In a news cycle that loves dramatic headlines and big failures I’m offering a different kind of post-mortem on Veev’s pending closure by sharing my thoughts on what they got right, where they met with obstacles, and ending on an optimistic note of what I think lies ahead.
Before we get into the nitty gritty there’s a nuance to this that’s critical to understand. Veev, like Katerra, was a panelized construction company, not a volumetric modular factory like VBC and many others in the US.
When the term “modular” is used it most commonly refers to volumetric or 3-D finished modules. Generally, this means that all of the interiors are complete as well as the mechanical, electrical, plumbing, sprinkler systems, and the finish materials are installed. These components are assembled into three-dimensional spaces or “volumes” and are installed on site to create a building.
You may be wondering why that distinction matters.
It's critical to understand the difference for two key reasons.
Veev's approach was primarily centered around technology enhancements that could be made within the walls as well as the finished material used to create the surfaces we live with. Both of those efforts take an intense amount of R&D, a lot of money, and a high level of adoption across a lot of stakeholders.
Modular construction is a proven, tested, regulated form of construction that has existed for decades (there are many multi-generational factories around the US!) and has robust industry associations (such as the Modular Building Institute and the NAHB's Building Systems Council).
“I know modular construction works because we are one of hundreds of successful firms globally. We've produced more than 6,000 units of housing and hotel rooms in more than a dozen countries globally.” says Vaughan Buckley the CEO at VBC.
VBC’s accomplishments don’t stop there.
We have built the tallest modular hotel in the world in New York, completed a hotel on a UNESCO heritage site, raised hotels beside the runways at Luton & Schipol Airports, erected buildings near Buckingham Palace and even built a modular hotel inside a theme park.
Yet, VBC is just one of many companies succeeding in the space.
“There are dozens of incredible modular companies, like VBC, that are fighting the challenges of an emerging industry and are still producing high-density housing without fanfare or failure. Like my friends over at Stack Modular, Autovol Volumetric Modular, Ritz-Craft Homes, Factory OS, Nashua Builders, Simplex Homes, ROC Modular Inc, RISE Modular, and many, many more.”
With those facts established let’s dig into Veev and our key takeaways.
Veev was founded in 2008 by Israeli tech entrepreneurs, Amit Heller, Ami Avrahami and Dafna Akiva. The original focus of the company was renovating and operating residential apartments in the Bay Area, but like most of us, they saw an opportunity for homes to be built better.
It wasn’t until 2014, seven years after the founding of the company that Veev entered the general contracting space and started doing their own construction.
After a series B close in 2020 followed by a substantially larger $100M series C in 2021 a well-funded Veev honed in on developing innovations for an improved wall panel system.
The closed wall panel system they developed had all the mechanical, electrical, plumbing, built into the wall panels and shipped to the job site for assembly. Veev layered on smart home tech which meant the same system controlled everything from the internet, fans, lights and HVAC and further pushed the envelope using new building materials by eliminating things like drywall.
“Wall panels are a challenging business. It comes with all the uphill challenges of being a disruptor to the construction industry without the pot of gold at the end of the rainbow. With panels, you’re asking inspectors, general contractors, architects, and tradespeople to completely change their process, but you don’t reap the same level of benefits as you do with full volumetric.” Says Jim Dunn, the president of Stack Modular, who has completed millions of square feet of modular construction.
It’s true that innovating in industrialized construction is no quick fix.
“New product introduction in a landscape with year-long product cycles and risk averse actors force companies to plan for at least three years of red numbers before making profit. Seeing Veev and their technology forced to close down is sad because the tech was great, but construction is less about technology and more about finances, lending, land availability, and regulations.” notes Helena Lidelow, the CTO at VBC.
Helena would know. She has jointly overseen or brought online some of the largest and most technologically advanced modular factories on multiple continents.
Veev’s focus on sourcing differentiated building materials like light gauge steel rather than wood and a material they call “High Performance Surface (HPS)”, which is touted as, “a non-porous and certified hygienic material for interior walls, backsplashes, and countertops.” came with challenges beyond stakeholder adoption and expensive production cycles, and that was the final cost.
If you remove drywall and wood and replace it with steel and HPS the costs are going to increase. This translated to a wall system that’s expensive to manufacture in an asset class that’s sensitive to price fluctuation and high interest rates.
Andy Berube hit the nail on the head when he said, “I've seen a lot of companies tell a fantastic tale of an improved product, but even being able to just do it faster or automate some portion can be a win. At some point you have to sell something or you’re going to run out of money.”
Raising hundreds of millions of dollars can dull the primal need any factory faces to keep the production lines filled. Perhaps Veev fell prey to that.
“Anything seems possible with $200M in the bank, but if you only had $20 in your account you might think differently.” Jim Dunn said.
At the end of the day, I applaud companies like Veev for pushing innovation forward and share in the pain of their loss. As an industry, we can collectively learn from each other's wins and failures to build positive momentum and improve an industry we all agree needs to grow to meet humanity’s rising housing needs.
At VBC we still believe the future of modular construction is bright and are happy to be in the trenches doing the work with other great volumetric companies.
I'm determined to end on a warm and fuzzy note so consider this....
Industry leaders of three competing companies agreed to share their thoughts for this article in order to set the record straight, focus on the facts instead of the negativity, and to help highlight the value of the modular industry as a whole.
I think that alone is worth celebrating.