Why we invested in Cottage
Residential construction is a trillion-dollar industry that has hardly changed in 50 years. Projects are consistently over-budget and over-time, and homeowner visibility into everything from permitting to labor to material procurement is opaque. I recently did my first personal home renovation project, and when I asked our general contractor (GC) where I could review materials purchased to-date, he joyfully tapped his head and said “oh, it’s all up in here”. While I admire his remarkable memory (truly!), I, like most who have been in my shoes, don’t accept that this pen-and-paper-based system is here to stay. Luckily, Cottage is on the path to transform it.
Digitizing residential construction management isn’t just about meeting consumer expectations for better experiences — it’s about housing affordability, sustainability, and supply — as much as 30% of all construction materials can end up as waste in today’s system! It is also about building more durable and diverse GC businesses with repeat customers, higher margins and fewer headaches. In short, it’s a real win/win/win opportunity.
Cottage is starting their journey with Accessory Dwelling Unit (ADU) construction projects — helping homeowners and residential investors unlock additional living spaces on their properties through detached structures or garage conversions. ADUs offer an answer to many converging needs in the single family housing space: they bring affordability by adding a rentable unit to a property; they unlock more housing supply in tight markets (e.g. the Bay Area); they create space for multigenerational living and aging-in-place; they offer a live-work alternative for the growing work-from-home base. Regulators have passed laws throughout the country encouraging ADU projects.
Yet, building an ADU is still a massive headache. Modular and pre-fab options offer a fantastic solution to some, however, they are constrained to markets proximate to factory production, and tend to align with a luxury customer.
Cottage has built a SaaS platform that enables end-to-end design, management, and tracking of custom ADU projects, without assuming any of the construction risk. This allows them to launch quickly in new markets, scale alongside demand, and expand beyond ADUs into other formats of residential construction. As network effects kick in, Cottage can access preferred pricing on materials, introduce embedded financial and insurance products, and build a powerful data engine to automate workflows and generate insights that further de-risk and improve projects — making their product even stickier to GCs and more attractive to customers — and so on.
To-date, Cottage’s traction has been remarkable. With very little marketing, they have proven they can successfully launch and scale-up in multiple markets, and have hired an all-star team to execute. Most importantly, we were drawn to how much their customers and GCs love them — with multiple GCs saying they are now building their business around the Cottage platform.
1Sharpe originally got to know Cottage while exploring ways we could bring ADUs into the single family rental industry, including across the 1Sharpe housing portfolio. We saw an opportunity to unlock additional housing supply and rental income for institutional real estate owners, and had seen no platform better equipped to streamline execution than Cottage.
We see Cottage as a perfect example of where a powerful D2C solution in real estate can achieve even greater scale at lower acquisition costs when they expand into B2B solutions for institutional owners. It is early days, but we are excited to explore that avenue with the Cottage team.
Longer-term, we look forward to seeing how Cottage becomes the de facto platform for residential construction — giving homeowners the tools to be their own project manager, and giving GCs a simple way to offer a digital and delightful experience to their clients. We look forward to partnering with the team on this journey!
They are hiring for a bunch of roles — join a team that’s building something big! https://www.cotta.ge/careers/