abodu Raises $20M to Revolutionize Backyard Homes

Addressing the Housing Shortage with Innovative ADUs

The escalating need for more attainable housing is increasingly pressing, coinciding with a persistent shortage within the U.S. housing market.

Numerous startups are emerging, each striving to alleviate this shortage through diverse approaches. Abodu, a company focused on prefabricated Accessory Dwelling Units (ADUs), recently secured $20 million in Series A funding. This financing round was spearheaded by Norwest Venture Partners, with participation from Initialized Capital, Redfin CEO Glenn Kelman, former Stockton Mayor Michael Tubbs, GGV investor Hans Tung, and Paradox Capital’s Kyle Tibbitts.

Changes in California Legislation Facilitate ADU Construction

Legislative changes in California, beginning in 2017, were implemented to streamline the construction of ADUs.

Further easing restrictions, on January 1, 2020, the state significantly simplified the process of adding additional housing units to existing single-family home properties. Local cities and agencies are now mandated to approve or deny ADU project applications within a 60-day timeframe. Moreover, the state now prohibits cities from imposing constraints such as minimum lot sizes, maximum ADU dimensions, or mandatory off-street parking provisions.

Abodu: A One-Stop Shop for Backyard Homes

Founded in 2018 and based in Redwood City, California, Abodu positions itself as a comprehensive solution for building an ADU – essentially, a home within an existing property’s backyard.

The company differentiates itself by not only handling construction and installation but also assisting homeowners through the often-complex permitting procedures. Abodu proactively obtains structural engineering pre-approval from California state agencies, ensuring statewide buildability. They also collaborate with local authorities to pre-approve foundation systems, facilitating predictable project timelines.

Compared to traditional construction methods, Abodu asserts a faster and more cost-effective process. The startup claims its backyard homes can be installed in just 10% of the time required for a conventionally built ADU.

Market Activity and Expansion

Abodu has been actively engaged in the market since the fall of 2019, completing the sale and construction of numerous ADUs. According to CEO and co-founder John Geary, the company currently has “dozens and dozens” of units installed, with multiple dozen more in production.

Currently, Abodu operates in the Bay Area, Los Angeles, and Seattle. The company states it can deliver an ADU in as little as 30 days in San Jose and Los Angeles, leveraging the cities’ pre-approval processes. In other California and Washington locations, the turnaround time is “as little as 12 weeks.” However, a fully customized project typically takes 4-5 months to complete, as noted by Geary.

Product Offerings and Pricing

Abodu’s product line comprises three distinct models: a 340-square foot studio, a 500-square foot one-bedroom, one-bath unit, and a 610-square foot two-bedroom unit. All models include kitchens and living areas.

Base pricing begins at $190,000, with the average project cost, encompassing permits and site preparation, being approximately $230,000, as stated by Geary.

Diverse Use Cases for ADUs

ADUs serve a variety of purposes, with housing family members and generating rental income being the most prevalent.

“Multigenerational living has reached an all-time high during the pandemic,” Geary explained. “People are addressing immediate family needs. Additionally, they are supplementing their income by renting to community members like teachers or firefighters, or to single individuals or young couples.”

Abodu is now setting its sights on expanding into the San Diego market.

Distinction from Competitors

Recently, we reported on the funding round secured by Mighty Buildings, another Bay Area startup specializing in ADUs and housing. Geary highlights a key difference: Mighty Buildings concentrates on construction innovation through its 3D-printing technology.

“We intentionally chose not to reinvent construction processes,” Geary stated. “Our focus was on optimizing for speed and simplicity.”

Asset-Light Model and Investor Confidence

Abodu operates on an asset-light model, avoiding ownership of manufacturing facilities. Instead, it maintains a network of factory “partners” throughout the Western U.S., allocating builds based on their current capacity.

Investors express strong confidence in the company’s business strategy.

Jeff Crowe, managing partner at Norwest Venture Partners, emphasizes that Abodu’s “beautifully crafted units” are a significant advantage.

“John, Eric, and their team manage the entire process – from permitting to building and installation – for their customers,” Crowe shared with TechCrunch. “With expedited permitting secured in over two dozen cities, they offer faster installation times than other ADU providers. This translates to high customer satisfaction and rapid growth.”

Michael Tubbs, former Stockton Mayor, added that Abodu is addressing two critical California challenges: the housing shortage and its contribution to racial and economic segregation.

“By making it easier for homeowners to build high-quality backyard housing, Abodu promotes integration of renters and homeowners within the same neighborhoods, while empowering small landlords and homeowners to build equity,” Tubbs explained via email.