When the Hayward, California, employees of the homebuilding startup Veev found out in late November that their company was folding, many were shocked.
Yes, the company had fallen behind on its production goals. And yes, high interest rates had squeezed two important sources of income: homebuyers and venture capital. But Veev, which promised to do for homebuilding what Henry Ford did for cars, seemed to be an exception. In March 2022, just as the Federal Reserve started hiking rates, the company announced that it had raised $400 million in a stock-selling round that propelled it to unicorn status.
Veev employees who spoke with Business Insider said they believed Veev still had years to get its act together and truly change construction — even as they grew frustrated by the company's inefficiencies and laboriously slow production process. Instead, on the evening of Black Friday, the company, which employed about 280 people, said it was shutting down. Hundreds of employees were let go; only a skeleton crew of about 50 people remained to finish outstanding projects while searching for a buyer.
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On December 20, Veev was purchased by one of its largest investors, Lennar, a homebuilding giant with $46 billion in market capitalization. According to the Israeli news site Calcalist, the deal valued Veev at just $100 million, a 90% discount from its days as a $1 billion company. Lennar didn't return a request for comment about its acquisition of, or its vision for, Veev.
For some people in the construction industry, it felt like the end of an era. Veev employees told Business Insider that they joined the company because they were excited by its mission to build homes faster and cheaper — and they knew that whoever solved the housing crisis stood to make a lot of money. Veev's biggest competitor, Katerra, went under in 2021 after raising $2 billion. Meanwhile, tiny home startup Boxabl has been facing questions about its ability to churn out affordable homes, as BI recently reported.
Industry insiders say Veev may still accomplish its mission of building homes faster and at a lower cost, but it's just as likely that Silicon Valley's dreams of disrupting one of the world's largest and oldest industries will require more than a smart idea and hundreds of millions in capital.
"Only Elon could do it," one construction tech CEO said of Silicon Valley's ambitions to revolutionize homebuilding.
Veev said it sold itself to Lennar because it ran out of money. However, employees, who spoke to BI on the condition of anonymity to protect their future job prospects, said Veev also suffered from internal problems, including a disorganized design and building process.
Israeli entrepreneurs Amit Haller, Ami Avrahami, and Dafna Akiva launched Veev in 2019 to disrupt the homebuilding industry using a factory model. Instead of building from scratch at the construction site, Veev started the process in a factory, where it built walls complete with mechanical, electrical, and plumbing hookups.
Haller told Insider in 2021 that its system resulted in a building process that was four times as fast as the traditional method — and at a better cost. And for a while, it seemed to be making progress. Completed projects included twin Palo Alto mansions that sold for over $7 million each, 78 units of emergency housing for homeless people, and six townhomes in San Carlos, California, including one the company recently listed for about $2.35 million.
In January 2023, Veev switched gears to churning out single-family homes that it would sell directly to consumers. The homes, according to its website, would be sleek and modern, complete with open floor plans and "sensors and touch panels in every room." Veev also promised they would be green and less expensive, thanks to its factory process.
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But people who worked with Veev said the factory process was plagued by delays and inefficiencies, starting with the panel designs, which were crafted by Veev's Israeli engineering team, based out of a beachfront office building in Tel Aviv. The company completed just two homes after the strategic switch — with three others partially completed — before the California headquarters was shuttered in November.
A Veev representative disputed the employees' description of the company's production process and said the company was "confident" it would have met its production goals had it not run out of money. The $400 million the company raised in March 2022 was committed, but "not all of it was received," she said.
"The company was working relentlessly and solely to produce and deliver the product and in the interests of shareholders," the person said via an email correspondence that started before Lennar's purchase.
According to the employees, the Israeli team would send a panel design to the US, where an engineer in the factory would evaluate it. They said many of the panels would have design flaws, which needed time to address. But sometimes, two of these people said, the chief operating officer, Ari Rauch, would order the team to press ahead on production anyway; when the design flaws inevitably prevented further work, the people said, this caused not only delays but inefficiency as factory space was taken up by partially built panels sitting idle awaiting redesigns.
"Every single day, we had to stop building panels on the line," one of the employees said. The Veev representative disputed this characterization of the process without addressing the claims about Rauch, saying errors and fixes were "part of the learning process." Rauch didn't return a request for comment.
Factory building conjures up images of identical items being churned out at a mass scale and moving down assembly lines. But Veev began by not repeating its home designs, which were complex: One home design was made up of 93 different wall panels, one employee explained.
The 10-hour time difference between the design team in Tel Aviv and the factory team in California added to the delays, employees said. Design errors spotted on a Thursday would go unresolved for four days as panels sat unattended on the assembly line because the Israeli team was off Friday and Saturday and the American team was off Saturday and Sunday.
Materials needed to build the panels were often missing, leading to further delays, former employees said. One former employee was so frustrated by this that they took matters into their own hands, purchasing materials at local hardware stores on their personal credit card. The Veev representative said "no employee was requested to do so as a policy."
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The Veev representative said "production lines were not idle," and design errors were inevitable because the company was still testing its product. "Errors and fixes are typical when prototyping a new product, as part of the process, this is part of the learning," she said.
But employees who spoke with BI questioned the notion that the delays were due to prototyping. They said there was no talk of prototyping until recent months, after which the company finally started mass-producing its panels.
While the employees had no direct knowledge of the reason for the shift, they noted that Veev had successfully made homes using its panelized wall technology before it switched to selling homes directly to consumers, suggesting the tech didn't need months of testing. They also noted that the shift to simultaneously building multiple copies of its panels took place in about September, two months before the company announced its intention to close if it couldn't find a buyer.
"The change came when it became clear they'd need another funding round," one employee surmised. "It's more of a recent realization that, 'Oh, shit, this completely custom strategy is not the way the company will survive.'"
Once it picked up the pace, however, Veev was moving so fast it just might have actually met its June production of 20 homes, this person added.
"Speed had ramped up over the past few months," they said. "There was probably a path to meeting their goals, but it was a low-probability path."
Veev's $400 million funding round should have given it the runway it needed to start building at scale.
But when it came time for Lennar and other investors to pony up the second half of the $400 million in March, some investors balked, according to Calcalist. Lennar's press representative did not respond to a request for comment, nor did other Veev backers, including Bond, Fifth Wall, and JLL Spark.
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"While the Series D money was committed, not all of it was received," the Veev representative said. She declined to elaborate except to say that the Calcalist report was mostly accurate.
This left Veev scrambling for emergency funding, according to Calcalist. An attempt to raise $120 million stalled out, and then Lennar withdrew an offer for a bridge loan that could have kept the company operating. After Veev said its California office would shut down, Lennar provided the company with a three-week bridge loan as Veev hunted for buyers. According to Calcalist, Lennar was the only company that offered to buy the company when the bridge loan ran out.
Looking back, some workers say there were signs of financial distress, including unhappy vendors and bounced paychecks.
One worker said he cashed his check only to receive a phone call the following day from an HR rep checking to see whether his check had cleared. He said it had, but then the check-cashing business he used called and threatened to file charges against him for cashing a bad check. He asked Veev to give him another check, and it bounced yet again. Eventually, the company gave him a check from a different bank account, which settled the issue.
The Veev representative confirmed the company had outstanding debts to vendors, but said "a payroll check has never bounced or been returned due to NSF," which stands for "not sufficient funds."
Now, industry insiders are asking whether the prefab homebuilder can accomplish its goal with the help of a Fortune 500 company.
Employees and observers said Lennar will allow Veev to test its technology on a larger scale. But some industry insiders think Veev's demise suggests that the hype around factory-built houses is misplaced.
"The lessons I've learned from my 25 years in this industry is that all of these centralized prefabrication companies are just condensing all construction-related problems under one roof," said Scott Long, the CEO of tech-enabled residential developer NileBuilt and the former head of two other prefab construction companies, including one that was purchased by Dow Chemical in 2001.
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In one potentially telling episode, Veev ran into problems on a project to build 102 townhomes thatit announced with Lennar in 2021. The walls required for the so-called Gramercy project were so heavy that one panel's Corian surface cracked as it was being pushed around the Hayward factory on rollers, according to a former employee who called the project a "disaster."
By the end of 2022, Veev had filed for permits to remove the work it had already begun, and Lennar had filed for permits to build the homes itself.
"Veev and Lennar made a joint decision to stop building the Gramercy project," the Veev representative wrote. "Both parties determined that this project, in hindsight, was not the right first project to collaborate on."
Long says the bigger problem is a lack of trained labor, which he says cannot be solved by building homes in a factory because many of the same skill sets — plumbing and electrical — are still required.
As for Veev, he thinks Lennar may have purchased the company to prevent someone else from owning it, just in case its tech is transformative.
"I don't think they have a clue if it will work. They just want to make sure it's in their possession," he said.
Veev has already rehired some of the employees it laid off in November, and the skeleton crew of people it retained ahead of Lennar's purchase celebrated their rescue with a Domino's pizza party at the factory, one employee said.
Veev may live on as Wall to Wall LLC under Lennar, according to documents obtained by BI. Under the new model, Veev's employees will lose stock options the company gave them to build a sense of ownership within the ranks. According to documents viewed by BI, all of those options were canceled when the company closed its California headquarters.
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"We were given these promises that we were a Veev family, but now I lost 100,000 stock options," one ex-employee said. "That was supposed to be my retirement."
While this employee was saddened by Veev's forced sale, he believes the underlying technology still has a chance to disrupt homebuilding."I believe this technology will change the construction industry if you have the right people running it," he said.
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