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
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.
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.
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.