Venture Everywhere Podcast: Anthony Dedousis with Jenny Fielding
Jenny Fielding, co-founder of Everywhere Ventures, catches up with Anthony Dedousis, Co-founder and CEO of Revival Homes on episode 22: Revival of the Fittest.
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In episode 22 of Venture Everywhere, Jenny Fielding, co-founder and MP of Everywhere Ventures, chats with Anthony Dedousis, founder and CEO of Revival Homes. Revival Homes operates as a combined lending service and contractor network, assisting residents in California with securing cost-effective financial solutions and dependable building services for their accessory dwelling unit (ADU) endeavors. Transitioning from finance, to now a key figure in housing policy with Revival Homes, Anthony brings innovation to the real estate industry by addressing complexities in constructing and funding Accessory Dwelling Units (ADUs).
In this episode, you will hear:
Anthony’s career shift from consumer finance to housing solutions.
California’s housing crisis as a catalyst for the rise of accessory dwelling units (ADUs).
Revival Homes’ approach to simplifying ADU construction and financing enhancing accessibility for homeowners.
Utilizing innovative data analysis and valuation models to assess the added value of ADUs on properties
The impact of fluctuating interest rates on customer acquisition and financing partnerships.
Championing policy reforms to increase housing supply and improve affordability.
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FULL TRANSCRIPT
00:00:00 Jenny: Hi and welcome to the Everywhere Podcast. We're a global community of founders and operators who've come together to support the next generation of builders. So the premise of the podcast is just that, founders interviewing other founders about the trials and tribulations of building a company. Hope you enjoy the episode.
00:00:20 Jenny: Welcome everyone to Venture Everywhere. We're super excited to have Anthony Dedousis here, the founder and CEO of Revival Homes. Revival is a lending platform and contractor marketplace helping homeowners build Accessory Dwelling Units, as we know, ADUs. So we're thrilled to have you and we wanna hear more about the ADU market and how you got into this and all this good stuff. So welcome, Anthony.
00:00:45 Anthony: Hey Jenny, great to be here.
00:00:47 Jenny: Awesome. Maybe we can just start out with a little background. Can you share, really the inspiration behind founding Revival? I'm always curious, what put you on this path?
00:00:58 Anthony: I did not come to the housing topic early in my career. After college, I had a traditional consumer finance background and corporate strategy at Capital One, went back to school to get my MBA at Chicago Booth, and worked in marketplace startups at ZipRecruiter in Santa Monica.
00:01:20 Anthony: And I realized that I inadvertently gave myself a really strong education in building a marketplace with financing plugged in. Now, where the housing piece comes in is that it was 2018. I was working hard at ZipRecruiter. The company was doing really well. I had lots of friends. I had pretty interesting work to do, and I nevertheless found myself unfulfilled. I said to myself, there's got to be something more here.
00:01:49 Anthony: And around that time, a close friend introduced me to a political group called Abundant Housing LA, which you could probably guess from the name, is part of the YIMBY (Yes, In My Back Yard) movement. A loose group of political actors, urbanists, fans of city life, who collectively recognize that we have a little bit of a problem with housing in California, where the housing affordability crisis at this point now the country is facing, has to do with the simple fact that we don't have enough housing.
00:02:22 Anthony: Because the law at the city and state level often makes it very difficult to build housing, especially more densely in urban environments, near mass transit and jobs and high quality neighborhoods. I saw that this problem was the most underrated problem in American life right now and it was one that I felt was worth solving. So I got involved as a volunteer, sort of becoming a self-taught policy expert writing blog posts, creating data visualizations.
00:02:51 Anthony: And things got busy enough to the point that my work got picked up in the LA Times opinion page. I was getting great reactions to my work. And I saw that this was a real passion area for me. To the point that I ended up taking a two year break from business and tech to lead policy and research full time for Abundant Housing. And it was during that time that I got a seat at the table to kind of shift from using data to describe the housing prices, to using it to design solutions.
00:03:21 Anthony: And so among those solutions that became state law during that time was a set of reforms that make it easier and more consistent to get permits to build accessory dwelling units, ADUs, which is basically just a backyard house. It's a second smaller house on the same lot as a regular house.
00:03:40 Jenny: But it needs to have a fancy name.
00:03:42 Anthony: Of course it does. Where would we be without a technical antiseptic name for a simple thing like a home, right? Now, these laws passed in 2020, and the market has responded to the point where last year 25,000 ADUs were permitted statewide. The best estimate I've seen says that the state could produce 450,000 ADUs in the coming years. And as more states and big cities pass similar laws, the best estimate I've seen says that we could see the ADU market grow by 1.6 million homes by 2030.
00:04:18 Anthony: But the best laws in the world alone will not build one single stick of housing. What needs to happen and what we're seeing happen is that individuals, entrepreneurs, businesses, small, large, and medium-sized enter this space that was created by these reforms in order to build housing and to finance housing.
00:04:41 Anthony: And through my research, I came across academic literature that showed that homeowners, when surveyed, reported that they almost always faced two really big problems when they decided to build an ADU, which are, how do I pay for this? And how do I find somebody I trust to build this? And so that was how Revival Homes was born. We, over the past two years, have put together, as you said, both a construction marketplace in order to match our customers to high quality, pre-vetted, trustworthy contractors.
00:05:18 Anthony: And on the financing side, to bring together conventional home financing, which is typically a home equity line of credit, as well as ADU specialty financing tailored to the nature of an ADU project. Because we are a licensed mortgage brokerage, and because we have close partnership relationships with these contractors. Unlike other players in the market, we help our customers win their projects. We can match them to a top contractor in their area and we can directly provide them with the financing they need to make their project a reality.
00:05:52 Jenny: Awesome. And so you'd say the mission for Revival is what exactly?
00:05:58 Anthony: Our ultimate goal is to build and finance thousands of homes every year across America. Right now, we're focused on building ADUs in the Los Angeles area, because that's where the demand for ADUs primarily is, if you look at the numbers. They ask the bank robber, “Why do you rob banks?” “Because that's where the money is.” If you ask me, “Why do you build ADUs in Southern California?” I said because that's where the demand for the ADUs is.
00:06:26 Jenny: Love it. When you think about the first year of getting this business going, obviously, there's a few interesting tailwinds that you had, the market's demand, but also some headwinds in the prop tech space and the like. So tell us a little bit about that first year of getting the company off the ground.
00:06:46 Anthony: Sure. I mean, there's no way around the fact that the first year in 2022 was a tough year. You alluded to a little bit of a cold winter for prop tech, and much of that has to do with the rapid run up in interest rates. That made things challenging for two reasons. The number one reason that we have a customer decide not to move forward with the project is that the interest rate on the loan that we offer to them or that they can get on the market is simply too high.
00:07:13 Anthony: But at the same time, as we seek to establish innovative partnerships with banks, credit unions and other capital sources in order to develop high quality ADU specialty financing, which we think is the real opportunity here, in an environment where rates went up quickly, you see lenders pull back in terms of willingness to deploy capital, but also willingness to test out unconventional ideas.
00:07:40 Anthony: And so what we ended up having to do was refocus on the customers who are able to make the projects work even in a higher rate environment, who have some ability to kick in cash savings and to focus on delivering high quality advice and project planning, as well as the contractor match. And so that ultimately helped us get our first 12 projects off the ground in 2023.
00:08:06 Jenny: One of the things that I always thought was interesting about your pitch when I first met you is that you really talked about the use of data. And I feel like a lot of startups do, but you're actually leveraging that data. So can you talk a little bit about how that's integral to your platform?
00:08:21 Anthony: Absolutely. We take data seriously here. And as I joke with people, I play a data scientist on TV, but we've had the good luck of patching in friends, colleagues who actually have a data science background. What that has enabled us to do is build a rigorous valuation model that answers the question, well, how much does an ADU add to the value of your home?
00:08:45 Anthony: And so what we did is we analyzed over 100,000 home sales in Southern California over the past five years. We found the homes that built an ADU during that time and then subsequent to that sold. And we controlled for the factors that you would imagine impact home sale price, like the size of the main house, the size of the lot, the location, the year of sale. And after isolating those factors, we found that the ADU adds anywhere from 15% to 35% to the sale price of a home. And that range has to do with how large the ADU is, which is logical.
00:09:19 Anthony: Now, if you ask me, “Gee, Anthony, why did you go to all that trouble to build this model?” It's that this is a core piece of loan underwriting that doesn't really exist today in the ADU market. I talked a moment ago about the need for high-quality ADU specialty financing. In my mind, what that means is a loan that's structured like a home equity loan of credit, but underwritten to a forecast of what the home will be worth once the ADU is built and where you have some ability to pre-count anticipated rental income, assuming you're going to rent the unit.
00:09:54 Anthony: That makes it possible for newer homeowners to take on these projects who currently are shut out because they lack equity, as well as retired households and people who are house rich but not cash rich who may have the equity but are a little short on the income side. By the way, those three groups of people I mentioned are the majority of homeowners in California.
00:10:13 Anthony: And so ultimately, for us to partner with a capital source and have everybody be comfortable with the notion of lending on the future value of the project the way most construction financing is done, then we've got to have a statistically rigorous model to help the capital source predict what will the home be worth post project and therefore how much capital are we comfortable extending to an individual customer?
00:10:38 Jenny: Got it. That is definitely unique, I'd say. Your secret sauce around the lending seems to be super unique. Going back to some of the early moments, you obviously saw a pain point in the market, but there's a big jump between seeing a pain point and actually starting a company. So any inspiration or people in your life that kind of gave you the nod that starting a company might be the right thing.
00:11:05 Anthony: Oh my gosh, there are two people who are special to me right away that I could think of. Because my initial game plan, Jenny, was to go and work for a company that was already active in the ADU space and to focus on bringing the specialty financing to life. But as I interviewed and as I got to know the other ADU companies, I came to see that they were all laser focused on other problems.
00:11:27 Anthony: And for good reason, the construction piece of the puzzle, building ADUs in factories using modular technology is a pretty formidable undertaking. It's really hard even for well-capitalized, sophisticated startups to take on two enormous challenges at once. So I came to see that nobody was really looking to develop specialty financing and to untangle that knot.
00:11:48 Anthony: And a friend of mine, [Chris Hong], helped me to realize that it was going to have to be me to untangle that knot. Because I told him, this was maybe a few months before I started the business, that I was deep in the interview process with a couple of prop tech startups in the ADU space and isn't this great, I'm going to go back to my roots and work at an established tech company. And Chris had worked with me at ZipRecruiter and had always encouraged me to think outside the box a little bit.
00:12:15 Anthony: And while most people in my life were patting me on the back, “Good job, Anthony, that sounds like a good thing to work on,” et cetera, et cetera, Chris pretty much like, he sounded half-hearted in his congratulations to me. And I'm… Knowing his personality, I said, “Gee, sounds like you're having some misgivings.” And he goes, “Honestly, I am. Why are you just doing the same thing over again when you could build something yourself? You're 30 years old, you have no debt, you have no kids, your obligations in life are only going to increase. You ought to take a swing at this now because there may not be another chance again.”
00:12:46 Anthony: And so he was one of the people in my life who was real with me to say, “No, no, no, you have an opportunity to do something unconventional here. It will require you to go outside your comfort zone, but you really ought to do this.” The other person who comes to mind is Jason Guss, the very successful founder of Octane Lending, which is another marketplace with financing plugged in, but for power sports vehicles like jet skis and motorcycles.
00:13:13 Anthony: Jason was a colleague of mine during our Capital One days. We were good friends in Washington, D.C. Time went by, we'd fallen out of touch, and we reconnected in 2021. And he was one of the people who really helped me see that A, there was a venture scale business here to be done with an ADU marketplace with financing plugged in. B, he helped me understand that business model, since he knew it so well from his own business. And then C, he helped me create my very first pitch deck.
00:13:43 Anthony: He was one of our first checks into the business and he introduced us to Surface Ventures, who ended up leading our pre-seed round. So what I always say is that this business has many mothers and fathers, but well Jason is the second father of this business. We wouldn't be here without him?
00:14:01 Jenny: I love it. Sounds like you had some really good inspiration along the way, which is pretty great. When you think about opportunities going forward, where do you see the bright space out there?
00:14:11 Anthony: Well, number one, I think that there's a very clear software component here. And that's where my head of technology, Ryan Olson, longtime, extremely skilled engineer from Zip Recruiter, big pro housing guy, is essential. The software piece of the puzzle matters because once again, if we are going to rely on capital sources to lend on future value, future income associated with a project, then my God, we have to make sure the project gets done, that risk is managed and minimized.
00:14:42 Anthony: And so what we have debuted is some simple software, our construction management platform. We're over the course of construction on five active projects right now. We have our partner contractors uploading photos, videos, explanations, inspection reports from the city at every milestone of the process. And on our end, we rely on an ADU construction expert, a friend of ours, to review these photos, videos, and give us frank feedback about how the project is going and do we need more information and to sort of sign off like, “Yes, everything looks good, let's keep going.”
00:15:21 Anthony: We supplement this with real-world visits too, but the software acts like a ledger, though the single source of truth that ultimately the property owner, Revival, the contractor, and the capital source can rely on in order to collectively judge the health of the project. And so what you will see us doing, and this goes back to your question of, where are we going with this software.
00:15:44 Anthony: This is going to plug into the ADU specialty financing, where number one, we're going to use our valuation model to determine, future value of the project and ultimately how much, is it appropriate to lend to the homeowner. But then B, once dirt is moving, once that project is under construction, the software is going to be our ledger for overseeing progress and managing risk and ultimately controlling payments to the contractor and conditioning payments on successful completion of a milestone.
00:16:18 Anthony: The same way that professional construction is done, just baked down at the individual homeowner or small rental property level. And in the longer term, what we think that enables, if you bring together contractors, if you bring together lending capital, and you layer on an underwriting model that is statistically grounded as well as software that helps us to minimize risk and oversee projects, that is a formula we can take to other parts of California and to other states and cities that have similarly pro-ADU inclinations.
00:16:53 Anthony: And I think that list is gonna grow over the years. But on top of that, that same playbook works for purchasing a fixer-upper property, for other home renovations, for rental property upgrades and adding more units to rental properties. All of those markets, by the way, are bigger than the ADU market, even though the ADU market is substantial. And so if we can get the formula right in LA and in ADUs, there's no telling where the same playbook goes.
00:17:21 Jenny: I love how you're creating this ecosystem. And that answers my next question, which was, we saw a big reset in 2022, 2023 around what is venture backable or not. And I think some people have come to the conclusion that some prop tech are potentially not venture backable. Can you talk a little bit about how this ecosystem that you're creating with the different components really set you up to build a huge business?
00:17:47 Anthony: Sure. So again, there is value in starting small, finding your sound, finding some modicum of PMF before starting to think bigger. Like I like to joke that right now we're the Beatles in Hamburg testing things out to different audiences. We're not ready to go tour Shea Stadium and the LA Coliseum yet, but everything that we're doing in Hamburg is going to get us there.
00:18:09 Anthony: And so going back to your question, there's a lot that needs to be done right now in order to make the process of matching the homeowner to the contractor more consistent and faster to create standardization of the different ADU projects, the layouts, tightening up and shortening the time period from the day you sign a contract with the contractor to the day dirt starts moving.
00:18:36 Anthony: On the lending side, there's the same piece where we need to be able to partner with multiple lenders. We need to be able to integrate the statistical model and the software into what we're doing and ultimately get ourselves to a place where there is standardization of construction, price transparency and process consistency. So I think that there is a lot of meat on the bone just in terms of the ADU market in California.
00:19:01 Anthony: Right now, construction alone is a $4 billion market in California. If you layer in a more mature market size in California, which we're very much on a trajectory for, and you add in financing, now you're talking about a $13 to $20 billion market. And then if you think about extrapolating that to a realistic list of cities and jurisdictions that we think are going to embrace the ADU market, now you're talking about a 50 to 90 billion a year industry, equivalent to 300,000 units or so being produced per year nationwide.
00:19:32 Anthony: That is a venture scale industry. But that same DNA, that playbook of standardization, of price transparency, of process transparency, that works again for home renovations, fixer-uppers, rental property improvement, all of which are thorny, mysterious markets that sort of defy professionalization and consistency. But again, if we can do it in Hamburg, we can do it at Shea Stadium.
00:19:59 Jenny: I love it. I'm a professor at Cornell Tech, and yesterday I gave a talk on market size and did some of the calculations and breakdown you did, but really talked about that idea of what a beachhead is and how you can expand from there. So I love the way you articulated it and agree. It's a massive opportunity once you start layering in all these different components. What's something that keeps you up at night about the business? Something that potentially you worry about in the industry?
00:20:24 Anthony: I worry about interest rates. Again, the number one reason why we lose a customer is that they say, I simply can't afford to pay this interest rate right now. And although things seem to be moderating, I can't read Jerome Powell's mind, but we do seem to be on a trajectory of somewhat lower mortgage rates, HELOC rates, that should help us to close more customers and to partner with capital sources on doing things that are a bit outside the box to increase risk tolerance.
00:20:54 Anthony: But I also don't know if inflation will come roaring back and if the Fed will decide to tighten, I don't know if the Fed will decide to slow down, a pace of anticipated rate cuts. These are things that are both outside of my control and therefore maybe not worth worrying about but nevertheless a source of sleepless nights here and there. For better or for worse, it's top of mind.
00:21:14 Jenny: What's one idea that experts in your field say that you actually disagree with?
00:21:20 Anthony: Let's talk about the housing policy world for a second. Most mainstream housing experts at this point are fairly unified in the idea that high housing costs, high unaffordability, homelessness are all directly related to a lack of new housing production. Just to give you a data point in California, we build anywhere from 90 to 125 homes per year now. In the 1980s, that pace was more like 300,000. That has real world consequences, the same way that if we just decided to stop building cars, pretty soon you'd see people paying $70,000 for a used Toyota Camry.
00:21:55 Anthony: But the same housing experts seem a little bit resigned to a continued state of shortage, especially in our big, what they call superstar cities, New York, LA, San Francisco, Boston, Washington, D.C., where the attitude seems to be, yes, we know that shortage is the main cause of unaffordability. We believe that states, if they were to pass things like zoning reform and permitting reform and streamlining and fewer restrictions on the types of buildings that you could build, that that would increase the supply and somewhat bring down costs.
00:22:30 Anthony: But really, we believe that on the margins, this will help, but that states are just going to stay stagnant and not embrace these reforms. And we're never going to see meaningful drops in housing costs. And frankly, I don't agree with that. Because the situation right now in our big cities is unsustainable. And by their very definition, things that are unsustainable eventually stop. There is just too much at stake right now politically where housing is the biggest share of the typical American's budget and people are becoming activated on this issue.
00:23:01 Anthony: You've seen this the most in San Francisco and the YIMBY movement, but this is also happening in other countries like Ireland, Canada, New Zealand, where there have been big run-ups in housing costs and people are starting to get angry about it. The good news is that we have examples in other parts of the world where nations and cities have passed strong housing reforms to meaningfully reduce barriers to construction, Japan and New Zealand come to mind, and these reforms have gotten the goods, they really do bring down costs.
00:23:31 Anthony: Tokyo grows and yet the cost of housing is relatively flat and affordable to the median family. We can do that too. And so I sincerely believe that 10 to 20 years from now, California, New York, the Northeast are going to have much more housing in cities and inner suburbs and therefore affordability relative to today. And I say that because the alternative is that we become Detroit on the sea or some sort of exclusive retirement community. And I just don't think people will accept that.
00:24:00 Jenny: Awesome. Love the passion in your voice. When I was looking through your bio, I saw that beyond how I know you from, Revival homes, you play the piano, you were on Jeopardy, you're a podcaster, marathoner, you speak French, Greek and Spanish, lots going on there. If you had to distill it down to your superpower, the one thing that you're really most known for, what would that be?
00:24:25 Anthony: Conscientiousness. I am a details guy, I am a perfectionist, and there are downsides to being that way, but instead of running away from my conscientiousness, I'm learning to embrace this. I'm the guy who answers questions and emails quickly. I keep a to-do list on pen and paper. My colleagues would make fun of me if you asked them this question, but it's true.
00:24:48 Anthony: And all the things that you mentioned in terms of loving to learn other languages and play the piano and being something of a trivia geek, those do require hard work and conscientiousness and focus. Like you can't really learn to speak another language well unless you bust your hump and learn the verb conjugations and do the exercises. It is hard to become a very good piano player unless you sit down and you play the measure over and over and over till you get it right.
00:25:15 Anthony: And so the things that have made me able to get some level of skill and a lot of joy out of speaking French or playing trivia or playing the piano at a bar required me to just knuckle down and learn and practice and focus on the details. And I think that I'm not going to say I'm a good founder because this is my first time out. You can ask me that question in a couple of years and maybe we'll have a clearer answer. But one of the things that might help me to be a good founder is that same level of conscientiousness and dedication.
00:25:47 Jenny: I love it. That's awesome. Great answer. Okay, speed round. Just a few of our favorite questions to wrap it up. What's a book you're reading or a podcast that you're enjoying now?
00:25:59 Anthony: I'm reading Inherent Vice by Thomas Pynchon. It's a hard boiled detective novel set in LA. And I love that genre, except that this one takes place in the psychedelic 1970s and the hard boiled private eye is something of a slacker/stoner with a detective agency. This book is just so weird. It's so riotously laugh out loud, funny and different. And I don't read enough fiction.
00:26:24 Anthony: This is a fun one to read. It's just so lovely to just get a laugh and take myself to a different place late at night while I'm winding down or on the subway on the way to work. Yes, I am one of those few weirdos in LA that rides the subway. And it's a lovely little distraction from the day-to-day focus, the grind, just take myself someplace weird and different for 15, 20 minutes at a time.
00:26:47 Jenny: Cool, if you could live anywhere in the world for one year, where would it be?
00:26:52 Anthony: Athens. You could probably guess from my last name. I'm a guy with Greek heritage. Growing up, we spent a lot of summers in the islands, which was lovely, but I have never seen Greece during the other seasons of the year. And living in Athens for a whole year while people do hate on it, it is not a terribly lovely place other than the antiquities. It is a vibrant place with terrific food. It would allow me to learn modern Greek really well and to hit a bunch of the islands that I've never been to before.
00:27:19 Jenny: Love it. Favorite productivity hack.
00:27:22 Anthony: It is the unglamorous, unremarkable pen and paper to-do list. I write it down, I make an order, I cross stuff off. If you can't get to it today, it's at the top of the list tomorrow. Unoriginal, unglamorous, but I swear by it.
00:27:37 Jenny: I don't think we've ever heard that one. So back to pen and paper, people. Okay, where can listeners find you?
00:27:45 Anthony: If you wanna find me personally, you can do it on LinkedIn. If you are building an ADU or you know somebody who is, you can find us at Revival Homes, which is revivaladu.com. Check us out.
00:27:59 Jenny: I love it. All right, Anthony, this was such a pleasure. Thank you so much and best of luck with everything.
00:28:05 Anthony: Thanks so much, Jenny. This was a treat.
00:28:07 Jenny: Awesome.
00:28:09 Scott Hartley: Thanks for joining us and hope you enjoyed today's episode. For those of you listening, you might also be interested to learn more about Everywhere. We're a first-check pre-seed fund that does exactly that, invest everywhere. We're a community of 500 founders and operators and we've invested in over 250 companies around the globe. Find us at our website, everywhere.vc on LinkedIn and through our regular founder spotlights on Substack. Be sure to subscribe and we'll catch you on the next episode.