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Co-founders of DigitalOcean raise $29 million for Welcome Homes

Alec Hartman was surprised by the lack of options when he first decided he wanted a house after his first child was born several years ago.

He recalls, “I didn’t like anything I saw, and I wanted a new house but couldn’t get one.” And just like every crazy technologist, you have to wonder, “Why can’t I go online and get a house?” Why is it so challenging?

He stated that the inquiries were “just rabbit holes.” In the end, Hartman built his own house and basically did the general work.

Hartman began to consider ways to solve the issue for others who were in his situation as a result of that experience and the questions that preceded it. So, in May 2020, he founded Welcome Homes, a New York City-based company that lets people design and build new homes online, with Mitch Wainer and Ben Uretsky, fellow DigitalOcean co-founders.

Before DigitalOcean went public in 2021, the trio had left the cloud infrastructure services provider and concluded that homebuilding was not that different from their previous venture.

In an interview with TechCrunch, Hartman stated, “Our main thing was educating and being that big value of simplicity for our customers.” Although this is a completely different product and industry, Hartman added, “We think there is a lot of crossover in the way we thought about owning the market position of simplicity.”

It’s interesting to note that the initial focus of Welcome Homes was on providing individuals with the opportunity to construct custom homes. However, Hartman claims that the team quickly came to the realization that many potential customers actually desired the opposite, which was fewer options.

He stated, “thankfully, we were able to notice that quickly and revamped the product” to offer a variety of models, or homes that are ready for occupancy, which will go live in March 2021.

He added that the startup “6xed” home sales in 2022. Today, Welcome Homes is available in Pennsylvania, Connecticut, New Jersey, New York, and Maryland. Offering “guaranteed pricing” and promising to streamline the building process, including land selection, financing, and construction, the company claims to be appealing to homebuyers. The cost of building a home through Welcome ranges from $596,000 to $1.75 million without including land.

Today, Welcome announces that it has raised more than $29 million in a Series A funding round that was led by Era Ventures and will close in September 2022 to continue its momentum. Parker89, Montage Ventures, Foundamental, Global Founders Capital, Activant Capital, Gaingels, Elefund, and Arkin Holdings also participated in the financing, which brings Welcome’s total venture capital raised since its inception to nearly $35 million. The company plans to use the new capital to develop its “proprietary land technology,” design new home models, and expand into new markets throughout the United States.

Welcome is just one of many startups that have raised venture capital in recent years to address the housing shortage. With $12.5 million raised in a Series A funding round led by Khosla Ventures in November, Atmos, a startup that has built an online marketplace that connects homebuyers with builders and land developers to design and build custom homes, emerged from stealth. Also, in February 2022, the tech-enabled homebuilder Homebound raised $75 million in a Khosla-led Series C. With the money, Era Ventures managing partner Clelia Warburg Peters will join the board of directors of Welcome Homes. Peters was previously president of Warburg Realty and a venture partner at Bain Capital Ventures. Era is a new company that invests in “ideas that leverage technology and innovation to reimagine the built environment.” Era’s primary focus is on these kinds of ideas.

Peters referred to Welcome’s capital-light business model via email as a “neo-builder,” a three-sided, managed marketplace that links demand (buyers), supply (builders), and the necessary financing (banks).

She believes that the startup can assist in reducing the persistent lack of single-family housing in the United States.

“Today, the total US single-family homebuilding market value stands between $250 billion and $400 billion annually,” Peters wrote. “We believe that this number could grow with Welcome Homes’ unique ‘lot-by-lot’ approach focusing on urban infill. This sits between production homebuilding, which typically focuses on master build communities, and custom homebuilding, which is inaccessible to the majority of consumers due to price and timeline.”

The investor went on to compare Welcome Homes to Tesla and Apple because it could “tap into an appetite for productized, branded homes that have not been sold ‘en masse’ since the Sears Catalog over half a century ago.”

Peters went on to say, “We believe these homes will resonate with a generation of millennial homebuyers who have grown accustomed to similar purchasing experiences from high-end brands like Apple and Tesla.”

In the meantime, she explained to TechCrunch that Welcome can use technology to automate and alleviate most back-office tasks that builders might find time-consuming. This also gives banks a way to offer construction financing directly to homebuyers in a less risky way because they will “be working with a scaled partner across multiple projects.”

Finally, Peters believes that Welcome Homes’ lack of land and unsold homes on its balance sheet will enable it to scale more quickly than traditional homebuilders.

Hartman, who also founded and later sold another startup, TechDay, stated, “We’re really more of a tech company than a tech-enabled homebuilder.” Understanding how to use imaging to detect walk patterns or how to establish a rules-based system for dealing with municipal variances so that we know precisely what kind of home would fit on a given property are examples of welcome.