Little House on the Backyard

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Happy Monday, folks - and a Merry Q3 to all who celebrate.

Was feeling extra ~artsy~ this week, so enjoy another updated newsletter template. If you love it, thank you. It took me a full 30 seconds. S/o, @Adobe. If you hate it, keep it to yourself. That’s a full half minute that I will never get back.

Seriously, though, always looking for feedback and suggestions on things you guys might like. To preview the outline for the time being:

1. Startup of the Week

2. TLDR (wait you mean you don’t read every word I type???)

3. Weekly News

4. Bonus section with a newsletter recommendation that I HIGHLY encourage you check out, and maybe a reader of the week? 👀

Side note, if you’re sitting on a fat marketing budget and don’t know where to spend it, might I recommend reaching out about being a sponsor for The Startup Breakdown?

We (that means all of us) have built a community of hundreds of founders, investors, and students, or as we refer to them here, baby founders and investors, all of whom are desperate for Lululemon joggers and AI productivity tools. If that sounds like the type of audience you want to get your brand in front of, let’s chat.

Anybody else’s TikTok/Instagram Explore pages look like an open house for mini luxury accommodations? Maybe the algo is on to me, but they’re just so sleek and pretty that I was all but prepared to drop a hundred grand to live in a shoebox where I could cook dinner from bed. Or as some people call it, New York, baby.

For those of you with the means to seriously consider getting one of these fancy dollhouses, Krava is ready to turn your Barbie (July 21 is so so close) dreams into reality.

The Austin-based startup is the newest to get a crack at modular construction, a process whereby larger buildings can be created through assembling a bunch of individual components, almost like a jigsaw you can live in.

Ideally, this would make bring down construction costs considerably, potentially even allowing entire rooms to be constructed off-site and transported to their final destination. Plus, it would bring down construction times and even offer a level of customization not seen since Sim City.

With pressing housing supply inefficiencies, labor shortages, and policy making it harder to build a toilet than to buy a tiger, costs to own a home are about as doable as a trip on a Virgin Galactic rocket.

Despite modular construction’s promise, it hasn’t yet reached the adoption many had expected due to unexpectedly high costs for even assembling the smaller parts.

The team at Krava believes that it finally makes dollar cents sense to play irl Minecraft at scale, and rising pressure on politicians to address the shortage and loosen up restrictions means that more are being met with the opportunity to add a quick 8×8 here or there to their house.

Rather than trying to build the Empire State building like it’s a 30,000-piece, 18+ Lego set, Krava is looking for quick wins, starting with the rollout of its 100-square foot K1 units. Coming with electrical, sheathing, insulation, and more, these K1s are truly A1 for a price tag of just $30,000.

The company launched out of stealth last week, waving around an early check from ShockVentures for an undisclosed amount. The waitlist was expanded from its current beta customers to installation for 100 total users.

As they’re not quite at a livable level (idk definitely an upgrade from under the stairs), current users are getting creative, leveraging them as podcast studios, mini gyms, and home offices. Extremely high degrees of customization, think size, layouts, windows, heating, etc, mean these puppies can serve just about any purpose. Maybe a bromance room, amirite, Tom and Barack?

The unit’s small size means there are fewer permitting obstacles and that contractors are able to install them in the 4 hours you spend rewatching New Girl every afternoon, meaning you can get right back to bingeing from the snug embrace of your very own tiny version of the loft in room 4D.

Globally, the modular construction industry is worth an estimated $91 billion and is growing at a 7.5% CAGR. Within this, the single unit space is actually expected to be the fastest growing, benefiting from growing demand for sustainable and efficient construction, increased government support and consumer demand, and rising costs for traditional materials.

The Asian market is the largest though still with strong demand in North America and Europe, and though commercial demand outweighs residential right now, spending some time developing with the K1s could allow Krava to eventually expand geographically and in industry.

Competitors include Blokable, Plant Prefab, and MODS, all of which have raised more and seen a bit more traction. Each is looking to address the more ambitious modular full home or office market, and if they’re able to figure it out could significantly hamper Krava’s ability to lead in this space.

However, given the failures of many startups seeking to start big in the past, the strategy of getting some quick wins could pay massive dividends, allowing the company to master its processes and ensure mass efficiency as customers are drawn to its affordable, customizable, and quick product, especially when people just need to have a backyard to install them. Garages are out, wood sheds are in.

CEO Ritwik Pavan is experienced as a founder, with past startups including an early-stage software development agency, a real-time data startup for solving parking problems, and various angel investments into early stage startups across industries.

He has also quite the knack for Twitter threads, so if you want to learn more and get the neat visuals to boot, check out his launch post:

Chief Design Officer Sean Tabris has experience as both a freelance and employed industrial designer, and with a variety of team advisors from the architecture industry, the team has the technical chops to turn your big ideas into lil reality.

What would you use your K1 for?

I’d go with a dungeon for all of my enemies, but that’s just me.

Krava is accelerating the construction process through easy-to-assemble modules and aiming to revolutionize the way people design and build their living spaces. By starting small with single units, their sustainable approach could be used to accelerate to build the skyscrapers of tomorrow.

If you see a sudden Russian GDP-sized spike in defense tech spending, just know that the space had been a sexy one for VCs even prior to Putin realizing how fragile his lil empire is.

There has been a noticeable spike in deal count (no deal shaming) over the last few years, with 4,744 since 2016. All of those 0s amounted to $135.5 billion, and if the first half of this year (ngl had to go back and change that) is any indication, 2023 could be big even by those standards. 89 deals were announced in just Q1 versus 60 in Q4 of last year.

“Defense” is relatively broad, ranging from drones to satellites to even AI. If you haven’t heard, the last entry to that list is kinda hot rn. Regardless, even Andreessen has committed $500 million to companies promoting “American interests.” Apparently, helping to move the crypto center of the world out of the country is good for us 🙃 

There are a few reasons behind the boom, including more companies serving both government and enterprise customers, the success of massive companies like SpaceX (more on that in a sec), and a growing belief that the government’s historically sloooooow (no… not the government!) procurement process might finally be due for a change.

Think we might be giving Joe and the boys a bit too much credit on that last one, but s/o to those of you building CoD stuff. Except the guys actually building CoD. They’re kinda going through it rn.

PitchBook is doubling down on its prediction that dry powder across European venture firms will hit record levels this year. The market data company is expecting a whopping $45 billion to be sitting in investors’ Venmo accounts, waiting to be sent to promising startups with an emoji of their choosing.

In addition to your typical “market bad” and “rates high” rationale, the slow deployment is also being driven by firms opting to double dip in their existing portcos rather than adopting more tech babies to wash and feed.

While this is great for the companies that managed to raise when the market was a bit more frothy, it means 😿 for those looking to raise their first round, particularly as the accumulation means that investors are willing to go full Saudi and pay whatever it takes for the most promising companies, shooting their valuations to the moon (not investment advice, pls don’t sue).

“Wait, isn’t that a good thing?” you intelligent, inquisitive individuals might ask.

Yes, when that valuation is warranted by fundamentals > FOMO. Raising at undeserved valuations creates excessive expectations, which if not lived up to make it a whole lot harder to raise later on when founders are forced to take excessive dilution in a down round because they haven’t been able to grow into the Wembanyama shoes they’re suddenly expected to fill.

Eventually, we’re gonna make it through this. So if you have a time machine and can figure out exactly when the market will get hot again so that you can perfectly position yourself to raise a retirement-ready round, maybe go ahead and do that.

Though if you know how to build the DeLorean, I don’t think you’d struggle to raise regardless of the market conditions.

Because one section is too long to go without mentioning something Musk-tangential, SpaceX as a company is doing far more mooning than its Starships.

It seems like selling secondary shares is all the rage these days, and not one to let a trend go by without participating, Elon is looking to find a spot on the VCTok fyp by selling shares of the world’s largest NASA playset, valued at $150 billion. More impressive, that marks a $13 billion increase from its $137 billion raise in January.

The company is the country’s largest “startup” and takes silver globally, trailing only ByteDance who is valued at $300 billion, indicating that Grimace vids > rapid unscheduled disassemblies.

Nate is Gr8. Let him help you to be great at sales, with some readers reporting 100-200% increases in their KPIs after incorporating his advice. You better pay attention, too. Pop quiz next week starts with “sell me this pen.”

And onto this week’s Reader of the Week… you? 👀

If you’re working on something interesting, looking to join a team and want to highlight your expertise to fellow subscribers who might be hiring, or think you can take on Joey Chestnut tomorrow in the hotdog eating contest, hmu with a short blurb and pic, and you might just get to be the pretty face smiling goodbye to the 3 or 4 of you who actually read to this point.

Cheers to another day,

Trey