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Inevitable
Modular, High-Quality Homes Built Faster and Cheaper with Cuby
00:42:25
Aleks Gampel is COO and Co-founder at Cuby, a company rethinking how homes are built in the middle of a nationwide housing crisis. The cost of housing has soared while construction productivity has barely budged in decades, and today’s homes are still built through slow, wasteful, and carbon-intensive processes that aren’t designed for escalating climate risks. Instead of shipping prefab boxes across the country, Cuby asks what it would look like if housing finally had its assembly line moment—and the factory moved to where homes are needed. Their mobile microfactories are inflatable, rapidly deployable facilities that manufacture standardized home components on or near the job site using mostly unskilled labor, then assemble houses in a predictable, repeatable way. In this conversation, Aleks unpacks the roots of the housing shortage, why past modular attempts fell short, and how Cuby’s model could change what’s possible for housing affordability, waste reduction, and resilience. ...
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- [00:00]
Cody Sims
Today on Inevitable, our guest is Alex Gampel, COO and co founder at COObee. We're in the middle of a nationwide housing crisis, one defined by skyrocketing costs, years long construction timelines, and an industry that hasn't meaningfully increased productivity in more than half a century. And the way we build homes today isn't just slow and expensive, it's carbon intensive. On site construction generates enormous material waste and embodied emissions long before anyone ever moves in. And with fires, storms and extreme weather escalating, today's homes also aren't built for what's coming. Alex and his co founder started Kubi with a simple but radical what if housing finally had its assembly line moment? Instead of shipping prefab boxes across the country, what if you could deploy a factory to where the homes are needed? Kuby's answer is the Mobile Microfactory, an inflatable pop up manufacturing facility that produces the components of a standard home on site using mostly unskilled labor and assembles those homes in a predictable, repeatable way. They build and ship these home building factories to the edge of where housing is needed. It's an attempt to rethink the process rather than the product. In this conversation, we get into the state of the housing shortage, why past modular efforts fell short, and how Kuby's model might change what's possible for housing affordability and waste reduction. From mcj, I'm Cody Sims and this is inevitable. Climate change is inevitable.
- [01:45]
Podcast Host (likely MCJ representative)
It's already here, but so are the solutions shaping our future.
- [01:52]
Cody Sims
Join us every week to learn from experts and entrepreneurs about the transition of energy and industry.
- [02:03]
Podcast Host (likely MCJ representative)
Alex, welcome to the show.
- [02:04]
Alex Gampel
Thanks Cody. Wonderful to be here. And as I told you before, I listened to a lot of the episodes. So excited to finally make this happen.
- [02:11]
Podcast Host (likely MCJ representative)
Well, I'm excited to make this happen too because we really haven't covered housing much at all on this show and it's such a big issue when you think about it from what's going on in the U.S. the Affordable Housing crisis is very top of mind. Obviously your solution to it, which we're going to get all into about mass manufacturing, the ability to mass manufacture housing, which is a little bit of a thing to get your head around. But I think we'll get there as part of this conversation. And then, you know, I think a lot of what doesn't get discussed is just why hasn't the housing industry changed all that much? And understanding that so a lot to dive into here.
- [02:49]
Alex Gampel
100% housing is one of those big topics that is Top of mind because Peter Thiel recently gave this whole interview how capitalism is not working for millennials. Housing is part of that for sure.
- [03:00]
Podcast Host (likely MCJ representative)
It is. It would be very intimidating. I mean, I'm not in my 20s or 30s. I guess millennials aren't in their 20s anymore either. But it'd be very intimidating to be that age and think about what does the next 20 or 30 years look like and how do you get to the point of homeownership and all of that. It's a challenging world.
- [03:16]
Alex Gampel
We're seeing some of the stats. There was recently a new updated stat around average first time home buyer reaching their 40s, which is interesting to think about because it was probably half that. Call it echo Boomer age or that timeline. And then when you think about Elon retweeting all the time around the population crisis and the fact that birth rate replacement rate is just super low. Part of it is folks are having a tough time starting families. Just household formation. You can't start in a studio or a one bedroom apartment and you start to delay it and you run into this vicious cycle of we're running out of people, it's costing the GDP a lot of money. So housing is and should be everyone's top of mind.
- [03:53]
Podcast Host (likely MCJ representative)
Historically, the percentage of Americans that own their home is substantial. I'm making this number up, but it's somewhere around 3/4 of Americans historically have owned their homes since really the 30 year mortgage was figured out as part of the Great Depression. Is that stat roughly accurate?
- [04:08]
Alex Gampel
I don't know what the exact stat is of ownership versus renter at this point in time, but I will tell you this. 50% of the US population cannot afford a down payment on a $250,000 house, which probably seems crazy to you and I who live on the coasts, but a down payment on a $250,000 house? It's not all that much if you live on the coast or work a white collar job. But again, statistically, 50% of the US households cannot afford a down payment of a 250,000 square foot house, which is half of what the average house in America costs today.
- [04:41]
Podcast Host (likely MCJ representative)
And is the issue that there's a shortage of houses, is it older generations are not moving out of their homes, which is stopping turnover of homes to people who want to buy. What's happening here that's causing this systemic problem?
- [04:53]
Alex Gampel
Maybe taking a step back, I think you can read a lot of things on the topic, but post 2008 there was obviously a very big shock to the system when it came to housing and builders decided to build a lot less just to avoid that same risk. It's a combination of that. It's a combination of the fact that there's really two, I would say, big concerns. One, there's a lot of regulation in housing and generally building. And people forget that building and construction is a highly regulated space, might as well be biotech. It's incredibly highly regulated. So from the moment a developer wants to go buy a piece of land and to the point where they break ground, put a shovel into that ground, into that soil, there can be up to a year, up to two years of regulatory steps that need to happen to actually allow for that to actually become a house or a building. So we've gotten so deep into this regulation rabbit hole, and we just keep adding regulation after regulation after regulation and the hole that we dug for ourselves as a country. And this is, by the way, not just the US Housing is every first world economy's main problem, every developed nation's main problem. But regulation keeps getting more extensive. We've dug such a deep hole that it's almost impossible now to fill. And we see this because it's not like Elon was able to successfully implement what he wanted at Doge. Even Trump can't deregulate around the construction ecosystem and the real estate building ecosystem because it happens both on a federal level, but also very much on a county by county level. So it's really hard to implement some sort of change around deregulation that would help a lot. And we see that Austin did a really good job at deregulating. They built a shit ton of housing, and now housing got a lot cheaper. And they're one of the most price recovered markets in the US the second reason why we're not building enough, and this is where Kubi steps in, and really, a company like ours and what we're trying to address is this idea that there's not enough skilled labor out there to actually build the millions of homes we need to build. What I mean by that is young people like us don't want to go swing hammers in the sun all day. It's a highly apprenticed industry. It's skilled by definition. It's a skilled trade. And there's not enough young people that want to enter this industry and remain in this industry. Statistically, about 40% of our construction labor is going to retire in the next 10 years.
- [06:59]
Podcast Host (likely MCJ representative)
One of the episodes that just aired right before this one will was with Boris Sofman of Bedrock Robotics. And we had the same conversation. He's automating construction because there's not enough skilled labor out there.
- [07:09]
Alex Gampel
They're focusing on a tiny subset which is tractor drivers and the horizontal land development. But look at it more broadly. Every building archetype is not being built efficiently or enough of because we don't have enough skilled labor. And the skilled labor that we have, the average status, they're entering their 50s. Think about it. The most gruelingly intense physical industry there is to make money. You're now aging into a population that it's tough when you're in your 50s, carrying a sandbag or swinging a hammer all day. So it makes sense in a way. There's just a lot more homes we need to build. We're not building enough and builders aren't building enough, but also we don't have enough labor to actually go build it. And I think the other statistic that always baffles me is that for every seven folks that retire in construction now, only one young person replaces them. So you start to run this big arbitrage for that reason. Simple supply demand. There's not enough construction workers, the actual cost to build something, most of it is anchored in that labor piece. So if you build a house In America, about 60 to 40% of that dollar that you spend will be labor related. So logically speaking, from an opportunity, there's an opportunity to reduce the labor piece. That's where the biggest driver will come about. So that's really where we play before.
- [08:18]
Podcast Host (likely MCJ representative)
We get into your solution and even maybe the evolution of the market in front of your solution. Given the themes of this show. I also want to talk about housing as an emissions problem and a climate change problem, both from an embedded emissions perspective and as well as the emissions of a single family home in general. What can you share there in terms of thinking you all have done about that side of the problem?
- [08:41]
Alex Gampel
Ironically, and you and I talked about this offline, you will never see a climate related slide in our decks. We'll never talk about it because we believe it should just be a byproduct of what you're doing. If you're going to have better unit economics, figure out a way to have those unit economics also make a dent in some other problem, which in this case is not only climate, but climate resiliency. Given where we're seeing natural disaster spike and repeatability and just occurrences. Insurance costs are a reflection of that. So we don't talk about climate. But obviously if you think about climate, every climate deck of every climate fund has some Built environment component, naturally, and buildings and emissions around buildings and production of buildings and embodied carbon and the waste in construction, it's a pretty big topic. You can't be a climate investor and for context ignore construction or the building ecosystem. When we think about single family homes, to me the most impactful thing is embodied carbon is a tough thing because I actually have like a maybe contrarian take there. But to me the biggest thing is if you show up to a single family home being built today, you're going to see more waste than house. In the early phases you're going to see one of these giant for rent, basically container trash bins. Essentially they have statistically about 4 tons of waste per house. It's a lot of waste. So when you cumulatively add up construction waste, not just single family homes, but in general, I think there's some statistic, and don't quote me on it, but I think something like 20 to 40% of a landfill are construction waste. That's a big number. So for us, the way we build, we reduce about 95% of that waste because we model out an entire house before we ever even produce it. The way we install it, there is no waste because we prep everything in advance. So little things like that. Obviously buildings themselves are not really efficient the way they're built from the context of electrical use, leakage of air and heat, et cetera. So when we do a house, our house is structurally incredibly sound. So it's climate resilient. We use steel rivets and tubes. For context to your audience, typical homes are built using sticks, stick built homes, basically lumber. We use steel tubes. That's more akin to commercial construction. Our house is not going anywhere. During a hurricane or tornado, et cetera. We enclose the house with a very interesting sandwich panel, which means our R values are in the 60s. That's a measurement of efficiency of a house. We use triple pane windows. That's usually reserved for super, super, super high end houses in America. The efficiency of our houses is incredibly good. We can make them all electric, et cetera. We can check all those boxes. But do that at scale enough and the question is, who can do it at scale? That's when it starts to make a dent in the climate conversation.
- [11:08]
Podcast Host (likely MCJ representative)
Fascinating. And the resilience side was an angle I hadn't even wrapped my head around, but it makes a ton of sense.
- [11:13]
Alex Gampel
Resilience side is huge. I don't know the stat, but I think we're having per year 6x more climate disasters per year than we've ever had.
- [11:21]
Podcast Host (likely MCJ representative)
We are currently up at eight times the amount of billion dollar annual disasters since the 1980s.
- [11:28]
Alex Gampel
Perfect. That's a massive number. So when you talk about climate, it's like, okay, and we can get controversial. You can have a bunch of folks that sit behind bureaucratic desks just for reasons of their volition, they want to go and implement certain code law, et cetera. It makes a house more expensive. It gets passed down to folks. To me, that's less interesting than figuring out how to build homes that are climate resilient because an annual insurance premium of an extra $500 a month is a lot for a lot of people. So that coupled through the fact that some places are uninsurable or even worse.
- [12:00]
Podcast Host (likely MCJ representative)
Not being able to get insurance at all, which I guess is cheaper from a monthly perspective, but definitely not cheaper when you need it.
- [12:07]
Alex Gampel
I mean, most of someone's net worth is parked in their primary house. So if that goes away, your livelihood is done. We saw that in California with the fires. So building homes that are better quality, sturdier, et cetera is also important.
- [12:20]
Podcast Host (likely MCJ representative)
I want to dive all into your solution and what you're building. But before we do that, I want to describe what you're not building. And to do that, I want to have you describe really this first wave of prefabbed homes that we saw emerge over the last 10 or 15 years. And unfortunately, a few very notable failures in this category, which again is not the category you're going after, but maybe describe what this first attempt looks like. And I think of companies like Katera and Veeve and a few others that were quite high profile prefab home builders that really haven't worked.
- [12:54]
Alex Gampel
It's funny, anecdotally, literally this week I spoke to someone who was really high up at VEE for four years and he reached out because he said everything we did wrong, you guys are doing right. We always joke that we're positioning ourselves as the antithesis to industrialized construction. I think it's important. But let's maybe take a history lesson for a second. Every industry historically over the course of the last half century have on average improved in terms of efficiency by a factor of 7 to 8x due to industrialization. If you look at construction, it's a 1% productivity gain in 50 years. That is insane. We don't build differently than we do 200 years ago. We always joke internally within our business that if Jesus were to come back to earth, there's only one profession he would recognize. It's the one we're in. The concept of industrialized construction is not new by any means. We're not inventing a category. It's actually common sense. If you look at post World War II Levytown for example, or even Sears catalogs, you'd be able to order literally a kit of parts to a home within a Sears catalog. They would get sent on a freight train. So like you would send them to a different region, someone would unload those kit of parts and they would basically be like Lego parts you would put together some GC would put it together.
- [14:06]
Podcast Host (likely MCJ representative)
Locally, and that's the Craftsman home. They're all over Southern California here.
- [14:11]
Alex Gampel
Not a bad idea by the way. We've gotten really extreme with regulation and our skilled labor has declined and standards have shifted, etc. So not a terrible idea. We're a version of that in the 21st century, maybe, but anyway, that's the U.S. i come and was born in Russia. So the Soviet Union invented the concept of a different form of industrialized construction, which was precast concrete blocks. These nine story buildings in Russia are just copy and paste everywhere by the hundreds, by the thousands. They're just precast nine story buildings everywhere. So the concept of precast has existed. So industrialized construction is almost common sense. If everything is made in a factory setting, why isn't the building? Well, the truth is a building today, the way we build today, each building, and let's say Cody wanted to build two buildings. He has the same sites right next to each other. He hired the same gc, he has the same spec of house he's going to build. They will both come out different. What that says is that it's a highly fragmented spec ecosystem every time it's a one off every time. Which is almost the polar opposite of industrialized construction. So the idea of industrialized construction, not new and not in quotes, original. So there's really three forms of industrialized construction, at least I place into different categories that exist today. There's volumetric, modular. Imagine you make an entire room or set of rooms in a factory setting and then you ship to the site to stack on top of one form of industrialized construction, another form. You create parts. Maybe you're creating all the parts or some elements of parts that go into a building. Imagine you make a wall panel. Imagine you make prefab kitchen cabinets. You can make some parts, all parts, et cetera. But think of it not as a 3D volumetric build, but 2D flat, packed, sent to the site. And then there's 3D printing, which self explanatory There's a printer that does some element of a house. I like to start with 3D printing. Walking backwards, I could be wrong. But based on what I know, I'm not incredibly bullish on 3D printing. I think there is applications to 3D printing buildings that are much better served than master planned communities or building housing. Why? It goes back to the original start to our conversation. Skilled labor is the big missing piece. So if you're a 3D printer, the problem of 3D printing is you are just printing the walls of a house. The walls equals framing. Framing historically is about 10% of the home building process. If you were to break it up into functions, that means that if you fully got it right, which no one has yet because it's still not less expensive than traditional framing. But let's say someone gets there, you've just solved 10% of a process where 90% is still done by that really expensive missing skilled labor. It doesn't solve much, even at grand scale. So I put that to the side. When you think about volumetric, modular and prefab in their current state, this is now going into an antithesis of what Kuby's doing. And I speak in antithesises. There's this idea that you put up a factory anywhere from 50 to $350 million, a gigafactory, like every other industry, where you literally take years, build a factory out of that factory, you make a product that you distribute everywhere. The problem there is, unlike a pair of AirPods, AirPods are easy to shove into a container and ship and whatnot. Imagine millions of square feet worth of buildings. Imagine the tonnage. It is a big product by definition. It's bulky, it doesn't fit nicely, it's impractical, illogical, not cost effective. To ship entire buildings or parts worth of a building thousands of miles. Talk about climate. Think about the CO2 emissions to go send on truck beds.
- [17:38]
Cody Sims
Sure.
- [17:39]
Podcast Host (likely MCJ representative)
Well, not to mention, I don't think our interstate highway system, bridges and tunnels even would allow for that.
- [17:44]
Alex Gampel
A lot of volumetric modular has to have supported, escorted, oversized trucks. Exactly. Which is logistically stupid, actually. I mean, ask Ryan Peterson from Flexport. He'll give you one rule. Don't ship air. This is by definition, shipping air. So that's one issue of gigafactories in industrialized construction. The second issue is naturally the capex is so high that it becomes this antithesis to venture. Because it's like, how do you scale that? You don't. And when you think about it, given the Capex is so high your unit economics to make work to cover the fixed costs, you have to bet on the idea that you're going to have constantly a ton of demand for real estate, a ton of demand for your product Archaeotype. The problem is real estate is a cyclical industry. Some years are great, some years are bad, et cetera. Look at the effect of interest rates and whatnot. So all of a sudden all these groups spend all this capex to end up going out of business because a certain year they can't cover their fixed cost. It happened over and over again. So that's issue number two. Issue number three, by definition of being a centralized gigafactory, you're selling something to someone. You become a cog in a machine. By being a cog in a machine, you're producing a volumetric box or a kit of parts and you have to sell that to a GC who then gets hired by a developer. You sent this thing a building a thousand miles away. Now you have to figure out a third party general contractor. Subcontractors have to figure out your system. The problem is most systems are reinventing the wheel. They're not traditional. It's not traditional construction. They make a mistake and what happened? Now you have a thousand miles of feedback loop again to course correct. It does not work. Maybe. Maybe volumetric modular can work on highly repeatable asset classes. For example, you ever stayed at Citizen M hotel?
- [19:24]
Podcast Host (likely MCJ representative)
I have. They're beautiful.
- [19:25]
Alex Gampel
Same box every time row over, same thing every time. Doesn't work well for housing because different needs, different customization, et cetera. Doesn't work on different plots when you have highly repeatable product. Maybe volumetric modular works. Maybe. But I still don't buy it. So that's antithesis number one. What Kuby did as an antithesis. We said, okay, how do we address those things? What if we instead became Home Depot or Lowe's who have a thousand locations across the us so that means we have to invent a new factory that has to be cheap to put up fast, to put up highly repeatably and can only service a small geography hyperlocal. So we had to invent a new type of factory. It's called the mobile microfactory. No one has done what we've done to date relative to the IP and the vertical integration around our factory.
- [20:10]
Yin (MCJ partner)
Hey everyone, I'm Yin, a partner at mcj, here to take a quick minute to tell you about the MCJ collective membership. Globally, startups are rewriting industries to be cleaner, more profitable and more secure. And at mcj, we recognize that a rapidly changing business landscape requires a workforce that can adapt. MCJ Collective is a vetted member network for tech and industry leaders who are building, working for, or advising on solutions that can address the transition of energy and industry. MCJ Collective connects members with one another with MCJ's portfolio and our broader network. We do this through a powerful member hub, timely introductions, curated events, and a unique talent matchmaking system, and opportunities to learn from peers and podcast guests. We started in 2019 and have grown thousands of members globally. If you want to learn more, head over to MCJ VC and click the membership tab at the top. Thanks and enjoy the rest of the show.
- [21:11]
Podcast Host (likely MCJ representative)
This is the part where I want to interrupt and just make sure to set some context, because this is what we're going to speak for most of the rest of this conversation about. It's almost like a nested Russian doll of things to unpack here.
- [21:22]
Alex Gampel
The vertical integration of Kubi is the hardest piece for us to do investors, because you just can keep layers and layers of vertical integration.
- [21:30]
Podcast Host (likely MCJ representative)
The things we're going to talk about is Kubi has built a factory that builds factories, that builds houses.
- [21:35]
Alex Gampel
If I were to null Kubi down to one sentence, we're building hardware and software fully vertically integrated to improve process and construction. The reason why we call ourselves an infrastructure company is because we're building infrastructure for how housing gets built, whereas a lot of folks have approached this direct to consumer home building. There's just ways from this. We're trying to literally take the most basic step back of how we become infrastructure. From the way we're capitalized to the way we expand to our cost of capital. It's a much bigger conversation. So centralized gigafactories have been the root of all evil, in my opinion. That's one. Now you get into a second antithesis. There's a lot of technologists like you described, Katera Veev, maybe not from industry, that step into this industry very naively. I'm lucky because I spent my entire career in real estate. It's what I know best. I spent my career investing in real estate, developing real estate, et cetera. It's a world I speak. But I think a lot of folks are technologists who enter the space, raise venture dollars, and they think they can reinvent the wheel and then kick down the door of regulation and that sales cycle of incumbent traditional folks, et cetera. It sucks because this industry doesn't like new things. Not that it doesn't like. It's systemically not able to adopt new things. And for the reasons following. One, we talked about regulation. This is a highly regulated space. For example, if you're not thinking about the system but you're thinking about end product, like I'm going to go make a new house with new type of materials and my product is the house, that's great. There's 26,000 different zoning codes. Your thing might work in county A, but might not work in county B. You just broke this whole logic that you're pitching VCs that you're scalable. So regulation is really big and incumbent sales cycles are a big problem. We call this problem familiarity. The more unfamiliar you are to what is traditionally done today, the more you struggle between those two things. That's what's happened historically. So it's very important to deceptively look like traditional home building or construction. For those reasons, we've been really conscious about designing our entire kiddo Parts the factory produces with non proprietary materials. They're built on site, on the actual home pad without hiding mechanical electric plumbing behind walls. Everything we do deceptively looks like traditional home building. When we submit permits, when we build on site, an inspector shows up. When a developer, Diligence is our company. They understand, see and look at everything. It's the know how of how it all comes together that becomes a little bit IP ish. But familiarity is another antithesis. I think a lot of folks have not been in tune with that familiarity. So many folks have tried to reinvent the wheel rather than trying to make it spin faster. And the third one, most critically important, I would say I'll end there. By the way, this antithesis around cost. If you were Cody and your venture fund was diligencing industrialized construction companies, there's a very simple question. What is your cost to build per foot? That's the one that tells it all. You know how Brian Johnson says, look, if you're going to look at all these health metrics, there's one that covers it all, or two, it's VO2 max and it's your resting heart rate before bed. So there's one that covers all of them. In industrialized construction, very simple. What is your cost per foot to build? If you're not going to be cheaper than traditional construction, you are dead in the water. And what you've seen to date from industrialized construction companies is the following. What is your cost to build? Their answer is, well, today we're a roadster like Tesla. Eventually we'll hit critical scale. We'll be Model 3 with that critical scale, that's great. You will never get to critical scale because no one in the development world cares to pay more and be a guinea pig. And then they're going to say, well, you have to pay more because we're doing higher quality product, we've reinvented the wheel, et cetera. You know what, you also have to contemplate the fact that we're building faster, which is true. And you do save on carry costs. But to developers, that's a cherry on top. Unless you're coming in and saying your build cost is here for this type of product, ours is cheaper and here, and we can show you, and we've proven it, you win. No one's done that yet. Our focus entirely, day one has been about $100 a foot in build costs. That is achieved by reducing skilled labor entirely in the build process and off site and on site. Basically.
- [25:33]
Podcast Host (likely MCJ representative)
What's the current construction cost for a.
- [25:35]
Alex Gampel
Single family home typically 2x that easily.
- [25:38]
Podcast Host (likely MCJ representative)
I was getting into this metaphor of the way I think about your business and I was talking about this nested doll. And to me that's how I think about the product that you've built. So the smallest product is the actual home, which you don't build. But I want to describe what that home looks like.
- [25:52]
Alex Gampel
We do actually build it. So the way to think about one of our mobile micro factories, just really quick, so we're correctly talking about the right context, is we place it anywhere and it services 150 mile radius because we're proximate, unlike these other companies in our categories. We can be the manufacturer next door, we can be the general contractor and all the subcontractors. There's up to 22 different subcontractors fragmented and involved in a typical build. We take on that entire function cohesively with four unskilled folks and two shifts on a construction site. It's our labor that's coming out and assembling it.
- [26:25]
Podcast Host (likely MCJ representative)
I'm just trying to help people understand the concept of mobile micro factories. So as I understand it, there are the end product single family homes that people live in. There are these micro factories that are essentially edge factories that get plopped down within. You said, I think 150 mile radius of where you're going to deploy the homes. And then there is the thing that you are building, which is you are building a system that builds these micro factories. And each one of these are different products that look and feel different, that have different capabilities and components.
- [26:53]
Cody Sims
And I think it's the fact that.
- [26:54]
Podcast Host (likely MCJ representative)
What you're doing is you're building the systemic platform that enables these micro factories to then basically be rolled off a truck and be ready to go then assembling single family homes. Am I following that part correctly?
- [27:08]
Alex Gampel
Entirely correct. But do you see how there's layers and it took 900,000 engineering hours to get here because just to build the internal system to. Today we're able to mass produce four mobile microfactories per year. And I'll show you offline us building our Nevada facility. But we might have to put a video in here or some B roll because really hard for people to imagine what is a mobile microfactory.
- [27:28]
Cody Sims
Let's start there.
- [27:29]
Podcast Host (likely MCJ representative)
Let's describe. So this is the middle part of the three stacked layers that I talked about. The middle part is the mobile microfactory. This is the thing that would get deployed in a neighborhood and service 150 mile radius that would build all the homes in and around that area.
- [27:44]
Alex Gampel
What does that look like by the way? For context, it's an oxymoron because no one's ever copied and pasted several hundred factories before. It just hasn't been done. It's the same thing when SpaceX said, well, rockets are non reusable, therefore they're incredibly cost prohibitive. But what if we made them reusable? So the way we backed into it is our factory is in. I'll show your audience, I'll just describe it.
- [28:06]
Podcast Host (likely MCJ representative)
It looks like a big indoor tennis court bubble. If you think about these bubbles that go up over tennis courts in the winter, that's kind of what it looks like.
- [28:13]
Alex Gampel
I wish it was that simple. But we send 130 shipping containers or so. Pretty standard 40, 20 foot intermodal shipping containers. Which by the way, if someone were to ask me a quirky interview question like what's the best invention of all time? An intermodal shipping container is the best invention of all time. It opened up global economy. It's a standardized way to ship things, but Basically we ship 130 shipping containers anywhere in the world. And they quick deploy like a plug and play system, like a factory in a box into a container. And inside of the intermodal containers we quick form production lines. Then inside this 30,000 foot or so facility, we produce all the parts to a single family home. We either make them or prep them, but either way we're touching the whole thing. Then we're palletizing them and then there's about 37 stages to our house. Those pallets are always being delivered. GoPuff is delivering locally, batched between one site to another, one apartment to the other. Like Uber, we're batching and delivering our kit of parts in stages, always the next two stages to the build sites. We've even built dispatching software. When you go layers, all the software is ours and whatnot. But anyway, that is a mobile microfactory. The reason why it needed to exist is because you can't go use typical construction and build industrial facilities. If you want to go launch hundreds of them, it would take you forever. There's regulatory risk, et cetera. So not only did we figure out a way to do this unbelievably cheap factories. We build factories for 1/20 of the cost of the average factory in America. We do it in about 90 days once it lands on the concrete slab where the factory is going. And because it's a repeatable product every time, we don't have to design a new factory floor every time. Same thing every single time. So we solved a lot of the things that can't exist in this model previously.
- [29:54]
Podcast Host (likely MCJ representative)
So that's the modularity of factory creation. Where are these modular factories themselves designed and created? So that's the top level of the nested doll model in my mind. Where do you design and build and manufacture these shipping containers full of factory parts?
- [30:10]
Alex Gampel
First we needed to, and this is context, because a lot of folks you have on your show have raised a lot of money. We're probably not that smart or that good. We didn't raise all that much, but we needed to get through a lot of engineering hours. Maybe more than most folks in El Segundo get to get through. Because we didn't raise $100 million. We needed to go to Eastern Europe, where engineers are quite good and a lot cheaper. So we set up a big engineering base there. And for the first time, we needed to build our own factory. For the first time ourselves. We needed to design every machine, lay it out, go throw stuff out that didn't work, redo it again, and that took three and a half years. Now we're at a final point where our mobile microfactory is a product. It's our mobile microfactory V01 that we're going to copy and paste that dozens of times before we get to a different design. We then opened up as a startup a full mass manufacturing facility in China where we make and sub assemble the entire factory before it goes somewhere in the world. We're doing our first one out of that facility. Now, what's interesting is McDonald's is a really cool example to what we're trying to do. Because when you want to launch a new McDonald's retail location, it's just a function of SOPS. It's literally just following a step. My partner Oleg has laid out the steps to launching a factory by the hours into a nine month process of by the hour. What needs to happen across our team between factory production, bringing the factory online, site selection, hiring. The level of SOP that we have is not a startup. You could sell this thing to someone.
- [31:38]
Podcast Host (likely MCJ representative)
And then just to complete the loop on all this. So then you mentioned in China, your factory assembling your factories. You then ship your factories in shipping containers where they can be unpacked onto a concrete slab. And then those factories are what builds the single family homes themselves. Can you describe what the end home that comes out of one of your factories looks like?
- [31:57]
Alex Gampel
It's actually not too different than traditional home building. We can build any type of single family home that you're used to living in, et cetera. There's going to be some limitations because that's the point of standardization. Meaning if you came to us and said I want this 12,000 square foot house, it's going to have a circular atrium in the living room and this and that, that's not our business. We're in the business of making sure that 99% of the US can afford a house. The best analogy I can make is we're probably like Volkswagen quality, but we're making a Toyota Camry price. Traditional home building today is a goddamn tuk tuk, meaning we have steel tubes and rivets for our structural framing. We have triple pane windows, really high R values when you step foot. And I would love Cody for you to visit our Michigan house. We have a Michigan house being finished right now as a model unit. I would love for you to visit because when people step foot into our houses, they don't believe the price point. High quality. Because our engineers, they just can't design something bad. In fact, we might have over engineered it a little bit, but they're regular houses. We like floor to ceiling windows, just regular houses. You want a 4,000 square foot house, you want a 3,000 square foot house, you Want three bedrooms, two bedrooms. Our system shape shifts to whatever you want.
- [33:01]
Podcast Host (likely MCJ representative)
Your micro factories are enabling custom houses to come out of it. They're not all stamped out looking the same.
- [33:07]
Alex Gampel
So we produce parts, we standardize parts, but those parts coming together can form different things. And that's the beauty.
- [33:15]
Podcast Host (likely MCJ representative)
Now let's get into your business model a little bit if your business is building these micro factories, the microfactories job is to build houses. But you're selling the micro factories to someone, someone's operating and running. Because you're not a home builder yourself, you're not a GC that's actually assembling the home.
- [33:30]
Alex Gampel
We're general contractor, we're not the developer. Developers hire generally or home builders, someone to actually do the build.
- [33:37]
Podcast Host (likely MCJ representative)
So who's buying the factories from you or are you operating them and running them?
- [33:41]
Alex Gampel
Good questions, different questions. Basically our model is. It's tough to explain, but I'll have to explain in entrances for broader audience. So the way to think about us is we want to phase one of our magic show. We want to mass produce the factories and become the infrastructure layer behind how home building actually gets built. To do so, we have to play with cost of capital, our balance sheet, et cetera. So if you draw a chart, maybe you have an animation team, maybe they can draw a chart. But the way it looks like is imagine an X and Y axis. On the X axis you have number of factories, on the Y axis you have cost of capital. Basically imagine the number of factories we put out goes up. Our ownership in factories goes up, meaning for now we JV and I'll get into that. But the cost of capital goes down. So every N plus one delivery of a factory, our cost of capital goes down, which means we can own 100% of them ourselves. That's phase one. So the way we do this today is for reasons of not being a spec factory builder, not being a merchant factory. We like to go into a market with a really seasoned operator, let's call them a small to medium sized homebuilder that knows the market. We tell that group that they are going to offtake the next three years of that factory, meaning each factory produces 200 homes a year. They're going to guarantee two to 600 homes worth of demand that they're buying from the factory, hiring the factory to build. That allows us to turn around and go to infrastructure funds, project finance, structured equity, whatever you want to call it, but not venture. Because that's an expensive cost of capital. That's why companies like WeWork, et cetera, had trouble, because wrong cost of capital and a lot of deep tech, by the way, is making this mistake. I think a lot more founders need to be very smart about cost of capital. Oleg and I have built different businesses in different industries where we know that this is the right path. But basically we turn around and show that there's a guaranteed demand. If the factory gets to this market initially for the first couple of years and then we turn around and raise leverage, some sort of leverage on the factory. Our factory by the way, is very cheap to build relative, which is important. And because we only need to do 200 homes a year generally in markets that do, you know, 10,000 homes a year worth of scale, we're doing homes cheaper, faster, better. Therefore it's not speculative. We're not worried about the demand. We don't need to cover our fixed expenses with a million square feet like we talked about gigafactories. So our model today is to do this in JV capacity. With time, we want to start pulling large facilities off our balance sheet to start putting them up ourselves. And our customer becomes small to medium sized homebuilders in that geographic radius. Therefore we're the infrastructure for how they build.
- [36:08]
Podcast Host (likely MCJ representative)
So they're buying all the equipment from you to build the homes that they're building.
- [36:12]
Alex Gampel
Once a factory is there, they tell us the plan they want. They pay for the house just like they would any other gcu. We make the parts and we put the home together. We are the general contractor. That's what I'm trying to communicate. The factory takes on the role of doing the physical unskilled labor on site. That's our whole unlock.
- [36:29]
Podcast Host (likely MCJ representative)
You're not placing an order saying I want a Kubi Mobile microfactory here. You're assessing the market, deciding where the right market might be, where there's going to be a boom in home building demand and where you think you have ample amount of developers who would want to work with your system. You finance the ability to set up shop in that location and then they start ordering the homes from you and ultimately building them.
- [36:53]
Alex Gampel
Correct. So imagine maybe a different analogy. Imagine a general contractor decided to start a new business in a new market. That's us. Imagine that general contractor, instead of hiring subcontractors, had that in house. And now imagine if that general contractor had the ability to manufacture last mile. That's what we are. So to say this, by the way, is the only way we could have first principles. We think this is the only way to do this. We don't think there's other ways to do this. We think this is the most logical path to doing this and actually addressing the cost element of home building.
- [37:25]
Podcast Host (likely MCJ representative)
You think about in a local economy, I think growing up, people I knew whose families were very well off, many of them were the big developers in town who built the neighborhood housing developments and this, that and the other. And then of course you've got a lot of labor that is supported through the general contractors who are hiring subcontractors and actually doing the building side of things. It sounds like your aha is it's that latter part that is just there aren't enough people doing that anymore.
- [37:53]
Alex Gampel
We're not displacing jobs actually. In fact, I'll tell you kind of an interesting quirk. We talk to a lot of high up public sector officials, think about what we offer and then think about it in the context of a political campaign. No one else can put up a factory this cheap, this fast, create 350 unskilled jobs per factory because we're also the GC disparate on sites. And it builds housing. Do you see when you start to talk about those things from a political angle how this gets really interesting?
- [38:20]
Podcast Host (likely MCJ representative)
Is housing the long term play for you or do you expect your microfactories to be building other things over time too?
- [38:27]
Alex Gampel
I think if we just stayed in housing and covered 2% out of the million that get built per year, just single family homes, that's a $50 billion business. So we can stay here for a while. But we do have aspirations and it's a function of focus to do other asset classes. We know how to do multifamily using the same system. Maybe there's other asset classes we can get into, but it's just a function of staying really, really prudently focused.
- [38:49]
Podcast Host (likely MCJ representative)
And you've mentioned you all have been relatively capital efficient. What can you share about how you've capitalized the company so far?
- [38:55]
Alex Gampel
We needed venture because imagine if I came to Cody and your venture fund and I said look, I have this idea. I'm going to make a factory that's never existed before. I swear it'll work. It's out of containers and it builds houses. I don't think you would have given me $70 million, which is what would have been required being based out of El Segundo to do what we did at our scale, we raised a fraction of that and we have pretty good investors. They're mostly skewed on the deep tech climate side. We've been very selective. We're going to raise something much larger pretty soon. But most of that topical raise is really about anchoring, project level raise and more. The non dilutive side. It's funny because one plays off the other.
- [39:31]
Podcast Host (likely MCJ representative)
Yeah, you have to have the balance sheet in order to raise the debt capital.
- [39:34]
Alex Gampel
It's not even debt though. It's not corporate debt. We're not interested in corporate debt. It's asset level backing on the factories themselves. But yes, they don't want you to go out of business if you're in the middle of putting up a factory. That's the logic there.
- [39:45]
Podcast Host (likely MCJ representative)
Alex, what else should we have covered? We have blown through a lot of topics here.
- [39:50]
Alex Gampel
I don't know. I think housing is important. You know, I'm personally and just like you, I'm really excited that Silicon Valley is back to let's go really talk about asymmetric upside and build real world things and it makes the world a better place. To me, that's always been more exciting than Nothing wrong with B2B SaaS, but just a little more exciting for moving the needle as a people.
- [40:08]
Podcast Host (likely MCJ representative)
What's next from Kubi? What should we expect to see from you in terms of upcoming things you're excited about up?
- [40:15]
Alex Gampel
We're moving incredibly fast. We're finishing up a house in Michigan incredibly fast with just four unskilled people on site. And it'd be awesome to get you out there right now. Capital is a constraint for us, meaning we're moving a lot faster than when the bottleneck becomes capital. You start raising more capital. So we're in the middle of that process right now. We've solved all the technical side. Everything about our system works. Everything we said we'll do, we've done. Which is a good problem to have. Capital is the easy one to solve for. And then we're pretty excited. We're trying to put up our first mobile microfactory in the US and that's slated for Nevada. So maybe this time next year it'll already be operating.
- [40:50]
Podcast Host (likely MCJ representative)
Amazing. That's an easy drive for me. I can't wait to come check it out.
- [40:53]
Alex Gampel
Exactly.
- [40:54]
Podcast Host (likely MCJ representative)
Well, listen, I really appreciate the conversation. This is a big meaty topic. It's one that doesn't get talked about in the tech venture world. Probably as often as it should. Probably a fraction of the amount of time it should get talked about.
- [41:06]
Alex Gampel
It should actually, because I love this chart that. Have you ever seen the opportunity index by 50 years. So you know, 50 years. The venture fund, they did this really cool study or piece. It's basically they took and ranked every industry relative to how much venture funding has gone in there and then they counter rank it and it shows the opportunity. Out of the top five, housing construction is one of them. The size of the industry versus the amount of venture dollars. Then you look at SaaS. Holy crap. That's penetrated relative to the max size. That's an interesting way to think as a venture investor. This happens to be one of the biggest industries that you can tackle relative to the amount of funding that has gone into it.
- [41:42]
Podcast Host (likely MCJ representative)
Alex, thanks for shining a light on it and helping us tell the story about what you're working on, and I'm excited to continue to follow your journey.
- [41:50]
Alex Gampel
Thanks, Cody. Look forward to building your house.
- [41:53]
Cody Sims
Inevitable is an MCJ Podcast. At mcj, we back founders driving the transition of energy and industry and solving the inevitable impacts of climate change.
- [42:06]
Podcast Host (likely MCJ representative)
If you'd like to learn more about.
- [42:07]
Cody Sims
Mcj, visit us at MCJ VC and subscribe to our weekly newsletter at Newsletter MCJ vc. Thanks and see you next episode.