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Why Autodesk is investing in an urban prefab construction startup

This article was adapted from the newsletter VERGE Weekly, running Wednesdays. Subscribe here.

Two years ago, prefab construction firm Factory OS — which leans heavily on software to build homes quickly while minimizing waste — got its first big order from one very big name in tech.

That high-profile customer was Google, which spent a reported $25 million to $30 million to build short-term housing for employees who otherwise couldn’t find places to live in the insanely hyperactive, insanely unaffordable San Francisco Bay area housing market.

This morning, design software firm Autodesk and financial services giant Citi made strategic investments in the Northern California company, which has its base in a former Navy submarine construction facility on Mare Island in California. The money Citi is putting toward the deal comes from its fintech incubator, Spread Products Investment Technologies group, and Citi Community Capital, which finances affordable housing and community development projects.

The amounts that Citi and Autodesk are putting up wasn’t disclosed, but the money will go toward creating a new, highly digitized factory dedicated (among other things) to building modular housing to help victims of natural disasters and other emergency situations. It also will help fund the buildout of a research center focused on sharing knowledge of housing policies. The lab is affiliated with UC Berkeley’s Terner Center for Housing Innovation.

While Autodesk already has been involved with Factory OS through its foundation arm, which donated software licenses to help the company get off the ground, the infusion disclosed Wednesday marks the first impact investment by the parent company, said Joe Speicher, executive director at the Autodesk Foundation. “I would argue that looking at the short-term horizon, modular construction looks to be ripe to solve some of our housing challenges,” he said. “Engaging in this deeper relationship allows us to explore how we can add value.”

While the specifics haven’t been cemented, the two companies will look at ways to integrate their software platforms to streamline design, fabrication and supply chain management.
Plus, the deal documents even include metrics around the startup’s ability to help reduce materials waste associated with construction, its ability to help stimulate the development of more affordable housing, and its potential to help create new local jobs, Speicher said.

It’s worth noting, for example, that Factory OS is allied with the Northern California Carpenters Union, which is using the company’s first facility to help train workers in the new digital technologies that are integral to the Factory OS approach. “Most companies are very aware that automation and machine learning” are disrupting many sectors, Speicher said. “They are actually doing something about it.”

While Factory OS is specifically focused on housing, it’s not a stretch to imagine how its approach might be applied to designs for commercial structures that might need to be built quickly and cost-effectively, such as factories or hospitals.

And lest you didn’t notice, Autodesk spent $275 million in December to acquire another software company meant to streamline and scale the construction process, BuildingConnected. Essentially, it’s a marketplace that includes more than 700,000 construction professionals — and customers such as Turner Construction, Skanska and AECOM.

Autodesk isn’t the only tech company investing in innovation aimed at solving the intractable problem of affordable housing in places such as Silicon Valley or Seattle, where the success of companies such as Google, Amazon, Apple, Microsoft and Facebook have sent living costs through the roof. Amazon’s Alexa Fund, a $100 million investment arm meant to amplify voice control technologies, was part of the $6.7 million Series A funding last fall for Plant Prefab, which operates out of Rialto, California. Plant Prefab was spun out of Living Homes, which built the first LEED Platinum home in the United States. Obvious Ventures is also a backer.

Like Factory OS, one of the biggest selling propositions touted by Plant Prefab is the potential to deliver low-cost homes in about half the time it normally takes, while minimizing construction waste. The best-funded startup in the technology for prefab space, though, is Katerra of Menlo Park, California, which has attracted more than $1 billion in its roughly four years of existence. In late June, Katerra started an apprenticeship program (offered in both English and Spanish) meant to help train workers in the new technologies and skills associated with this approach.

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