Assembly OSM, a company aimed at updating modular construction for urban high rise buildings, recently raised a $38 million Series A led by Fifth Wall‘s Climate fund.
While existing modular construction typically leans into a repetitive, one-size-fits-all approach, Assembly OSM is instead working to move that model forward with a custom building approach that allows for custom buildings at scale.
It says this approach, which utilizes proprietary design software and a distributed supply chain model, enables faster build times, economic savings and significant reductions in embodied carbon than traditional construction.
FinLedger recently spoke with Andrew Staniforth, CEO of Assembly OSM, to talk about how its model differs from standard modular construction, sustainability impacts, challenges in the segment and the company’s plans for its recent funding.
Q: First off, can you just describe Assembly OSM and the services you offer?
A: Assembly OSM is a design builder for high rise modular buildings. We were born out of about 25 years of shop architects working on pushing the boundary of where architecture could go. And they realized that in order to be able to really bridge that gap between architectural design and the way you actually build, you have to look harder than the standard tools of architecture. They started diving deep into the way that cars and airplanes go together and realized that the direct to fabrication approach, where you actually get into the means and methods of how things go together, was a way that buildings didn’t work. Building didn’t work that way, and they would really unlock the next generation of high rise buildings.
What we’re doing is building custom high rise buildings the way that you build cars and airplanes, and we do that by focusing on three core areas. Our software is using aerospace software, we use CATIA rather than standard tools like Revit and Rhino. We use a distributed approach, so rather than everything being in a single factory, we use a network of suppliers that make our bathrooms, our kitchens, our structure, and ship that to our assembly facility, hence our name, and we assemble it there and then stack it on site. The last focus is, we allow a higher degree of customization and a higher rise product. We can go up to 32 stories, which really unlocks the urban market as compared to a lot of other modular competitors.
Q: Can you talk about your previous experience and how you joined Assembly OSM?
A: So my background is educationally in computer science, and then real estate and finance. My first real professional job was at Forest City when we were working on 461 Dean Street, which is the tallest modular tower in North America. That project was really interesting, and it set the tone for my career when I was starting in this industry. This first project is going up and we’re like, “We’re changing the industry. The industry is broken, and we have this solution.” I’m not sure how much you followed that project, but there was a lot of lessons learned on that project. Things didn’t go perfectly. It’s now a very successful building, but the process was a little clunky. Having that be the first project I ever worked on set the tone for trying to find innovation throughout my career.
I was at Forest City and worked on that project, worked on the Barclays Center, worked on the NASA Coliseum, all large-scale complex projects. And then jumped over to Sidewalk Labs, Google’s urban innovation company, for two years and worked on the Toronto master development project up there. After that I led a $2 billion off development here in New York City, before jumping over to Assembly OSM, and I was brought in by a lot of the people that I have worked with during my Forest City days. On the modular tower and Barclays, because Assembly was moving into the execution phase.
So for four years it was really focused on R&D, and really getting our systems and technology ready. Now we’re moving into that commercialization phase where we’re going to start executing and building buildings.
Q: What are the biggest focuses when it comes to execution and what are your big goals as we’re looking ahead?
A: Execution is a really exciting phase because when you move into execution, you convert all of your “unknown unknowns” to “known unknowns.” It’s really that forcing function that happens, which is really exciting I think. For us, it’s going to be that ramp up of manufacturing, ramp up of our supply chain, which is going to be really, really important for the firm and really exciting to see. I’m not sure if you’ve checked out our website, but we have on the background. It’s a time lapse of our full team, building our first one bedroom unit. It’s our architects or engineers or software engineers all doing that assembly work in our facility. And when we move into this execution phase that we’re doing now, it’s just going to be that but 10-fold, which is really exciting. It’s going to have a lot of energy and the company is really excited about that.
Q: You recently raised a $38 million Series A led by Fifth Wall. How did you get into contact with them and what was that process like?
A: I had spoken to Fifth Wall late last year and into the beginning of 2022 as they were coming up with their decarbonization of construction thesis. And the timing just happened to align where as part of their climate tech fund, they were developing a strategy around, “How do you decarbonize construction across multiple different product and asset types?” They had done investments in the lower-rise space, and they were really looking for that player in the high-rise space that could decarbonize construction. And through our process and our methods we have strategies that allow us to eliminate significant amounts of embodied carbon, and also work to reduce the green premium associated with minimizing your carbon impact on the operational side.
Q: Can you talk about the most important ways you reduce that carbon impact, and what are the most important things to remember when taking into account the actual building process and practicality?
A: I think one of the things that we’ve become really focused on is embodied carbon. I think to a certain extent operational carbon is well understood, because the proxy of that is your dollars that you spend on your gas or electricity. Landlords always want to minimize costs, so to a certain extent they always monitor that, but are less focused on the just-as-important embodied carbon that goes into these buildings through the process of constructing them. If you think about the embodied carbon that goes into a concrete building, the type of building that I’m living in right now, there’s a lot of carbon that goes into that. What we’re doing now by reducing the material going into our buildings, and really reducing waste along the whole process. We significantly reduce that embodied carbon, we’re looking at about a 30% to 40% reduction on embodied carbon with our current systems, and we hope to continue to improve that as we work with different suppliers on new materials and new technologies that continue to drive that down. That’s the area that we’re really focused on.
For the operational carbon, on that side we really are focused on using the best technology and helping to reduce the premium associated with that. Right now you can put in the most high performing system or high performing facade, but in traditional construction that typically comes with a premium. We’re trying to find strategies and ways to add that into our system and in our buildings without that incremental cost. One of the things that’s really nice is we have to do a lot of things that make our buildings better performing, just because they’re modular. They’re super sealed up, which helps with air infiltration, just because we have to make sure that they can sit outside before we stack it up and rain doesn’t get inside. We’re really, really tight sealed, which really unlocks strategies for things like Passive House.
Q: Back to the Series A fundraise, what are your plans for that? Is there still. R&D stuff going on, or is it mostly about funding these projects and getting the team ready to actually executive?
A: Part of it’s going to growing our team. As we move into that execution phase, we’re going to be growing our manufacturing and supply chain, and systems designers and software engineering teams which is exciting. Then it’s moving into building out our facility. Right now we have a facility in Harrison, New Jersey, and are opening a larger facility and ramping up into execution. Prototyping, large scale prototyping. That’s the main use of funds with this capital.
Q: What is the timeline in your head for this execution phase and actually getting stuff constructed?
A: Immediately. I’d like it so that the next time we talk, I can walk you through our facility and we’d be building a building. So in the next few months we’ll probably have some announcements on our first buildings going up, and that sort of momentum. Really with the announcement of the Series A, we’ve we’ve sort of hit the gas pedal on moving into that execution mode.
Q: Assembly OSM has used the term “post-modular” to describe its model. Where in your mind does regular modular construction fail and what do you do differently?
A: I think modular has to a certain extent, received a really bad reputation because of a couple of key things. One, it is typically extremely capital intensive and not scalable. What I mean by that is typically you open a single factory, you bring all the labor and all the materials to that factory, and you build the building there. Then you rinse and repeat inside that factory, hoping to turn out the same mod over and over again. But if you wanted to enter a new city, you’d have to open a whole new factory there, or truck thousands of miles to that new city, which is not very scalable.
Our model basically looks at what happened in the last few decades in advanced manufacturing, where the same realization happened with manufacturers, even companies like Boeing that looked at their company and said, “Why am I building everything in my factory? Why am I manufacturing every single component of this? I can create a network of suppliers that manufacture each of these components for me.” And that was that move to a much more distributed supply chain that’s happened in advanced manufacturing over the last few decades. We’re taking that precedent and applying it to building. If you think of modular as what Boeing was 30 years ago, post-modular is where we’re taking that and distributing the manufacturing approach.
The other side of modular that has gotten a bad rap is on the repetitive lack of design. It has a stigma associated with it, and that’s primarily because in order to achieve the efficiencies coming out of a highly repetitive plant, you end up with the same box over and over again. What we’re doing is, because we have this network of distributed manufacturers, we can have a higher degree of variation in our product. Because of our software platform, we can customize these buildings in a way that lets them look, feel and perform very custom, but then down at the connection details it’s all very repeated. It gives us, the user, the developer and the communities these really bespoke buildings, but they’re highly efficient from a manufacturing perspective. Finding that sweet spot is something that we’ve been focused on, rather than just leaning into that pure repetitive model which is how modular construction has worked in the past.
Q: What are the biggest challenges when you’re looking at suppliers and what do you look for?
A: We are really looking for suppliers that can keep on schedule and perform, so there’s a whole financial and reference qualification process that we go through with them. That sort of leads us to find suppliers that have done this before, but at the same time we recognize that we’re sort of incubating a new ecosystem right now. There’s already a very robust bathroom pod supplier ecosystem, right? That exists. We’re tapping into that, but other areas like our MEP (mechanical, electrical, plumbing) systems, there’s not as robust of an ecosystem there. So we’re tapping into new suppliers that can serve that, and part of our long term strategy is to help incubate suppliers over the long term. That’s really exciting because it has all of these economic development benefits, diversity, equity inclusion, that you can really rethink this industry from scratch and build up suppliers in a really fair and equitable way. That’s how we’re thinking about it long term.
Q: What your big goals are for the end of this year and the next year?
A: At the end of this year I’d like to be working full steam ahead on a project in one of our first three markets. New York, St. Louis and the Bay Area are the three focus areas for us right now. So to be full steam ahead on that.
And then at the end of next year, I’d like to be working on a big pipeline deal. There’s massive opportunity with large developers, that have pipelines and that they need an execution partner. I think by the end of 2023, we’ll be working with one of those large developers on a big pipeline deal. I think those are the two “North Stars” for me right now.
In other recent proptech news, FlipOS parent company Stoa USA secured another $100 million debt securitization from Cantor Fitzgerald. iGuide also announced reaching a 20% market share in Canadian homes, highlighting the markets’ increasing adoption of floor plan technology.