Beyond costs, what else can we do to make housing affordable?

This week on Extra Crunch, I am exploring innovations in inclusive housing, looking at how 200+ companies are creating more access and affordability. Yesterday, I focused on startups trying to lower the costs of housing, from property acquisition to management and operations.

Today, I want to focus on innovations that improve housing inclusion more generally, such as efforts to pair housing with transit, small business creation, and mental rehabilitation. These include social impact-focused interventions, interventions that increase income and mobility, and ecosystem-builders in housing innovation.

Nonprofits and social enterprises lead many of these innovations. Yet because these areas are perceived to be not as lucrative, fewer technologists and other professionals have entered them. New business models and technologies have the opportunity to scale many of these alternative institutions — and create tremendous social value. Social impact is increasingly important to millennials, with brands like Patagonia having created loyal fan bases through purpose-driven leadership.

While each of these sections could be their own market map, this overall market map serves as an initial guide to each of these spaces.

Social impact innovations

These innovations address:

Market map: the 200+ innovative startups transforming affordable housing

In this section of my exploration into innovation in inclusive housing, I am digging into the 200+ companies impacting the key phases of developing and managing housing.

Innovations have reduced costs in the most expensive phases of the housing development and management process. I explore innovations in each of these phases, including construction, land, regulatory, financing, and operational costs.

Reducing Construction Costs

This is one of the top three challenges developers face, exacerbated by rising building material costs and labor shortages.

Innovations in inclusive housing

Housing is big money. The industry has trillions under management and hundreds of billions under development.

And investors have noticed the potential. Opendoor raised nearly $1.3 billion to help homeowners buy and sell houses more quickly. Katerra raised $1.2 billion to optimize building development and construction, and Compass raised the same amount to help brokers sell real estate better. Even Amazon and Airbnb have entered the fray with high-profile investments.

Amidst this frenetic growth is the seed of the next wave of innovation in the sector. The housing industry — and its affordability problem — is only likely to balloon. By 2030, 84% of the population of developed countries will live in cities.

Yet innovation in housing lags compared to other industries. In construction, a major aspect of housing development, players spend less than 1% of their revenues on research and development. Technology companies, like the Amazons of the world, spend nearly 10% on average.

Innovations in older, highly regulated industries, like housing and real estate, are part of what Steve Case calls the “third wave” of technology. VCs like Case’s Revolution Fund and the SoftBank Vision Fund are investing billions into what they believe is the future.

These innovations are far from silver bullets, especially if they lack involvement from underrepresented communities, avoid policy and ignore distributive questions about who gets to benefit from more housing.

Yet there are hundreds of interventions reworking housing that cannot be ignored. To help entrepreneurs, investors and job seekers interested in creating better housing, I mapped these innovations in this package of articles.

To make sense of this broad field, I categorize innovations into two main groups, which I detail in two separate pieces on Extra Crunch. The first (Part 1) identifies the key phases of developing and managing housing. The second (Part 2) section identifies interventions that contribute to housing inclusion more generally, such as efforts to pair housing with transit, small business creation and mental rehabilitation.

Unfortunately, many of these tools don’t guarantee more affordability. Lowering acquisition costs, for instance, doesn’t mean that renters or homeowners will necessarily benefit from those savings. As a result, some tools likely need to be paired with others to ensure cost savings that benefit end users — and promote long-term affordability. I detail efforts here so that mission-driven advocates as well as startup founders can adopt them for their own efforts.


Topics We Explore

Today:

Coming Tomorrow:

  • Part 2. Other contributions to housing affordability
    • Social Impact Innovations
    • Landlord-Tenant Tools
    • Innovations that Increase Income
    • Innovations that Increase Transit Accessibility and Reduce Parking
    • Innovations that Improve the Ability to Regulate Housing
    • Organizations that Support the Housing Innovation Ecosystem
    • This Is Just the Beginning
    • I’m Personally Closely Watching the Following Initiatives
    • The Limitations of Technology
    • Move Fast and Protect People


Please feel free to let me know what else is exciting by adding a note to your LinkedIn invite here.

If you’re excited about this topic, feel free to subscribe to my future of inclusive housing newsletter by viewing a past issue here.

What we want to know in the We Company (WeWork) S-1

With news that the We Company (formerly known as WeWork) has officially filed to go public confidentially with the SEC today, there’s a big question on everyone’s mind: is this the next massive startup win or a house of cards waiting to be toppled by the glare of the public markets?

No company I follow has as much polarized opinion as the We Company. And while the company will have to reveal at least some of its hand in its official S-1, my guess is that the polarization around the company will not be alleviated until well after it goes public, if ever.

The challenge with understanding its business is how much the details of each of its leases, real estate markets, and tenants matter to its bottom line. We already know the top line numbers: the company had revenue of $1.8 billion in 2018, and a net loss of $1.9 billion that year. That led to the received opinion that the company has an extraordinarily weak business. As Crunchbase News editor Alex Wilhelm put it:

$44M-funded Omni pivots from storage to rentals via retailers

Omni simply couldn’t scale storing stuff in giant warehouses while dropping it and off picking it up from people on demand. Storage was designed to bootstrap Omni into peer-to-peer rentals of the goods in its care. But now it’s found a better way by partnering with retailers which will host and rent out goods for Omni that users will pick up themselves.

With that strategy, Omni is now formally pivoting from storage alongside its expansion from San Francisco and Portland into Los Angeles and New York. In SF and its new markets starting today, users can rent GoPros, strollers, drills, guitars, and more for pickup and dropoff at 100 local storefronts which will receive 80 percent of the revenue while Omni keeps 20 percent.

“Storage was always meant to supply a rentals marketplace. We launched storage in an Uber-for everything era and now it’s no secret that physical operations are tough to scale” Omni’s COO Ryan Delk tells me. “This new model gives our users more supply, local entrepreneurs a new revenue stream, and us the ability to launch new markets much more quickly than the old model of building rentals on top of the storage business.”

LA Omni users will be able to rent surf equipment for pickup and dropoff from local surf shop Jay’s

To that end, storage won’t come to any more markets, though storage services with delivery will continue in San Francisco. Users there and in Portland will also be able to pick up and drop off rental items from a few Omni-owned locations including its SF headquarter office. Omni will add retailer pickups in Portland and more in San Francisco soon. At least that’s one way to make Omni’s investors like Highland, Founders Fund, Shrug.vc, and Dream Machine feel better about SF real estate prices. Omni also recently doubled the monthly storage price of closed bins in SF, triggering ire from customers to cover its overhead and encourage storing individual items that can then be rented out

“Ownership has a bit of a burden associated with it” Delk tells me, referencing the shifting attitudes highlighted by Marie Kondo and the tidiness movement. Ownership requires you to pay up front for tons of use down the line that may never happen. “Paying for access when you need it unlocks all these amazing experiences.”

Omni’s COO Ryan Delk (left) and CEO Thomas McCleod (right)

Omni discovered the potential for the model when it ran an experiment. “What if we could pick up items directly from Omni?” Delk explains. Omni learned that many people “can’t afford to pay for transit both ways. It was pricing out a lot of people.” But pick-ups unlocked a new price demographic.

Meanwhile, Omni noticed some semi-pro renters had cropped up on its platform who were buying tons of a popular item like chairs on Amazon, shipping them to its warehouse, then renting them out and quickly recouping their costs. It saw an opportunity to partner with local retailers who could give it instant supplies of items in new markets while handling all the pickup and dropoff logistics.

Omni’s retail partners like Adventure 16 Outdoor & Travel Outfitters, Blazing Saddles and Sierra Surf School can choose their own prices and adjust for demand, set black-out dates, pause for vacations, and sell items like normal and let Omni know to restock them so rentals don’t cannibalize their sales. Rentals are covered by up to $10,000 in insurance so both the retailers and people who rent from them don’t have to worry. Omni users just show their ID at pick up to verify their identity, but that will soon be part of the app. Last fall, Omni hired Uber’s head of sales strategy and operations who oversaw UberEats growth from zero to 200,000 restaurants to run its retail partnerships as VP of special projects.

Delk says Omni is “all-in on the rentals” which he sees as a “pure play marketplace vs a recurring ARR business” that “democratizes access to Omni to people who aren’t the 1% in major markets.” Now someone who couldn’t afford to buy a drill for a quick home improvement project or pay to have a rental delivered and picked up can stop by their local retailer to grab it and return it later for $6 per day with no extra fees.

That in-store experience of actually being able to go same-day, hold an item, and ask questions about it could allow Omni’s rental model to compete with Amazon’s prices and delivery logistics. The one thing Amazon can’t do right now is let you try before you buy. Omni could win by letting you try without ever having to.

Super raises $20M to fix the home services and repairs market with its subscription service

Home owners in the US spend upwards of $300 billion annually on home repairs and maintenance — a huge sum that often comes with another, more hidden cost: the stress of finding reliable tradespeople, managing those jobs, and (in the worst-case scenario) picking up the pieces if things go wrong.

Now, a startup called Super has built what it believes is a “fix” for that problem: a subscription service for maintenance and repair services for your property. Today, it’s announcing a Series B of $20 million to continue scaling that business across the US after growing its business 400 percent each year for the past two years.

The funding is being led by Aquiline Technology Growth (ATG), with participation Munich Re Ventures, Liberty Mutual from the insurance industry, Moderne Ventures, Joe Lonsdale’s firm 8VC, the Qatar Investment Authority and Solon Mack Capital. It’s an impressive mix, as it underscores Super’s traction and credibility among those close to its field: Munich Re Ventures and Liberty Mutual are insurance powerhouses; Aquiline and Moderne focus on insurance and real estate startups, QIA has extensive investments in the construction sector, and Solon Mack is the family office of the Mack real estate entrepreneurs.

Jorey Ramer, the founder and CEO of Super, said he came up with the idea for Super after he sold his previous company, Jumptap — an advertising network acquired by Millennial Media (which is now part of Verizon by way of its acquisition of AOL, just like TechCrunch). Having been an apartment renter and dweller for all of his adult life, he found himself buying property when he moved to the Bay Area, and it came with more than a little reluctance because of the headache of taking care of his new home.

“I liked being a renter,” he said in an interview. “You pay a fee, and you know what to expect.” (Indeed, “Super” is double word play meaning “great” but also the nickname for the superintendent that often handles the maintenance and repair in an apartment building.)

Looking at the state of the market, he said he wasn’t very happy with the services that were already out there offering to provide maintenance and care, which he found were too entrenched in their old way of doing things (something that I’d agree with from personal experience as a homeowner in England, by the way).

“These companies have prioritized costs over service,” he said. “Yes, they have built service provider networks, but they are not service providers that you would invite into your own home if you were finding them directly. The whole system creates incentives to do the least amount of work possible, or upsell work that you just don’t need. They are deeply ingrained systems that needed to be reinvented from scratch.”

And that is what Super is aiming to do. Right now, the company provides links through to vetted providers of repair and maintenance services that are priced in tiers of $20, $60 or $90 per month depending on levels of service (for example: appliance, home, premium home; breakdown coverage; expanded coverage, and so on). Today there is a $75 copay on all repairs and other work, but as the company continues to hone its business model and relationships with suppliers — including those who might sell its service to home owners such as the companies selling the actual homes — that is likely to change.

“The long term vision,” Ramer said, “is eventually to cover 100 percent of your repair and maintenance in your home. You will never have to pay for anything because everything will be included in the subscription.”

Super is touching on an emerging but very interesting point here. Just as companies like Uber and Lyft have helped change the conversation about the future of transportation services, companies like Opendoor are changing the dynamics and conventions around how people buy and sell — and potentially own — homes. That’s presenting a big opportunity to rethink every stage of that process, bringing in new players like Super, and old players like Angie’s List that are now taking new approaches; to also reconsider not just what they offer to the market, but what channels they use to find customers. (It’s an area that Amazon, unsurprisingly, is also eyeing up, since the home is the ultimate platform for just about everything else it offers to the market in terms of products and services.)

Ramer said that while Super today is primarily selling directly to homeowners, there are many options open in the future for how its service might be bundled with others, be they buying the property, or buying insurance, or even buying the white goods and other things that will eventually fill those homes.

“Super has developed an effective, convenient platform to provide premium care and repair services for homeowners,” said Max Chee of ATG in a statement. “Super is tackling an industry that is ripe for innovation with a smart, technology-forward approach, and we are excited to work with Jorey and the rest of the team at Super to help continue that exciting trajectory.”

 

Another day, another U.S. company forced to divest of Chinese investors

Foreign investment scrutiny continues to creep into the startup world via a once obscure U.S. government agency that has new tools and a shift in focus that stands to impact young, high-growth companies in huge ways. The Committee on Foreign Investment in the U.S., or CFIUS, recently made waves when it forced Chinese investors into two American companies to divest because of national security concerns.

There is much to learn from these developments about how government concerns over foreign investment will affect startups and investors going forward.

It is important to understand how we got here. CFIUS has long had the authority to review investments for national security concerns when the investment delivers “control” of a U.S. entity to a foreign entity — and control is defined broadly to mean the ability to determine important matters of the business. CFIUS is the body that rejected Broadcom’s acquisition of Qualcomm to name one well-known example.

The Treasury Department-led body can tap a few powers if it has concerns about an investment, such as blocking it outright, requiring mitigation measures, or—as we saw recently—forcing a fire sale of assets long after a deal is complete.

In the last few weeks, CFIUS has forced Chinese investors to divest from PatientsLikeMe, a healthcare startup that claims to have millions of data points about diseases, and Grindr, the LGBTQ dating app that collects personal data.

Historically, CFIUS’s focus has been on things like ports, computer systems, and real estate adjacent to military bases, but in recent years its emphasis has included data as a national security threat. The Grindr and PatientsLikeMe actions underscore that CFIUS is more focused than ever on how data can pose a security threat.

For example, the U.S. government’s move against Grindr was reportedly motivated by concerns the Chinese government could blackmail individuals with security clearances or its location data could help unmask intelligence agents.  These developments make CFIUS highly relevant to tech and healthcare startups, which frequently hold valuable data about customers and users.

Last year, Congress expanded CFIUS’s jurisdiction and gave it new tools to scrutinize even minority, non-controlling investments into critical technology companies or those with sensitive personal data of U.S. citizens if the investor receives certain rights, like a board seat.  These might be direct investments into startups by a foreign corporation or individual, or indirect investments into a venture fund by institutional investors like foreign pensions, endowments, or family offices.

Many aspects of the new law have been partially implemented through a pilot program that is impacting foreign investors into venture funds and direct investments into startups. One piece of the law that has not been implemented through the pilot program is the authority of CFIUS to scrutinize certain non-controlling investments into companies that maintain or collect “sensitive personal data of United States citizens that may be exploited in a manner that threatens national security.”

This piece is likely to go into effect in early 2020.

Keep in mind that in the cases of Grindr and PatientsLikeMe, the government relied on its preexisting authority to police investments that delivered control to a foreign person. Due to CFIUS reform, we are likely to see it similarly scrutinize minority, non-controlling investments into companies with sensitive personal data once the authorities are fully in force. Now is the time for investors and startups to go to school on recent cases to understand what is at stake.

Three lessons stand out from the Grindr and PatientsLikeMe actions.

First, CFIUS’s focus has evolved over the years to include control over data-rich companies. That is a trend that is likely to pick up considerably now that Congress has directed the agency to examine some of these deals, even when the investment does not give control to a foreign person.

Second, in both the Grindr and PatientsLikeMe cases, reporting indicates that neither company filed with CFIUS in advance of the transaction, thereby opening both companies up to the deals being unwound. Once CFIUS’s focus on sensitive data expands to non-controlling investments, we can assume CFIUS will not be shy about forcing divestiture for venture-style investments if the parties did not file and get approval for the transaction in advance.

Finally, it is important to understand that while recent newsworthy cases involved China, CFIUS’s jurisdiction applies on a global basis, so its data concerns may port over to investments from other countries as well.  The National Venture Capital Association, where I work, is urging Treasury to use authority it has in the CFIUS reform bill to not apply the expansion to non-controlling investments from friendly countries. This makes perfect sense, since the impetus for CFIUS expansion was largely China, and narrowing the scope of foreign actors will help CFIUS focus on true threats.  However, as long as the pilot rules are in effect—and perhaps longer—the full suite of CFIUS’s authorities apply whether you are from China, Canada, or Chile.

The one constant of the enhanced foreign investment scrutiny we have seen of late is that it is always shifting.  Investors, entrepreneurs, and companies must be on their toes going forward to understand how to raise and deploy capital in innovative American companies.

The IPO wave of 2019 won’t upend the Bay Area housing market

The impending wave of San Francisco tech IPOs is substantial and will influence San Francisco real estate, but the hype about its impact is likely overblown. In particular, despite being centered on San Francisco instead of Silicon Valley, its impact is still likely to diffuse throughout the broader Bay Area. Rather than breaking with the past, the current wave of IPOs is likely to reinforce existing trends: undulating but maintained pressure on the gas pedal, not an abrupt kickdown.

Lyft’s recent offering, combined with a series of anticipated IPOs this year — headlined by Uber, Airbnb, Pinterest, Slack, Zoom and others — has prompted numerous alarming headlines suggesting a coming flood of stock-enriched home buyers. “[E]ven conservative estimates predict hundreds of billions of dollars will flood into town in the next year, creating thousands of new millionaires,” reports The New York Times. “And they want houses,” warns the report, quoting a real estate agent promising investors that single-family homes in the city selling for a mere one to three million dollars will soon be a thing of the past.

The estimated value of the companies going public sums up to about $200 billion, and their combined San Francisco workforce probably ranges somewhere from 10,000 to 15,000. But does that mean 15,000 new home buyers will descend on the City of San Francisco in 2019 and spend $200 billion on homes? Certainly not, for several reasons.

Employees’ share of the pie is but a fraction. Investors, founders and a few key executives usually own the lion’s share of stock before an IPO. The Information estimates that as of late 2017, only 17 percent of Uber shares were in the hands of employees (excluding its founder and two other key executives).*

The vast concentration of wealth going to investors, founders and key executives may result in a handful of grand estates exchanging hands, but it generally won’t find its way into the Bay Area’s common housing stock. If we conservatively take 25 percent of $200 billion to be employees’ share, we arrive at a $50 billion figure, but that too is an overestimate of the employees’ likely windfall in the wake of the offerings.

Most employee equity hasn’t fully vested, stock options need to be exercised and taxes need to be paid. Employees’ initial equity grants typically vest over a four-year period. Given the rapid growth of these companies over the past few years, most employees are relatively new and their equity grants won’t fully vest for years. Uber, for example, had about 5,000 employees in San Francisco in early 2018 — but in 2014, it had only 550 employees in total (not just in the Bay Area).

Despite the stereotypes, not all San Francisco tech workers are young, city-dwelling millennials.

At best, those employees that joined more recently will have only a fraction of their full equity grant available to sell this year, diminishing their immediate buying power (and if the past is a good indication, many won’t stay long enough to see the full equity grant vest). In addition, many employees obtain their equity in the form of stock options, and for all but the earliest employees the strike price is not negligible, i.e. an employee exercising an option and selling $100 worth of stock will generally pocket far less. Finally, employees must pay tax on their IPO windfall, keeping yet another slice of it out of the housing market.

Not everyone receiving an IPO windfall will buy a home. Those compelled by the windfall to purchase a home in the next few years — and who wouldn’t have done so otherwise — are likely a small subset of the total employee pool. Suppose they number 5,000 and each buys a home during the next three years: That’s about 2 percent of the 243,575 homes purchased in the Bay Area over the past three years. Also: Some of these firms’ employees own homes already. And some employees may not want to buy a home: Maybe their personal life is in flux, maybe they appreciate the freedom of renting or maybe they would like to use the IPO cash for other purposes (ever dream of bootstrapping a startup?).

The IPOs won’t happen all at once, and many would-be buyers won’t buy immediately. Among those compelled to buy a home, many will wait: For the hype to pass, for their partner to say “yes” or for their second child to fully illustrate the inadequacy of their rent-controlled two-bedroom. And the IPOs themselves aren’t all going to happen on the same day either. In fact, part of the 2019 wave is already anticipated to take place in 2020.

A large portion of IPO-enriched home buyers will seek homes outside the city. Despite the stereotypes, not all San Francisco tech workers are young, city-dwelling millennials living nearby. Downtown San Francisco and adjacent SOMA (where the wave of IPOs is headquartered) are arguably within the single most accessible section of the Bay Area, drawing commuters from throughout the region. The immediate housing impact of the IPO windfall will extend in all possible directions: South along the San Francisco Peninsula, north along the ferry lines to Marin County and east past Oakland and Berkeley to the I-680 corridor. And the secondary impacts — those that occur if and when those selling to IPO-enriched buyers use the proceeds to make another home purchase — will extend even farther, diffusing the housing component of the IPO windfall throughout the region.

Newly wealthy employees are likely to bid up home prices only to a certain point. An early employee with $10 million in newfound wealth might decide to pay $4 million to ensure they get what is otherwise a $3 million home. But they probably won’t put down the full $10 million, because even very wealthy people don’t like to give away money. And despite this buyer’s personal $10 million infusion of wealth, it’s only the $1 million difference between the IPO-driven buyer’s bid and the price that would have been obtained otherwise that fuels appreciation.

IPOs are just one of many ways in which wealth arrives in the Bay Area.

Some spectacular bidding wars could make headlines when IPO-fueled buyers compete for homes against each other, but they will most often be competing with everyday buyers, and while they may have more resources to bring to bear, they won’t be eager to spend more than they must.

IPO-driven buyers will add an affluent but small contingent to the Bay Area buyer pool and they will help support the Bay Area’s ongoing price appreciation — perhaps even substantially — but they will be extending a long history of price appreciation in which IPOs have played a part, not breaking from it. Between 1970 and 2017 there were 1,987 IPOs by California-based companies, with a large share being in the Bay Area. The scale of the current wave of IPOs, although it is exceedingly large, is not very different from Facebook’s in terms of home-buying power. After its 2012 IPO, Facebook was valued at $104 billion — but because Bay Area housing prices have roughly doubled since, that’s equivalent to the same home-buying power as $200 billion-plus today.**

The underlying cause of concern around this latest IPO surge and housing — the long-term erosion of housing affordability in the Bay Area — is serious. But the wise way of mitigating the upward pressure of the IPO wave on home prices is not to stoke fear of it, and certainly not to demonize the employees rewarded for creating it. Indeed, IPOs are just one of many ways in which wealth arrives in the Bay Area. Instead, the wisest course is “simply” to add more homes, allowing the local housing stock to accommodate more people — the well-heeled and less well-off alike.

The short-term fears of an IPO wave flooding San Francisco with cash are overblown, but the long-term fears of the Bay Area failing to accommodate people and growing unaffordable to all but the most affluent — those fears are very real.

* Part of the reason current IPO valuations are so high is that IPOs are currently taking place later in the company life cycle, at which point employee equity tends to constitute a decreased fraction of the total.

** To put that $200 billion number into perspective, consider that only a small fraction of that wealth will find its way into the housing market — for the reasons spelled out here — and that as of 2018, residential real estate in the Bay Area was worth a total of about $2.38 trillion.

Udacity restructures operations, lays off 20 percent of its workforce

Udacity, the $1 billion online education startup, has laid off about 20 percent of its workforce and is restructuring its operations as the company’s co-founder Sebastian Thrun seeks to bring costs in line with revenue without curbing growth, TechCrunch has learned.

The objective is to do more than simply keep the company afloat, Thrun told TechCrunch in a phone interview. Instead, Thrun says these measures will allow Udacity from a money-losing operation to a “break-even or profitable company by next quarter and then moving forward.”

The 75 employees, including a handful of people in leadership positions, were laid off earlier today as part of a broader plan to restructure operations at Udacity. The startup now employs 300 full-time equivalent employees. It also employs about 60 contractors.

Udacity, which specializes in “nanodegrees” on a range of technical subjects that include AI, deep learning, digital marketing, VR and computer vision, has been struggling for months now, due in part to runaway costs and other inefficiencies. The company grew in 2017, with revenue increasing 100 percent year-over-year thanks to some popular programs like its self-driving car and deep learning nanodegrees, and the culmination of a previous turnaround plan architected by former CMO Shernaz Daver.

New programming was added in 2018, but the volume slowed. Those degrees that were added lacked the popularity of some of its other degrees. Meanwhile, costs expanded and their employee ranks swelled.

Udacity CEO Vishal Makhijani left in October and Thrun stepped in. He took over as chief executive and the head of content on an interim basis. Thrun, who founded X, Google’s moonshot factory, is also CEO of Kitty Hawk Corp., a flying-car startup. In an earlier interview, Thrun told TechCrunch that he discovered the company had grown too quickly and was burdened by its own self-inflicted red tape. Staff reductions soon followed. About 130 people were laid off and other open positions were left vacant, Thrun said.

Thrun insists these latest layoffs aren’t just a half-hearted attempt to quickly cut costs and instead are part of a strategic turnaround plan. He communicated that same thinking in the email sent to employees.

“By bringing our costs in line with our revenue and refocusing our product strategy, we believe we can continue to grow the overall business both in enterprise and consumer segments in fiscal 2019 and beyond, while also achieving a break-even position in terms of both cash flow and EBITA, which will ensure that we can continue to do our important work,” Thrun wrote toward the end of the email to employees.

Last year, Udacity generated $88 million in revenue, but it reported a loss of $40 million.

Even as Udacity slashes costs and headcount, it’s trying to expand its enterprise business, which has had recent success. Udacity now has contracts with 60 enterprise customers, including AT&T and PricewaterhouseCoopers. Airbus and Audi recently signed on, as well.

Udacity’s plan was developed largely by Lalit Singh, the interim COO hired in February. Singh conducted a review of the business, including its operating model and Udacity’s primary costs such as workforce, marketing and other non-workforce expenses. As a result of the review, Udacity has laid off more staff, streamlined operations and programming and cut other costs.

“We have tremendous opportunities in front of us, and we also have some challenges. To succeed, we have to ensure that we have an operating structure that allows us to be nimble, efficient, and better organized to win with fewer silos and frankly, reduced cost,” Thrun wrote in the email.

As of Tuesday, four executives who handle different aspects of the business now report directly to Thrun. Those executives include Singh, Alper Tekin, who recently became CPO, James Richard, who was VP of engineering and has been named CTO, and Caroline Finch, vice president of consumer growth.

Alex Varel, the company’s head of enterprise sales, and Jimmy Lee, head of enterprise operations, will now report to Singh.

The change is striking compared to October, when Thrun came back to temporarily fill the CEO role. At that time, 17 people reported to Thrun.

Udacity also has cut costs and streamlined its marketing efforts, downsized and consolidated office space and made its educational programming consistent throughout the various regions in which it operates, including the U.S., Brazil, China and India.

The company will keep an office, albeit a smaller space, in Mountain View, and one in San Francisco. Udacity is closing an additional satellite office in San Francisco and is evaluating its real estate needs in other countries, as well.

Landed raises $7.5 million Series A to help teachers buy homes

Teachers are notoriously underpaid and buying homes is notoriously expensive. This is where Landed, which just raised a $7.5 million Series A round led by Initialized Capital, comes in.

Landed helps educators buy homes by providing them with down payment assistance. That’s because many teachers leave their jobs due to a lack of stable housing. In Berkeley, Calif., for example, more than half of the school district’s employees reported they considered leaving because of the high costs of housing.

“Our mission is to help these people build financial security and help them remain committed to their communities,” Landed co-founder Alex Lofton said. “We try to stay flexible to peoples realities. We don’t require people to buy in any particular city.”

To date, Landed has helped more than 200 educators buy homes in the San Francisco Bay Area, Denver and Seattle.

Currently, the maximum amount of support Landed gives is $125,000 in the Bay Area, but Lofton says people generally take less than that. Unlike some of the city-run housing programs, there’s no income restriction with Landed.

“A lot of people we work with make a bit too much money to qualify for those programs,” Lofton said.

Landed, which manages the funds it sets up, offers down payment assistance in exchange for a cut of the home’s appreciated value. Landed, Inc., which is a licensed real estate brokerage, gets money on every transaction that occurs while Landed’s fund.

Given the influx of new cash into the SF Bay Area via IPOs from tech companies, Landed expects the market to become more challenging.

“With all of these economic booms In a market that’s already really supply-constrained with housing, it will be even more challenging,” he said.

While that’s surely discouraging to potential homebuyers, Landed is prepared to expand into additional markets and diversify where it offers support.

“[IPOs] will affect us but it won’t end our mission,” Lofton said. “For the community that we’re a part of, in our backyard, it does make us all here a bit nervous.”

With the funding, Landed will be able to expand to more cities and serve educators beyond K-12.

“I’ve followed the team at Landed for several years in their mission of providing more equitable access to homeownership to some of the most important community members – our educators and teachers,” Initialized Capital Partner Kim Mai-Cutler* said in a statement. “Not only is Landed attacking a profound issue affecting teacher retention in metros and school districts throughout the country, this is a promising market opportunity to build a trusted brand and institution to help essential professionals achieve their lifetime financial goals.”

*Kim-Mai Cutler is a former colleague of mine, but this relationship had no bearing on coverage.