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Hi friends 👋 ,
Happy Thursday! It’s my favorite kind of Thursday: a Not Boring Syndicate Thursday!
Since I sent the SkillMagic Memo in late October, our little Not Boring family has grown a little bit and there are more than 6,000 new smart, curious people here, so I want to take a second and describe how and why we do the Syndicate. (If you’ve been here for a while and the anticipation is killing you, skip to the memo).
I love telling companies’ stories, both the very, very big ones and the very, very small ones, the ones at the earliest stages of their lives. A few months ago, we decided to launch a Syndicate and write investment memos on early stage companies, for a few reasons:
Building a startup, particularly at the early stages, is a challenging, scary, exhilarating, lonely, fun, uncertain roller coaster. I want to tell the stories of some of the most exciting companies while they’re in that wild stage, before they get big and famous, and when a little extra exposure can go a long way.
The Syndicate is a way to let Not Boring readers (accredited ones, for now) invest in startups together, and get access to deals that few of us could get on our own.
Venture Capital and early stage investing have a mystique around them, and I know I felt like it was something reserved for other, smarter, better connected people. That’s not the case, and I hope these demystify the process a bit.
Anyone can write that Stripe is a fantastic company (that doesn’t stop me from doing it, of course); I want to put my money where my mouth is and bet on companies before it’s obvious.
Watching what brilliant people are building at the early stages is the easiest way to see the future.
So far, we’ve invested in five phenomenal companies: Apt, Composer, OZE, Swaypay, and SkillMagic. Today, we’re partnering with Jonathan Wasserstrum to invest in Outfit Renovations and peek into the future of architecture.
If you’re an accredited investor, you can apply to join the Not Boring Syndicate here to get more information, including a deck and deal terms and potentially invest with us.
This is NOT investment advice and is intended for educational & informational purposes only.
Let’s get to it.
Outfit: Not Boring Investment Memo
The Outfit Investment Thesis
A couple of weeks ago, Fed Novikov, the co-founder of another Not Boring portfolio company that’s using software to streamline the traditionally heavy real estate industry, Apt, told me about a company a friend of his was starting and asked if I wanted an intro. As a quick check, I showed the company’s website to Puja. She’s the skeptical and sensible one in our relationship. Her reaction: “Woah. That is incredible.” That’s a word that I typically use about startups, but not her.
Outfit is incredible as a product because it puts the dream we all have of living in a space we’re proud to show off within reach. Outfit is incredible as a business because it uses software to scale a traditionally unscalable product in a massive market while maintaining high margins.
I’m excited to bring Outfit to the Not Boring Syndicate for a few reasons:
Market. The DIY Home Improvement Market is way bigger than you’d think -- $46 billion, 38% of all home improvement projects are DIY -- and growing, particularly as COVID pushes more people to buy and improve homes. Young startups in the home renovation space have recently raised tens of millions from top investors.
Product. There’s no solution in the market that sits between traditional DIY and hiring contractors. Outfit uses software, processes, and buying power to build the first scalable architecture product.
Founder. Ian Janicki is a second-generation architect with software and design skills honed at top tech companies. He’s one of the most compelling founders I’ve met.
Customers. Outfit’s customers are middle-class, suburban, and young. They’re not the typical startup target. They’re the IKEA generation, who want to get involved and roll up their sleeves. Outfit is to renovations what IKEA is to furniture, a natural next step.
Business Model. Outfit is asset light and scalable in an industry that… isn’t. They don’t need to deal with scaling labor (which is hard) or working across jurisdictions (which is really, really hard).
Vision. When Outfit is successful, you’ll be able to buy a new look for your home as easily as you can buy a new outfit for yourself.
We put the deal live on AngelList last week, and already, AngelList itself has written a big check into Outfit via the Not Boring Syndicate. AngelList sees thousands of deals and only writes checks into a few, so it’s a big stamp of approval for what Ian is building. Read on to learn what they (and I) are so excited about.
The DIY Market
If you’ve felt a strong urge to refresh your bathroom or modernize your kitchen during COVID, you’re not alone. Bank of America surveyed over 1,000 Americans, and more than 70% planned to tackle home improvement projects during the pandemic. Even pre-COVID, the DIY Home Improvement industry was worth an eye-popping $46 billion. There are 2.6 million DIY bathroom projects and 1.6 million DIY kitchen projects in the US every year.
This trend is just getting started. Last Monday, I wrote that We’re Never Going Back to the office in the same way again. One of the second-order consequences is that people will be moving more often, potentially out of major cities and to places where they can afford to buy a home.
Another is that people won’t be commuting and putting in face time with their bosses, meaning that they’ll have more time to spend on other things. Plus, the insides of our homes are no longer a secret reserved for our closest friends and family; they serve as the background to our Zooms which mean that they serve as the backdrops to our lives.
Two startups launched in the past eighteen months have seen early success. Block, launched in early 2019, has raised $21.5 million from investors including NEA, Lerer Hippeau, and Obvious Ventures. Made, launched early this year, raised a $9 million seed round from Base10, FoundersFund, and Felicis. Block and Made offer a great service to customers in New York and San Francisco, respectively, with over $30k to spare, but there’s a massive opportunity still up for grabs to serve the rest of the country with a better option.
That’s where Outfit comes in.
Outfit is DIY renovations in a box. It’s unbundling architectural drawings into step-by-step directions. As a non-design person who managed a design team at Breather and tried to understand what drawings meant, I can tell you that this is like translating Ancient Greek to English.
Starting with kitchen renovations, Outfit fills the gap between “figure it all out on your own” and “hire a contractor” by sending everything you need for the job to your door and providing interactive step-by-step instructions in an easy-to-use app.
Outfit exists between traditional DIY, which is the cheapest option but comes with a ton of uncertainty and often yields subpar results, and hiring a general contractor, which can be at least 3x more expensive than DIY, requires permitting, and often comes in over time and over budget. Outfit uses software to combine the satisfaction and savings of DIY with the guidance and quality of hiring a contractor.
Here’s how it works.
Choose a project template.
Take pictures and simple measurements of your space.
Outfit sends you instructions, tools, and materials.
You do the renovation yourself, and chat with Outfit experts right inside the app.
Outfit does all of this for only a small mark-up to a full DIY because it’s able to take advantage of a few things:
Software. Today, Outfit customers can take pictures and measurements of their space and receive a custom combination of instructions and tutorials. Over time, technology will make the process easier and faster. For example, getting LIDAR scan used to be done with a super-expensive device, and now it's on every new iPhone; trends like that mean that Outfit will be able to automate more of the process moving forward.
Negotiation at Scale. Outfit orders all of the materials and tools for its customers and coordinates deliveries, meaning that it can get discounts with vendors beyond what a general Pro gets.
Delivery. Home improvement retailers compete with Amazon for convenient next-day delivery, so they’re offering unbelievably cheap materials delivery. They’ve already done the hard part of getting these heavy items to the edge, which Outfit piggybacks on.
To be clear, this is going to be difficult to pull off. No one has ever done it before. As a general rule of thumb, architecture and construction don’t scale. But Outfit’s founder, Ian Janicki, has spent most of his life building up the skills to change that.
Ian: Product-Founder Fit
Like most of the deals we do in the Not Boring Syndicate, Outfit is very early stage. It’s a small team with an early product and a small batch of customers in their Beta. At this very early stage, where company and idea are one in the same, you’re betting on a few things:
The idea seems feasible.
The market is very big, or if the company is successful, it will create its own big market.
Of these three, the Founder is the most important. The idea may change, and the market may not even exist yet. If it does, it’s likely full of unwelcoming incumbents looking to beat the new entrant out of business. A great Founder can overcome those obstacles, evolving the idea based on customer feedback while staying true to the vision, willing a market into being, and fighting for their big piece of it.
Ian Janicki is the perfect Founder for Outfit. A second-generation architect, Ian grew up in the trades, working construction as a teenager before studying at the nation’s top undergrad architecture program, Cornell.
While at Cornell, Ian learned how to engineer software as well as buildings. When he graduated, understanding that the path for a junior architect is a miserable one, he decided to head to San Francisco to try his hand at software instead. Over the past eight years, he’s worked as a Product Designer and Product Manager at open source mobile-app platform Xamarin (acquired by Microsoft), Microsoft, construction unicorn Katerra, and design unicorn Figma (the very same software with which I make all my beautiful images!).
He always knew that he wanted to get back into architecture, but not in the traditional sense. Instead, he’s on a mission to make architecture scale with software. Outfit is the manifestation of that mission, and of the lessons he learned, particularly at Katerra.
Traditional architecture relies on teams of junior people to churn plan after drawing after plan after drawing. Pre-fab has high fixed costs in a cyclical industry, tough labor arbitrage, and can’t reach economies of scale.
Ian’s first exploration to make the process easier was to build an API for building permits and inspections, which, if you’ve ever had to deal with building permits and inspections is an absolute nightmare. The process requires in-person interaction across 20,000 separate jurisdictions with no standardization, no incentive to improve, and all of the fun that comes with dealing with local government. No go.
He then looked at existing models, like Made and Block and realized three things:
They’re difficult to scale.
They still need to deal with permitting.
They’ve left a massive hole in the middle of the market.
Made and Block appeal to the segment of the market that is willing to spend $30-50k to have someone else design and build beautiful bathrooms and kitchens for them. But that’s a small piece of the overall market. Outfit is for the rest.
Target Customer and Marketing
One of my favorite slides I’ve ever seen in a pitch deck is Ian’s customer slide, in which he defines Outfit’s customer as:
“A middle-class, suburban, young couple (not you).”
Often, companies whose products VCs can see using themselves have an easier time fundraising than products that they can’t. It’s one of the reasons that Airbnb had such a hard time raising money initially. What VC in their right mind would let a stranger stay in their house for a hundred bucks, or sleep on someone’s air mattress to save a few dollars?
Outfit rightly calls out that it probably isn’t for most VCs. If you have more money than time, Outfit isn’t the solution for you. But Outfit’s customer is most of the country. They are:
Low on Cash, High on Time. Chances are, they put their life savings into the down payment on the home. They’re willing to spend the time to turn their investment into a home.
Used to Digital Experiences. They don’t want to deal with existing solutions, which are in-person, over-the-phone, and paper-based.
Willing to Pay for DIY as a Premium. The “IKEA Effect,” from a 2011 HBS study in which people assign higher value to things that they created, shows customers willing to pay 63% more for DIY.
If you’ve been reading Not Boring for a while, you might remember a brilliant July guest post by native Texan Ali Montag titled Monopolies and Magnolias. She told the story of an American business empire that most of us didn’t even know existed: Chip and Joanna Gaines’ Magnolia. Launched from the popularity of the couple’s hit HGTV show, Fixer Upper, Magnolia now spans DTC, retail, a luxury hotel, a construction business, a seven-city real estate agency, best-selling books, a campus with restaurants and a shopping center, and more than 20 million social followers, with a cable network on the way. Magnolia’s secret is this:
Magnolia is a monopoly because it serves an audience with few other exciting options. Magnolia is about slowing down. It’s about watching the sunset and enjoying a plate of chocolate chip cookies with your family. It’s about using real, full fat butter. That’s a signal many American women are eager to open their pocketbooks to share. Lighting a $28 valencia orange scented candle from Magnolia sends a signal to houseguests, family members, and to yourself: Home is important.
She didn’t know it at the time, but Ali might as well have been writing about Outfit. It’s built for people for whom home is important, people Silicon Valley companies typically target only once they need to “cross the chasm,” people who want nice things but want them to be accessible and permanent, with some of their own elbow grease mixed in.
Most of America drives pickup trucks -- the Ford F-Series has been the best-selling vehicle in the US for decades -- and when they want to do home improvements, they watch HGTV instead of calling the interior designer, and head to Home Depot instead of paying someone to do it for them.
Outfit has a smart plan in motion to reach these customers efficiently (I can’t give away all the tricks here though 😉 ). Janicki is betting that once Outfit reaches these customers, they won’t just buy, they’ll share, too. Outfit is a product that was built to show off. Who doesn’t want to show before and after pics of the room that they built themselves? What influencer wouldn’t want to prove that they can build, too?
Seriously, pause for a second and think of your friends. How many of them would spend a few weeks on a renovation without posting at least 5-10 pictures?
Currently, with a small team and six months under its belt, Outfit already has hundreds of customers on the waitlist and influencers already reaching out to partner. Oh yeah, and it has its own HGTV star lined up. Anthony Carrino, host of TheBuild.TV is set to join the Outfit team to lead content and growth.
This is going to be a major advantage for Outfit: by targeting the customers others aren’t, and helping them share their progress, Outfit will build a loyal fan base that will help spread the product organically. And as customers feel that satisfaction of the first job, they’ll want to come back for more.
Repeat, vocal customers are just one piece of a business model that Janicki … architected … for asset light scale.
The Business Model
In order to make architecture scalable, it has to be asset light, meaning that Outfit doesn’t own materials or hire contractors, it has to leverage software to replace repeatable processes, and it has to avoid permitting.
That’s exactly what Outfit does. For an industry like home improvement that can seem a little bit messy, Outfit’s business model is surprisingly clean.
After customers send Outfit pictures of their space and pick a package, Outfit gives them one price for the entire job. For a light kitchen refresh, that might be $1,500. That’s all the customer needs to worry about paying.
From that $1,500, Outfit needs to:
Acquire the Customer, which it will do as outlined above. We expect CAC to decrease as customers share their work and come back to do more renos.
Purchase Materials from big box home improvement stores to specialty suppliers, using its professional discount, which will increase with scale.
Ship materials to customers, which vendors now offer cheaply in order to compete with online retailers.
Create a to-do list based on customer’s space starting with in-house and contracted labor, and moving increasingly to automated over time as LIDAR, AR, and other technologies become more ubiquitous and Outfit learns what works best for which specs.
Support customers with on-demand expert help.
Outfit expects that once it’s a few hundred projects in, it will be able to generate a positive gross margin of around 20% on each job, and that those margins will improve as it benefits from scale, automation, larger ticket sizes, and more repeat customers.
It’s important to remember that while Outfit is in the real estate and construction space, it’s a technology company. Although it deals with home renovations, something people have been doing as long as there have been homes, Outfit is only possible now, for a few reasons:
Abundance Necessitates Curation. Ecommerce has put everything online. Now, the challenge is to curate those materials. There are 100,000 faucets! Which one is best for my kitchen? You need an architect to figure that out.
Advanced Sensors. The technology to scan and map a space now comes built-in on new iPhones, and will only become more ubiquitous.
The Missing Piece of Ecommerce. We buy and configure laptops, cars, vacation rentals, and even homes (see: Opendoor) online. But until now, we haven’t been able to buy architecture online. Everything that once seemed crazy to buy online is normal now.
The Instagram Economy. Matcha took off in the United States because its green hue pops on Instagram. Outfit can go viral today in a way it never could have before.
The Airbnb Economy. Airbnb is going public today, and the Airbnb economy is only going to grow from here. Outfit is a phenomenal solution for semi-professional Airbnb hosts who want to spruce their places up in order to generate more income.
Millennials Are Buying Homes. They’re the IKEA generation, and they’re used to doing everything online and on their phone.
Now is the time for Outfit, but it’s just the beginning. Ian’s vision is to change the way we design and build spaces.
With the money from its seed round, Ian plans to grow the team, build a self-serve eCommerce product, and continue to complete projects. Lots and lots of projects. When we spoke, he told me that he was starting with simple cosmetic projects in the bathroom and kitchen to get reps under the company’s belt, and that he wanted to do hundreds of them in the next year.
As Outfit iterates through all of those projects, it will:
Build up a database of common floorplans and and edge cases that it can use to automate future projects.
Expand its library of instructions and resources based on customer feedback.
Understand the pain points that customers have throughout the process and build solutions to help get them unstuck.
Grow its customer base, who will become repeat customers and brand advocates by sharing their work.
Helping customers do great work is crucially important. They’ll start with an easy project, get it right, and move on confidently to something a little more complicated. They’ll also want to stick with Outfit for the next room so they can easily match the aesthetic from the first. The combination of people completing and sharing more projects is Outfit’s Flywheel.
Outfit will learn too, and it will be able to confidently expand into more project types, and to make each project more modular and magical. Its vision is to “build the buy button for architecture.”
Imagine seeing a kitchen you love on Pinterest or Instagram, clicking “Buy on Outfit,” and getting materials and instructions delivered right to you. You might even be able to say, “I want to do steps 1-7 and 10-13 myself, but I would love to hire someone to help with 8 and 9.” Because Outfit is building a database of detailed steps, they can quickly and easily bid out the more challenging parts of the process, removing frustration while letting customers keep the sense of accomplishment from a job well done. At the same time, influencers can monetize their spaces by partnering with Outfit. Puja would buy Something Navy’s kitchen on Outfit right now if she could.
Ultimately, DIY is a wedge into making architecture scalable using software. By working with the people who are willing to get their hands dirty upfront, Outfit will be able to work out the kinks in its software, logistics, and processes until anyone, anywhere can take a picture of a room, choose what they want it to look like, and get everything they need, from instructions, to materials, to labor, delivered to their door. Today, that’s kitchens in houses. In the future, that could mean full homes or offices.
It’s the Magnolia, HGTV dream, accessible to anyone. It’s not hard to imagine the company’s customers starring in an Outfit show on HGTV one day soon.
Early stage investing comes with major risks, and Outfit is no different. As with any early stage investment, the numbers suggest that you should expect any money you put into an early stage startup to go to $0. Here are a few Outfit-specific risks:
Solo Founder. Ian is working with a small team, but he’s still a solo founder. Many investors like to see co-founders with complementary skill sets working together to start a company.
Execution. Outfit is early. It has only completed one project so far with several others kicking-off later this month, and new challenges will arise as it tries to expand and scale.
Business Model. Outfit’s model relies on getting customers to pay a slight premium for the full package, and on getting its costs down using software. To the extent that it needs to do more things manually over the long term, margins will be hurt.
Competition. Competitors may try to copy aspects of Outfit’s business, large incumbents may enter the space, or new startups might form to compete.
There are certainly risks that neither I nor Outfit is currently aware of that could sink the business. Again, this is not investment advice, and you should do your own diligence before deciding whether to invest.
The Outfit Opportunity
Building asset light, software enabled real estate and construction businesses is a holy grail that many have talked about attempting and few have achieved. If I had a dollar for every time I heard the phrase “asset light” while I was at Breather, I’d have more dollars than I could count.
There’s a reason for that. Real estate and construction is the largest industry left largely untouched by software. The prize for the winners will be massive. In this case, the DIY Home Improvement market is a $46 billion annual prize, and if Outfit is successful, it will blur the lines between professional and DIY, giving it line of sight to a $250 billion market, just in the US, and just in housing.
The two leading home renovation startups have raised over $30 million combined in the last 20 months from top investors. Because of Outfit’s asset light approach, it’s raising a much smaller amount to tackle an even bigger opportunity -- one that touches every part of the country, and not just the coasts. Already, Ian has top angels onboard including Gumroad’s Sahil Lavignia, Runway’s Siqi Chen, Mercury’s Immad Akhund, Kleiner Perkins EIR Thomson Nguyen, and Xamarin and GitHub’s Nat Friedman, Ian’s old boss.
Outfit feels like one of those opportunities that we’ll look back on in five years and say, “Remember when we thought this was just about bathrooms?” In a world in which spaces will need to change and adapt more than ever before, new solutions in architecture and construction have the potential to reshape how we interact with the buildings around us. It’s why I love Apt, and why I’m so excited about Outfit.
As excited as I am by the potential, Ian is madly passionate about it. It’s clear that this is his life’s work, that he’s the right person for the job, and that like the tradesman, architect, and engineer that he is, he’s going to experiment, tinker, build, demolish, and rebuild until he gets it right.
I am thrilled to have the opportunity to participate in this competitive seed round, and to get the band back together and partner with Jonathan Wasserstrum, who runs one of AngelList’s most successful syndicates and its top PropTech rolling fund.
If you’re an accredited investor and would like to learn more, you can apply to join the Not Boring Syndicate by clicking the button below. I’ll be sharing more details -- including deal terms and the deck -- over on AngelList.
Inspired to go give your kitchen that facelift you’ve been putting off? Join the waitlist here. So inspired that you just want to join the team? Good news: Outfit is hiring! Reach out at firstname.lastname@example.org.
Thanks for reading, and see you on Monday!