#704 Building Beautiful Affordable Housing w/ Alexis Xavier Rivas

Alexis Xavier Rivas is the co-founder & CEO at Cover, a company focused on using technology to build beautiful, affordable housing that everyone would aspire to own. In this conversation, we discuss housing, technology, first principles thinking, hiring, architecture, backyard homes, and much more. ======================= If you haven’t started building your crypto portfolio on Okcoin, there’s no better time. They’re one of the fastest growing global exchanges around and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in BTC with a friend when you invite them to sign up for Okcoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more BTC you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building their portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on Okcoin until November 1. That’s no fees at all on your purchases until the holidays. Get started on the web or on their new super easy-to-use app at okcoin.com/pomp ======================= LMAX Digital - the market-leading solution for institutional crypto trading & custodial services - offers clients a regulated, transparent and secure trading environment, together with the deepest pool of crypto liquidity. LMAX Digital is also a primary price discovery venue, streaming real-time market data to the industry’s leading analytics platforms. LMAX Digital - secure, liquid, trusted. Learn more at LMAXdigital.com/pomp ======================= Cryptocurrencies offer boundless potential, but who will protect yours? Arculus is the crypto cold-storage wallet that combines the world’s strongest security protocols with an easy-to-manage app. Unlike other storage solutions that are less secure and more difficult to use, Arculus doesn’t compromise security or usability. You can store, swap, and send your crypto all with a simple tap of your Arculus Key™ card. And with no cables and no USB connections, you’re insulated from the thousands of hackers online trying to get at all the digital assets people store in the cloud. So that the only person with access to your crypto... is you. Order the safer, simpler, smarter crypto cold storage solution at getarculus.com today.

Speaker names marked ? are inferred from speaking time and the show’s known hosts — they are not voice-verified.

• 0:02Anthony Pompliano?

  What's up everyone, this is Anthony Pompliano. Most of you know me as Pomp. You're listening to the Pomp Podcast, simply the best podcast out there. Now let's kick this thing off. Alexxus Xavier Rivas is the co-founder and CEO at Cover, a company focused on using technology to build beautiful, affordable housing that everyone would aspire to own. In this conversation, we discuss housing, technology, first principles thinking, hiring, architecture, backyard homes, and much, much more. I really enjoyed this conversation with Alexxus, and I hope you do as well. Before we get into this episode, though, I want to quickly talk about our sponsors. First up is OKCoin. If you haven't started building your crypto portfolio on OKCoin, there's no better time. They're one of the fastest-growing

• 0:44Anthony Pompliano?

  global exchanges around, and they have some promotions happening right now to help even more people be part of the future of finance. If you have an account already, you can split $100 in Bitcoin with a friend when you invite them to sign up for OKCoin if they buy $100 of crypto in the first month. The more friends who sign up and buy, the more Bitcoin you get. And I always recommend dollar-cost averaging as a way for investors to have more control over their average price when building any sort of investment portfolio. Now you can automate dollar-cost averaging with completely fee-free daily, weekly, or monthly recurring buys on OKCoin until November 1st. That's right, there are no fees at all on all purchases through that recurring buys product until the holidays. Get started on the web or on

• 1:29Anthony Pompliano?

  their brand-new, super-easy-to-use app at okcoin.com/pomp. Again, okcoin.com/pomp. Next up is LMAX Digital, the number one institutional crypto exchange. They offer clients the deepest pool of crypto liquidity on the planet, underscored by 100% uptime track record through volatility spikes. They leverage LMAX Group's liquidity relationships and ultra-low latency technology. LMAX Digital is the market-leading solution for institutional crypto trading and custodial services. They feature a central limit order book, streaming spot Bitcoin, and other cryptocurrencies, all paired with the US dollar, euro, and yen. LMAX Digital, they're secure, they're liquid, and they're trusted. That's why... They're the number one institutional crypto exchange.

• 2:12Anthony Pompliano?

  People have been sleeping on LMAX Digital, but when you see the numbers under the hood, it is impossible not to be bullish. Go learn more at LMAXdigital.com/pomp. Again, LMAXdigital.com/pomp. Go check them out and let me know what you think. Last but not least is Arculus. Cryptocurrencies offer boundless potential, but who will protect yours? Arculus is the crypto cold storage wallet that combines the world's strongest security protocols with an easy to manage app. Unlike other storage solutions that are less secure and more difficult to use, Arculus doesn't compromise security or usability. You can store, swap, and send your crypto, all with a simple tap of your Arculus key card. And with no cables and no USB connections, you're insulated from the thousands of hackers

• 2:57Anthony Pompliano?

  online trying to get all the digital assets people store in the cloud. So if the only person with access to your crypto is you, order the safer, simpler, smarter crypto cold storage solution at getarculus.com today. Getarculus.com. Go check it out if you're looking for a crypto cold storage wallet that serves as the world's strongest security protocols with an easy to manage app. Getarculus.com. All right, let's get into this episode with Alexis. I hope you guys enjoyed this one.

• 3:25Speaker 01

  Anthony Pompliano runs Pomp Investments. All views of him and the guests on his podcast are solely their opinions and do not reflect the opinions of Pomp Investments. You should not treat any opinion expressed by Pomp or his guests as a specific inducement to make a particular investment or follow a particular strategy, but only as an expression of his personal opinion. This podcast is for informational purposes only.

• 3:48Anthony Pompliano?

  All right, guys. Bang, bang. I'm here with Alexis. Thank you so much for doing this.

• 3:52Speaker 02

  Thank you for having me, Pomp.

• 3:53Anthony Pompliano?

  All right, let's start with this housing problem. Obviously, I think a lot of people are waking up to the idea that the housing problem is really, really bad in America. How bad is it and what's driving the problem?

• 4:02Speaker 02

  Yeah, I mean, Housing is super broken. I mean, we have like a shortage of 5 million homes in the United States. It's growing every year. And the problem looks like it's getting worse. And that's because there's a shortage of skilled construction labor. And the labor population is aging in construction.

• 4:23Anthony Pompliano?

  Got it. So basically, we have people who want to build homes. They have to go get materials, and then they also have to get construction teams, human capital. And in the short term, maybe there's problems around the cost of lumber, whatever these products are. But that hasn't been kind of a long term problem. That's more recent. The really, the long term problem is that you've got this cost of labor, and you're basically making the argument that there's two things. One is they're getting older, who have these skill sets, and so they're becoming somewhat more scarce. And that's driving cost up. And as you drive up cost, it becomes harder to actually build a home for something that's affordable price.

• 4:57Speaker 02

  Yes, exactly.

• 4:59Anthony Pompliano?

  And when you think about the construction industry in general, how much of this is like what I would consider like general labor? So somebody who is going to do kind of rudimentary carpentry skills, or lay bricks, or whatever, versus an electrician, or something that people might say, hey, look, that needs more of an education, more of a kind of apprenticeship type education in order to be able to actually do that live on a job site without anyone there to kind of look over you?

• 5:26Speaker 02

  Yeah. Conventional construction is a lot of that skilled labor, right? Even a carpenter takes years to get good enough to, you know, do a kitchen and it looks great. And so most of the cost comes from that skilled labor. And even the areas that are, you know, less, require less training and education, there's still an apprenticeship type approach, right? Like laying foundations, formwork, mixing concrete, all of that. You know, it's not rocket science, but it's not like you can, you know, watch a YouTube video and then go do it.

• 6:02Anthony Pompliano?

  Absolutely. When we look at the housing problem, there's construction. Walk me through, what does that construction process look like? If we just want to build, let's just say that we're going to build a two bedroom, two bath home. How much does that cost the consumer? And then what does that timeline look like from the day somebody says go, to it's actually constructed, somebody can move in?

• 6:25Speaker 02

  Yeah, so with the conventional process, it's extremely fragmented. And the first question that you have to ask is, what am I even allowed to build from a zoning standpoint? And that's where, you know, you would either go yourself to the city, go start talking to people, spend hours just waiting in line. And then you might get the same answer. You're probably going to get different answers if you go on two different days and talk to different people. Right? So that's the first part of the problem. Or you can hire a zoning consultant or an architect to go do that research for you and spend thousands of dollars. And, and what you'll learn from that is, you know, how big can you build? Where on your property can you build? And what can you build? You know, what's the maximum number of bedrooms? All these restrictions, right? Height, all of those. And then from, from there, you go into the design process.

• 7:10Speaker 02

  And so conventionally, you do this design process, you know, if you can afford it with a good architect and an engineer, or you go straight, straight to the general contractor. But this is an iterative and expensive design process, especially if you go with an architect and an engineer, which is what you need to get, you know, the super, super nice, super high-end kind of home. It's an expensive process because you're going, you're going and you're doing iterations. And for each iteration, you're spending, you know, 200 bucks an hour. And so that adds up and that takes months. And then you submit the permits, you wait a few months to get your permits back, and then you work with a general contractor. And that general contractor manages a army of subcontractors.

• 7:50Speaker 02

  These are the, the foundation, the crew, the framers, the plumbers, the electrician, you know, the kitchen subcontractors. And they are managing that whole team until, until the project is done. The issue with that is that if one of those teams is delayed, or they prioritize another customer over you, now the whole project timeline is completely screwed. Because everyone had allocated time for your project, now they need to be pushed back because, you know, the, the framers can't, you know, or the, the painters can't start until the drywall's up, you know, and these dependencies. And so you have this timeline that, that goes way, you know, takes way longer, much more expensive than you thought.

• 8:34Speaker 02

  And, you know, the norm is that it's twice as expensive and it takes three times as long as what you expect. And it's actually true, which is crazy.

• 8:43Anthony Pompliano?

  And when they do this, you gotta go through the zoning process, then you've got to go through this architect. And is that because people want something that's original? Or is that because literally there isn't just like, hey, here's five plans, just pick one of the five and then run with it?

• 8:57Speaker 02

  Yeah, I mean, you could go to your general contractor for most buildings and just for most homes and just do the designs with them. But usually it's because you want something that's tailored to your needs, but also each property is different, right? You might have a 50 foot wide property, you might have a 30 foot wide property. And those two properties, you know, it's just not going to make sense to build the same home.

• 9:17Anthony Pompliano?

  And so, once you decide, okay, this is the design that I want, let's say you went through an architect and you've got the engineer, and you say go in, let's say LA where you all are, is that a six month process, a one year process, five year process? Like, how long does it take from the second somebody breaks ground and they've got the zoning in place? They've got the architect plans, all that ready to go to the somebody's actually moving into the home?

• 9:44Speaker 02

  So with conventional construction, that's typically for like a one off home, you're not a professional developer, that's typically a one year to two year process from when you break ground.

• 9:56Anthony Pompliano?

  Okay. And what is the average price, do we think, kind of across LA, let's say two bedroom, two bath, is that 500,000, 200,000, 2 million? Where do we kind of come in at, you think?

• 10:09Speaker 02

  So this is where it gets tricky. In a city like LA where land is expensive, housing is expensive, often people put more into the finishes. And so you are looking at, you know, at least 500,000, but more often you're looking at, you know, a million dollars for the construction of a new home.

• 10:27Anthony Pompliano?

  Okay. So that I would expect that in a place like LA. So let's just say a million dollars as a general directional, it's more expensive than other places in the country. There's also a lot of challenges in terms of zoning, everyone wants to do crazy stuff, and I'm assured that they're going crazy trying to prevent people from doing that stuff. But there's also like a very big homeless population. And is that in relationship because they're strict zoning and they won't allow for the building out of more? Homes. So for example, San Francisco, I think is kind of more egregious in that one of the big things people complain about is they say, hey, they won't let us build up, meaning higher high rises. And also, they won't allow us to build in certain areas. So what you get is a net

• 11:09Anthony Pompliano?

  negative amount of homes being built compared to what is needed, right? So you're actually building less homes than you need just to keep up with regular population growth. And because you're actually lagging so far behind, there is this constant delta between, hey, we already have a homeless population. They don't have a home. We can't build affordable housing fast enough. And so we're actually falling further and further behind the problem, which doesn't seem to have an end in sight. Is that similar in an LA type area?

• 11:35Speaker 02

  Yeah, it's, it's, it's the same core problem. I mean, the homelessness issue, it's, it's, it's a complex issue. That's one big driver. It's just housing is extremely expensive. Right? And, and there's, and it's, it's not getting better right now.

• 11:49Anthony Pompliano?

  Yeah. Well, inflation and other things don't help either.

• 11:51Speaker 02

  Yeah.

• 11:51Anthony Pompliano?

  But so probably only going to get worse. Let's talk about cover. I, when I first met you, was blown away with just like, hey, look, there's this problem. And most people are going to go solve that problem with what I would consider like an elementary view of, oh, we need to build more homes. Like, let's just go build more homes. Right? And I'll build a construction company and it'll be amazing. You and the rest of your team have taken much more of what I would consider like a first principles thought process to, what is the core problem that is limiting the production of more homes? And how do we solve that? And so kind of talk through like, what is that original idea for cover? And kind of how do you guys think about it today?

• 12:26Speaker 02

  Yeah. So, so I come from an architecture background, right? And, and I from, I always wanted to build homes. And I worked with my grandparents closely to build their home, saw the process from their perspective. And it was exactly what I said earlier, which was, you know, it took twice as, it cost twice as much as what they expected and took three times as long. And it was shocking to me because they didn't want anything crazy. They just wanted, you know, a nice home that was going to last long, was going to be well-built. And that it was, you know, thoughtfully designed. They didn't want anything crazy. And, and then I also saw, so, so, you know, saw that problem, went and worked for architecture firms, see what was going on behind the scenes.

• 13:08Speaker 02

  And what I realized was, you know, it wasn't just, you know, they had a bad architect or they had a bad team. It was a structural problem with how the industry was set up.

• 13:15Anthony Pompliano?

  Okay.

• 13:16Speaker 02

  And, and what that structural problem is, is it's fragmented. There's

• 13:21Speaker 02

  All the different parties involved, they're not working under one roof, they're not even working towards the same incentives, right? They're all charging hourly.

• 13:28Speaker 02

  And saw that problem.

• 13:33Speaker 02

  And started asking the question, you know, why aren't homes built like every other product in our lives?

• 13:40Anthony Pompliano?

  What do you mean by that?

• 13:41Speaker 02

  Built in a factory.

• 13:42Anthony Pompliano?

  Yep.

• 13:43Speaker 02

  Right? Like your clothing, your furniture, your electronics, right? It's all built in a factory, your car. And as a result of that, it's abundantly available, it's low cost, there's very tight quality control. And why aren't homes built that way? That's kind of the question that went, ran through my head. And so I started Googling and learned about this industry called prefab. I was like, oh, people are trying to do this. That sounds really cool. So I went and worked for a prefab company, thinking that they had the solution to this problem. And what I learned was that while they were building homes inside of a factory, all they had done was taken the conventional home building process and replicated that same process inside of a factory. So they were still building, you know, with plumbers and electricians

• 14:24Speaker 02

  and carpenters, all using conventional tools and materials.

• 14:30Anthony Pompliano?

  They were just doing it in the factory rather than onsite on the land and they would bring those pieces there and then construct them. But ultimately, it didn't really solve the time, cost, and like efficiency standpoint. It was more so just, we're not going to do it onsite, we're going to do it in a factory. So it appears like it happens faster, but not really.

• 14:49Speaker 02

  Yeah, it appears like it happens faster. There's some efficiency gains by having, you know, everyone working in the same company. It wasn't, you know, completely, you know, but the efficiency gains were marginal. You're looking at like, you know, 10% more efficient than conventional construction.

• 15:05Speaker 02

  Which is good, but that's not enough. And so I started asking the question, you know, what would it look like if homes were actually designed from the start to be geared towards manufacturability from the start, right? To be geared towards the factory tooling, the machine, the process from the beginning? Because nobody had actually redesigned the physical home for that. And that's because every product, you know, your car, it's the, the design of the car is so that it can be manufactured incredibly efficiently. And it's designed with that in mind from the start. That hadn't been done for homes. So that's kind of the, Core insight. That was the core insight.

• 15:48Speaker 02

  And at that point, I said, started looking at other companies touring their factories, talking with people, learning about the space and realized nobody had actually redesigned the home from the ground up. And so that's what we're doing, right? We're redesigning the entire home building process from the ground up to be geared towards manufacturability from the start. And I think one of the big differences, and this is, this is where, yeah, one of the big differences is that unlike a car, unlike clothes or furniture, where it's the same product over and over again, because properties are different, because the sizes are different, homes have to have customization. And so then, how do you do that customization at scale, right? That's, that's a hard problem.

• 16:34Anthony Pompliano?

  And when you think about this, walk me through, okay, I buy a piece of land, I want to put a house there, or I've got land in my backyard, I want to put some sort of structure there. I say to cover, hey, I would like to potentially work with you. What is that process from day one to, okay, now we can actually put furniture in and move in or use the structure? Like, what is almost like the customer journey, if you will, that makes this so powerful for them?

• 17:00Speaker 02

  Yeah. So the first step, right? When you want to build, you can, at no cost, go on our website, type in your address. This is, this is for Los Angeles, where we currently serve, and immediately know up to how big you can build. I think much.

• 17:17Speaker 02

  Yeah. You can, you can immediately know up to how big you can build and what you can build. So just by typing in your address and telling us what you want to build. So that's the first step, right? We just make it simple. Then, once you say, okay, great, you know, it sounds like I can build what I want, pay $250, and then we create three custom designs for you based on what you fill out in our digital design profile. And so that's, that's a series of 50 to 100 questions about what you're looking for. So, you know, what's your budget? How do you want to prioritize between the bedroom spaces and the living spaces? How do you want your home to relate to the neighboring structures in terms of privacy? You know, all the questions that a great architect would ask. So.

• 18:03Speaker 02

  We do that. Then you say, you know, I love this design. You put down a $20,000 deposit. We permit it. Once we get the permits, we manufacture it. We do the foundation work. We manufacture the panels from our factory. We ship the panels on a regular flatbed truck. We don't need, you know, an oversized permit. So it's flat-packed. And then we install it on your property. We don't need massive cranes that, you know, if you have a tree or if you have power lines, those will get in the way. We just, you know, carry them with carts and then lift them into place. So, and that install process today is a month.

• 18:43Anthony Pompliano?

  Got it. And so you're essentially taking the software process that technology companies have used forever in terms of creating systems, being able to use technology to do a lot of work rather than have humans do it. And it drives all this efficiency. It also, both from a time perspective and a cost perspective. But let's go back to that example of like a two-bedroom, two-bathroom house or a structure that you guys would build. What that looks like is from an installation time period is a month. From a cost perspective, what does that look like compared to, let's say, a million-dollar home in LA?

• 19:21Speaker 02

  Yeah. So, you know, a two-bedroom, two-bathroom home, you know, we can do that for half a million dollars. But it's gonna be the type of, which is actually expensive. Like, that's a lot. But it's at the level of quality that would cost you with conventional construction around a million. You know, we're talking about sub-zero Wolf appliances, super-high-end finishes everywhere. You know, it's like, super-clean design. So, we're starting off with a high-end product. And we're making it way easier and less expensive to buy that high-end product, but it is still a very high-end product.

• 19:57Anthony Pompliano?

  So I'm going to say something which I don't know if is you're going to agree with or not. But after we talked and I looked at what you guys were doing, I decided I was going to invest in the business. But the reason, I don't know if I ever told you this, was like, it seems like you're following the exact same model that a Tesla would follow, which is go to the high end product, build a great product. It's expensive, but as you build that high end model, you're basically using the luxury pricing to subsidize the creation of this entire system, the backend, the team, the technology, et cetera. And over time, you can actually drive downstream in terms of you go from making half a million dollar homes to eventually, you know, I don't know what the goal is, a hundred thousand or less.

• 20:40Anthony Pompliano?

  And there's still some level of quality that is associated that people would expect to be much more expensive. But now you're able to do that because you've got technology, team, training, short time to install, like all these advantages that are going for you, that you perfected at the high end of the market. But now you've kind of brought it down and almost democratized access to it to everybody else.

• 21:00Speaker 02

  Exactly.

• 21:01Anthony Pompliano?

  Okay, so very similar type of strategy that they followed, now just doing it with prefabricated homes.

• 21:06Speaker 02

  Yes.

• 21:06Anthony Pompliano?

  Okay, when we start to think about where you guys are today, you've already built some of these homes. You already have some of them on display in certain areas in LA. Talk to me about what those homes have inside of them, right? So are they two bedroom, two bath on average? Like when I walk into one, is there like a pool out back and there's like a rooftop? Or is it kind of what I would expect with hardwood floors and marble countertops? Like just describe what these homes kind of look and feel like.

• 21:35Speaker 02

  Yeah, so these, you know, these homes are clean design, like large floor to ceiling windows, large windows, sliding doors everywhere. You know, every bathroom is well lit, bright, spacious. We pay a lot of attention, a lot of attention to the small details, right? So how materials feel, how they integrate with each other? And how do we eliminate visual clutter? So that a space that is actually relatively small, you know, say a thousand square feet, feels much bigger than it really is, because not all square feet are created equal.

• 22:14Anthony Pompliano?

  What do you mean by that?

• 22:15Speaker 02

  Well, I mean, you can have a 2,000 square foot home that feels like a thousand square foot home because it's poorly designed.

• 22:21Anthony Pompliano?

  And vice versa.

• 22:22Speaker 02

  And vice versa, which is what we're doing.

• 22:23Anthony Pompliano?

  Okay. And why is it that your team is so effective at doing this, right? Like, what background or what thing do you know that other people may not have figured out in the prefab home sector or just in construction in general?

• 22:37Speaker 02

  Yeah, I mean, we have a, we have an insane team. It's a crazy team. These people have built, you know, they were at SpaceX, Tesla, top-tier architecture and construction firms, you know, did the Apple campus, structural engineering for the Apple campus in Cupertino, you know, all of these, all these different things. And we're pulling together this expertise from industries that haven't worked on this problem before. And we're putting them together on the same team and we're, and we're giving them a hard problem and they're solving it. Right? You know, people that, yeah, yeah.

• 23:13Anthony Pompliano?

  And those people come together, how much of the team is what I would consider technologists in terms of they're either using some sort of software or technology platforms to do design and kind of cut down on a lot of the time or cost versus more of folks coming out of the construction industry where they're more architects or actual, you know, installation teams, things like that?

• 23:37Speaker 02

  Yeah, the majority of the team is from, on the technologist side. So people that worked at Google, Amazon, SpaceX, Tesla, and are, you know, manufacturing engineers, mechanical engineers, software engineers. And they're, they're figuring out, you know, okay, here's the problem. How do we automate? How do we design for manufacturability? How do we design tooling that makes this scale really well?

• 24:00Anthony Pompliano?

  Why can't the incumbents do this? Like, what you're saying isn't, nothing you're saying is like shockingly abrasive, right? Okay, we get the time down, we get the costs down, right? We spend more time almost being thoughtful and thinking kind of from first principles. And then we build repeatable systems in order to replicate this literally over and over and over again. And oh, by the way, we also happen to do some really kind of what appear to be simple things, maybe I'm just naive. If you type in an address, we can quickly hit an API and say, here's what you're allowed to build in this area, here's what you're not allowed to build. It feels like none of that is like crazy or quote, quote, rocket science?

• 24:41Anthony Pompliano?

  But nobody seems to be doing it. So like, what is the difference there? Like, why you guys and not the incumbents?

• 24:49Speaker 02

  So, I mean, as soon as I kind of understood the problem, I agree. It was like obvious, right? Like, this was the solution.

• 24:57Speaker 02

  I think for someone that has been building homes for decades, right, which what these incumbents have been doing, thinking of a way to build a home without drywall, for example, is just, they can't think of it, right? They're so stuck in the conventional way of doing things. And then the other thing is actually that most of these home builders, especially the large ones, I mean, so let me step back a sec. There's your local general contractors, right? Which if you're in LA and you're gonna tear down and rebuild a house, that's who you're gonna go to. They don't have the resources to do what we're doing, right? We've raised venture capital dollars. We've put together an insane team. They just can't do that, right? You can't do this with two people. It takes a team. So they can't compete.

• 25:41Speaker 02

  And then when you look at the large home builders, you know, that build 10,000, 50,000 homes per year, they, they,

• 25:54Speaker 02

  they just, I mean, most of them aren't actually vertically integrated. Most of these large home builders are just working with other local general contractors to do this. And they want to do this kind of innovation, but they don't have the technology know-how and mindset.

• 26:10Anthony Pompliano?

  And is it something where once you show them how to do it, they can replicate it? Or is this like a difference in DNA, right? Like, I think a lot about in software, if you're building, I don't know, let's say a social application, you could pretty much call up almost every other social media company and say, hey, guess what I'm doing? And tell them, and they literally like, all right, sounds cool, dude. I gotta go. And they won't do anything about it, right? Like, there is this element of, you know, if you look at all of the rise of ephemerality in social media, like somebody had to go do it, prove that it worked, and then everyone kind of was a fast follower and tried to copy it. If you look at things like news feed, right? Sure, theoretically, in hindsight, makes a ton of sense. Somebody had to go do it, and then it made sense. And so I think that like,

• 26:55Anthony Pompliano?

  it feels like what you're doing is very similar, which is almost the incumbents are in a little bit of like an innovation or innovator's dilemma, right? Where like the innovation is so counter to the way they think. It would violate everything they believe to go and do this. And so that kind of boxes them out from really kind of attempting to compete today.

• 27:16Speaker 02

  Yeah, I think it, yes. Yeah, it's hard for these incumbents to.

• 27:25Speaker 02

  You know, they might understand it at an abstract level, what we're doing, right? We're replacing

• 27:32Speaker 02

  broken, fragmented processes with vertically integrated process driven by technology. They understand that, but they don't really know how to build that technology.

• 27:41Anthony Pompliano?

  Yeah.

• 27:41Speaker 02

  Cause they don't have that in their DNA. They're not.

• 27:45Speaker 02

  They're not innovation oriented companies. They're, you know, execution and volume oriented companies.

• 27:51Anthony Pompliano?

  When you think about your progress to date, how many people do you have? How much money have you raised? And like, what are the milestones where you're like, okay, from the day we started to where we are today? Here's like the milestones that we kind of checked off along the way.

• 28:04Speaker 02

  Yeah, so we just raised a $60 million Series B led by GigaFund. And we had, you know, existing investors, Founders Fund, Valor, General Catalyst, 50 Years and you, you know, coming in. As far as like milestones, right? The first step was just developing your product, right? And we did that with our seed round. We developed the product, we built a few of them for real customers. We got some real feedback and we continuously improved, right? And then with the Series A, which was led by Founders Fund and Lennar, actually, which is, you know, the largest home builder in the country. So they co-led the Series A.

• 28:46Speaker 02

  With that, with those funds, we took our install time down from 120 days down to 30 days. We tripled the speed.

• 28:56Speaker 02

  So those are some of the kind of like high level milestones. We're about 50 people now.

• 29:00Anthony Pompliano?

  Why is Lennar, the largest home builder in America, investing in a startup that no one knows about in the home industry? Right? That is it out of fear? Is it out of learning? Is it out of economic gain? Like, what, what, talk to me about like, why you think philosophically this is interesting to them?

• 29:20Speaker 02

  I mean, I think you said it earlier, as far as, you know, the innovator's dilemma, right? They, they see this problem in terms of, you know, home building hasn't changed in a hundred years. There's gotta be a more efficient way. They, they see the inefficiencies. They also see the labor problems, right? And this isn't, this isn't just Lennar. This is. All the large home builders, they're facing an issue in terms of not being able to meet the demand for homes, right? There's a 5 million shortage of homes. They can't meet that demand because there isn't enough skilled labor out there that can build those homes. And so we solve that by taking a huge part of the process and moving it into the factory where you can put efficiency tooling, automation behind it and make the process faster. So we solve that core problem that home builders have.

• 30:05Anthony Pompliano?

  And then the $60 million that you just raised in the Series B, what are you going to do with that money? Where does that get you?

• 30:11Speaker 02

  A lot more R and D and like not theoretical R and D. We're talking about building homes, testing them and getting them to be even faster, even more efficient before we go and scale up and build a factory that can build 10,000 of these.

• 30:29Anthony Pompliano?

  And the idea is if we zoom out, let's say 10 years from now, I want to build a structure, whether it's in my backyard or it's my entire house. I can come to you, I can answer my 50 to 100 questions. You basically spit out back to me, hey, here's three potential things that we could build for you. I say, yep, I like option two. And in 30 days, I go from, all right, here's the foundation has been laid to the actual property is ready to be moved in and inhabited. Or do we think we can get this down to 20 days, 15, 2 days? Like walk me through kind of where you ultimately think you can get it to.

• 31:12Speaker 02

  I think if we take out the regulatory constraints of zoning and permits, I think we can get it to under a month for sure, probably around two weeks.

• 31:21Anthony Pompliano?

  Okay. And the regulatory approvals and all of that, is there a world where you all can make a dent in that in terms of accelerating somebody getting approved? I'm assuming, and again, I'm somewhat naive and ignorant when it comes to some of the zoning stuff in various cities, but if you're building the same size structure, right? You may change some bells and whistles or kind of what it looks like, but if you're essentially building- Maybe three types of the same thing. Can you almost get the pre approvals where it's hey, if it's within the zip code and it's within this structure size, we already know it's it's just yes, it's approved, it's approved, it's approved. Or is there still going to be a highly bureaucratic process where it's kind of one off? And somebody has to go out to the property or do something like that?

• 32:03Speaker 02

  Yeah, I mean, there's a lot of things that we can do to simplify it, even even with custom designs. We can, we can get our system approved and work with the cities. It really comes down to this, the local city governments were wanting to work with us and wanting to build homes. Because at the end of the day, you know, it's a, it's a local issue. So we can do that. And there aren't any kind of like first principles, like core reasons we couldn't do that. It's not like they're doing months of, you know, and engineering analysis on the permits. You know, they're actually spending between two and four hours per permit. Right? So, so even though it takes six months, they're not spending more than two, two to four hours on that.

• 32:48Speaker 02

  You know, this is where we want to work with cities to solve their housing issues by making the process more efficient and working with software, maybe create, maybe creating an API that, that, you know, we can tap into on their end. And all home builders can use to get instant approval.

• 33:04Anthony Pompliano?

  I'm fascinated by this idea of private companies starting to put a dent in the bureaucracies of the kind of public organizations and not from a, we want to do your job for you, but from a, this would make it easier for us and all of our peers and competitors to work with you. And therefore we have the resources, you don't let us help and build something. A great example of this was recently Flexport, the CEO went out on a boat in LA and basically identified, hey, there are two or three, you know, things that probably makes sense in normal times from a regulation standpoint. But if we were to change these, I think that we could drastically accelerate

• 33:45Anthony Pompliano?

  kind of getting all of these ships into the ports, unloading them and getting the supply chain kind of unscrewed up. And I'm willing to volunteer my time and my team's time to go ahead and help do this. And the regulations were things like they have basically like shipping containers or Connex boxes that can only be stacked too high. And he's like, hey, we should stack them four or five high. Again, there's good reason why it's only too high during normal times. Right now, we probably should increase it. And he took to Twitter. So his team didn't even necessarily build any technology or do anything, but he was able to drastically create change by kind of bringing awareness to the issue. The second step of something like that is like to actually go build technology for them, right? It sounds like there's an opportunity, whether it's you or somebody else in the industry to say, hey, look, one of the ways that would be much easier for us to operate and kind of interface with

• 34:30Anthony Pompliano?

  you is through technology. Here is a thing that basically just take it for free so that we can kind of loosen up that bottleneck so that we can continue to move faster. It's going to lead to more affordable housing, more affordable housing solves a bunch of these social issues and therefore like this is good for the government and it's also good for kind of private industry. And so like, let's go forward. Is that like a general thing that you think is possible?

• 34:51Speaker 02

  Absolutely. Yeah, absolutely.

• 34:53Anthony Pompliano?

  What stops us from doing that right now?

• 34:57Speaker 02

  I mean, right now, we're really trying to grow our software team and our engineering team. And we're focused on kind of like, you know, the problems immediately ahead of us. I see this as like, certainly an issue down the road that we need to start working on now and building out that regulatory team and just the team to engage with the city so that we won't spend months building this tool. If you're a 2000 person company, you can dedicate a team of 10 to go work on something. Absolutely. We're a 50% company. We can't do that yet. But we will in the future and we'll start those conversations with cities so that when we have this tool, we know that it's going to be adopted by, you know, at least half a dozen or, you know, more cities.

• 35:39Anthony Pompliano?

  And once you start to look at those roles that you're trying to fill, are there specific types of skill sets or experiences that you're looking, you're like, right now I have open jobs. Here's the exact people that I'm looking for?

• 35:49Speaker 02

  Yeah, there's, there is. It's primarily engineers, although there's also a lot of operations, production staff, but primarily engineers, mechanical engineers that have worked outside of construction. So in places like aerospace, automotive, software engineers, and from a software engineering standpoint, it's, you know, people that can take, here's a problem.

• 36:16Speaker 02

  Develop a set of requirements and actually build the whole, you know, either microservice or feature themselves, you know, kind of deploy a test, get feedback, either if it's an internal product or an external product, you know, get feedback from the users and then go iterate kind of independently, right? So you're not, you're not gonna have, so we're looking for people that can operate without a team of, you know, product managers.

• 36:38Anthony Pompliano?

  Yep. Is everyone based in LA or you have people remotely as well?

• 36:41Speaker 02

  Uh, right now, everyone's based in LA.

• 36:42Anthony Pompliano?

  Okay. Is that something that you guys are gonna continue to kind of focus on is bringing people to LA to make sure they all work together in one place?

• 36:48Speaker 02

  Yeah, it's, it's really important when you have such a big physical product.

• 36:52Anthony Pompliano?

  Yep, that makes sense. Talk to me about this idea of execution as marketing. I saw a tweet from you recently. Uh, you were, from my understanding, leaving one of the cover structures. Uh, and there was somebody walking by who had no clue that you were affiliated with cover whatsoever. And they basically were like, wow, that house went up really fast. Uh, and in some way, that's like marketing exactly what the value proposition is. But you didn't spend any money to do it. It was just like people saw how quickly it went up. Like, how do you think about that in terms of virality and customer acquisition and kind of like spreading the word of mouth?

• 37:25Speaker 02

  Yeah, I mean, we would much rather spend the limited resources that we have on, on exactly that, which is execution, right? And then having that do the talking for us from a marketing standpoint, right? People see what we're actually doing and they're impressed. That's what we wanted. That, that's what I meant by that.

• 37:47Anthony Pompliano?

  And when you do this, is there a belief that, uh, the majority of customers, these will be their primary homes? Or this will be more kind of like second structures on their property? So remote work's becoming much bigger. Uh, I've seen a ton of people on the internet all saying like, hey, I need to build something in my backyard. Cause I gotta get out of my house and I kind of feel like I'm going to the office. It just happens to be the office in the backyard. Like, how do you think that these structures end up serving people either from like a more full-time basis or more of like a office type thing on their property?

• 38:14Speaker 02

  Yeah. So, so today with the focus on backyard homes, uh, it's a mix, right? We have some people that are building them for personal use, right? So just like an office, a workout space.

• 38:26Speaker 02

  That kind of thing. The other, the other use case is people actually renting them out to someone else or having a family member live in them. So a mother in law or a parent or parents living in the backyard with them. Right. Instead of moving into a retirement home, for example. So that's, that's a big use case. And then, and then the other option is actually for someone else to live in it and generate rental income and support their mortgage, right? You can build one of these and now all of a sudden, you know, living on your home is less expensive because it'll pay for more than the cost of whatever the loan is to pay for, you know, the $250,000 backyard home. It'll generate more rent than, than the cost.

• 39:08Anthony Pompliano?

  Absolutely. That, that makes a ton of sense to me. And so when you think about building this, one of my big questions is always like, okay, cool, sounds cool. Uh, you got a small little house, like, why don't you live in one? But you do.

• 39:20Speaker 02

  I do.

• 39:21Anthony Pompliano?

  So explain a little bit about like the idea of you being, uh, you know, running this organization, but you literally live in one yourself and like, why that's so important?

• 39:30Speaker 02

  Yeah. So, so I moved into one. It was two years ago. Uh, the homeowner was like, you know, they built it to generate rental income. And then they asked us, do you know anyone that wants to rent it? And so, you know, I moved in, rented it from them. Uh, cause I was like, yeah, I want to test the product that we're building, right? I want to, I want to feel what it, what it's like to live in a cover, right? And see what works well and see what doesn't, right? And improve it. Um, so, so worked there, I lived in there for about a year. Then unfortunately they sold the house. So I, I moved into, you know, a regular apartment. Um, and then we had another cover, cover client that came up and rented it. And so I moved into that one again. So I've now lived in two separate covers. Um, and, and, uh, you know, seeing the difference and the improvements and, and where there's still room for improvement.

• 40:15Speaker 02

  Um, you know, yeah, yeah, it's, it's, it's been, it's been, it's been really cool to actually, you know, it's, you know, a lot of companies have products where you can try them every day.

• 40:24Anthony Pompliano?

  Do you ever feel like, um,

• 40:28Anthony Pompliano?

  You're just giving people feedback on how to make your own home better, right? Like, do you ever like message the team and you're like, hey, man, this doorknob or like, hey, this corner? And you're just actually improving your own home, which ultimately will improve all of the cover structures?

• 40:41Speaker 02

  Oh, yeah, that's, that's a huge, that's a huge perk of living in your product is that constant feedback. And it's like, it's things that you would not notice if you just walk through it for 30 minutes or even an hour, right? It's like little things.

• 40:55Anthony Pompliano?

  I want to, before we finish up, kind of just look forward 10, 15, 20 years. I will give you the benefit of the doubt that you're going to be successful. I'm quite literally financially betting on you being successful. What is the impact of cover being successful, right? Like, to me, this is one of those companies where forget what you think about construction or any other issue. You want to cheer for the company because if it's successful, there's all these like net good kind of impact to a local community. So how do you think about, okay, if we're successful, here's what changes in us in a local economy?

• 41:29Speaker 02

  Yeah, I think, I think the first thing is just that we've raised the bar for the standard of, of homes, right? Homes are higher performing, they're more energy efficient, they're, you know, affordable, right? So we've just raised the bar. And they're stunning. So I can, can I just read?

• 41:51Anthony Pompliano?

  Yeah, go ahead.

• 41:51Speaker 02

  Yeah. So the first thing is that we've raised the bar, right? Homes are stunning, they're high performing, they're energy efficient. And then the second, they're more affordable, right? So homes are abundantly available, there's no shortage of homes. When there's a demand, if, if, you know, a company opens up, a big company opens headquarters in a new city, and now there's demand for 500,000 more homes, we can meet that demand within a couple of years, right? We've changed that delay from the demand to the ability to produce homes. And as a result of that, we have a society and cities that are a lot more dynamic. You see a lot more change. Housing is, is not, you know, 50% of people's income.

• 42:33Speaker 02

  They have income to spend elsewhere, they have income to go on vacation, to go to college, to support, you know, their kids and their grandkids. And we've just created a lot more financial stability by making something so basic like housing, you know, abundantly available and affordable.

• 42:49Anthony Pompliano?

  And it feels like the affordability of this is only going to become more and more of a conversation as we get this kind of wealth divide in the country, right? And there's all kinds of monetary and fiscal policy nonsense is going on, whatever. But everyone can come together and say, having more affordable housing is a net positive. How we get there is in question, right? And how much regulation should be in the way versus not, you know, highly debated. But really, you guys kind of stand outside of what I'd call the kind of political disagreements. And you're just like, listen, you guys figure out what the rules all are. Like, we're just going to build affordable housing. We're going to be really damn good at doing that. And when you guys want us to go in somewhere, like, we can do it. We can do it fast. We can do it cheap. And ultimately, this is a net positive for your local community.

• 43:32Anthony Pompliano?

  So like, you know, you kind of should be cheering for us to win here more so than trying to stop us from doing this.

• 43:38Speaker 02

  Absolutely, yeah.

• 43:39Anthony Pompliano?

  Last question I have for you is, have you talked to local politicians or anybody in terms of them saying, hey, we want to actually make this successful? Like, we want to help you guys?

• 43:48Speaker 02

  Yeah, we have. We have, we've had state senators come to our factory for, you know, the zoning, the free zoning lookup tool launch. And we've engaged with, you know, local politicians and members of the city. And there is support for what we're doing.

• 44:05Anthony Pompliano?

  Yeah. Where can people go to look at the actual designs of the structures or learn more about the company?

• 44:12Speaker 02

  Yeah, they can go to our website, buildcover.com.

• 44:15Anthony Pompliano?

  Okay. And where can they find you on the internet?

• 44:17Speaker 02

  They can find me on Twitter or Instagram, alexis x rivas.

• 44:23Anthony Pompliano?

  Okay. And when people go there, right now, you're only available in LA. But is there a plan or a timeline when you will move outside of LA? Or are we just sticking with LA for the moment?

• 44:34Speaker 02

  Right now, we're sticking to LA. That's because we're focused on solving, you know, the whole process and the product first before scaling. But then we're going to scale fast everywhere.

• 44:46Anthony Pompliano?

  Got it. I, uh, I'm really cheering for you to be successful. I think this is like a no brainer, both from a, here's the mission of the company, but also too, again, I gotta just go back to, there's a very kind of deeply rooted first principles thinking that goes on here in terms of, okay, the problem that we're trying to solve actually isn't going to get solved by just going faster, doing what we're already doing. How do we build a scalable system that we can then replicate, not only in one single geography like LA, but then if we want to bring this national or international, how do we do that? Right?

• 45:15Speaker 02

  Yeah, exactly. It's, it's kind of putting in place the core parts and the core gears of the machine before you turn the machine on and start pumping them up.

• 45:23Anthony Pompliano?

  Yeah. Um, all right. Go follow on Twitter, Alexis X Rivas, uh, or Instagram and then buildcover.com. Uh, but I appreciate you coming in here and doing this. We're definitely going to have to do this as you continue to grow. I feel like this is not going to be the last time we have this conversation.

• 45:39Speaker 02

  Thank you, Pom. Thanks for having me.