying to diversify or pivot into SLC are unfamiliar with the needs and design best practices for this demographic, and underestimate the difficulty and importance of properly managing care & service operations.

            Designing, renovating/building and equipping homes that enable older adults to safely, healthily, independently, happily & affordably age-in-place requires a better, integrated approach by age-tech and housing innovators.

    • Parker Hine

      Great post.

      I’m not sure I understand the significance of a shift in CPG on homes.

      Can someone clarify this?

      • robchogo

        Thanks! We think of home as including certain categories of household spending, like furniture, home furnishings, and certain categories of CPG. Incidentally, that’s apparently also where the BLS categorizes CPG spending.

    • Frank Otenasek

      Rob: There is an urgent, growing opportunity to develop new housing, and renovate existing housing, that practically and affordably meets the needs of older adults, including those with functional impairments or higher acuity care requirements. Aging Baby Boomers are helping swell the 65+ population in the US from 40M in 2010 to 73M by 2030; unfortunately, many people are living longer, in declining health. More than 75% of people 65+ are living with multiple chronic health conditions, which frequently impairs their mobility and other activities. In spite of age-related functional limitations, more than 85% (according to AARP) want to continue living in their own homes, “aging in place.”

      The vast majority of existing homes are poorly designed to accommodate an older adult with a common age-related impairment — mobility, vision, hearing, cognition, etc. Only 1-2 % of the current stock of homes includes “Universal Design” elements — i.e. no-step entry, wider entrance and doorways, main floor MBR & bathroom, railings on both sides of stairs, lever-style door handles & faucets, etc. — even though these features would be practical and user-friendly for older adults, as well as people with a disability, a parent with a stroller, or a person recovering from an injury. Ideally, these more accommodating homes would also serve their cognitive, social & emotional needs, as well as their physical & medical needs.

      For many older adults, there are no alternatives — they have no adult children to move in with, or an adult children willing and able to do so; moving to a senior living community, which offers a Universal Design environment and other supportive services and programs, is beyond their means; they qualify for, but do not want to move into, a Medicaid-funded nursing home. And relying on in-home caregiving from an unpaid family member or a paid home care assistant, is an expensive and draining workaround for a home that just doesn’t meet their needs. Homes that better accommodate the needs of older adults, without draining the resources of the senior or the healthcare system, are needed.

      • robchogo

        This is a great point and seems like a really important area for founders (and investors) to focus! Thank you.

      • Jay DeVivo

        Frank – you raise a number of important points. I had a similar discussion with someone that was looking into this space on the tech side a few months ago. See my response to Rob below, interested in your take.