From cloud computing to proptech: Digital Ocean co-founders raise $29M for Welcome Homes

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

“I didn’t like anything I saw, and I wanted a new house and I couldn’t get one,” he recalls. “And like every crazy tech person, you have to ask questions like, ‘Why can’t I go online and get a house? Why is this so difficult?’ ”

The questions, he said, were “just rabbit holes.” Hartman ended up building his own house, and essentially serving as the general contractor.

That experience, and the questions leading up to it, got Hartman to start thinking about how to solve the problem for others like him. So In May 2020, he teamed up with fellow Digital Ocean co-founders Mitch Wainer and Ben Uretsky to startup Welcome Homes, a New York City-based company that offers people a way to design and build new homes online. (DigitalOcean’s other two co-founders Jesse Mauro and Marc Hartman are advisors to the company).

The trio had left Digital Ocean, a cloud infrastructure services provider, before the company went public in 2021 and concluded that homebuilding was not that dissimilar from their previous venture.

“Our main thing was educating and being that big value of simplicity for our customers, and while this is a completely different product and industry, we think the way in terms of owning the market position of simplicity,” Hartman told TechCrunch in an interview.

Interestingly, when Welcome Homes started out, it was focused on giving people the ability to build custom homes. But the team, according to Hartman, soon realized that many potential customers actually wanted the opposite – fewer choices. 

“Thankfully, we were able to notice that quickly and revamped the product” to offer a variety of models, or move-in ready homes, going live in March of 2021, he said.

The startup “6xed” home sales in 2022, he added. Today, Welcome Homes is available in New York, New Jersey, Connecticut, Maryland, and Pennsylvania. The company says it appeals to home buyers by offering “guaranteed pricing,” and a pledge to streamline the process of building a home – from land selection to financing and construction. Excluding land, the cost of building a home through Welcome ranges from $596,000 to $1.75 million. 

To build on its momentum, Welcome is announcing today that raised more than $29 million in a Series A funding round led by Era Ventures that closed in September of 2022. The company plans to use its new capital to boost its current headcount of 40, develop its “proprietary land technology,” design new home models and expand into new markets throughout the U.S. 

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 inception to nearly $35 million.

Welcome is just one of many startups attempting to address the housing shortage that have raised venture capital in recent years. In November, Atmos, a startup which has built an online marketplace that teams up homebuyers with builders and land developers to design and build custom homes, emerged from stealth in November with $12.5 million raised in Series A funding round led by Khosla Ventures. And in February 2022, tech-enabled homebuilder Homebound raised $75 million in a Khosla-led Series C.

In conjunction with the funding, Clelia Warburg Peters, managing partner at Era Ventures, will join Welcome Homes’ board of directors. Peters previously was a venture partner at Bain Capital Ventures and president of Warburg Realty. Era is a new firm focused on investing in “ideas that leverage technology and innovation to reimagine the built environment.”

Via email, Peters described Welcome’s capital-light business model as that of a “neo-builder,” which she described as a three-sided, managed marketplace that links demand (buyers), supply (builders) and the required financing (banks). 

She believes the startup can help alleviate the United States’ chronic undersupply of single-family housing.

“Today, the total US single-family homebuilding market value stands between $250 billion and $400 billion annually, and 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 generally focuses on master build communities and custom homebuilding, which is inaccessible to most consumers because of price and timeline),” Peters wrote.

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

“We believe these homes will resonate with a generation of millennial homebuyers who have grown accustomed to similar buying experiences from high-end brands  such as Apple and Tesla.” Peters added.

Meanwhile, she told TechCrunch, Welcome can leverage technology to automate and alleviate most back-office functions that builders might find burdensome while giving banks a way to offer construction financing directly to the homebuyer in a less risky manner since they will “be working with a scaled partner across multiple projects.”

Finally, unlike traditional homebuilders, Welcome Homes doesn’t have land or unsold homes on its balance sheet, which Peters believes will allow it to scale more quickly.

“We’re really more of a tech company than a tech-enabled homebuilder,” said Hartman, who also previously started and sold another startup, TechDay. “Welcome is figuring out things like how we can use imaging to detect walk patterns, or how to create a rules-based system around municipal variances so we know exactly what type of home would fit on a given property.”

From cloud computing to proptech: Digital Ocean co-founders raise $29M for Welcome Homes by Mary Ann Azevedo originally published on TechCrunch