A Postmortem of a Startup

Do you steer them away from ‘bad ideas’? Trying to recall pg’s essay, which was admitted sw focused, but the core idea is both worthless on the open market and essential to the ultimate success. Is this coaching ‘don’t become a statistic’ or ‘better luck next time’

Thank you — the way you frame this is helpful.

This is good especially 1. bit of Bayesian thinking thrown in.

I find a lot of founders ask for feedback, advice and just carry on doing what they were going to do anyway, perhaps convince themselves that the advice backs up their thinking when it doesn't. Not everyone of course but a lot, hence why I like your question.

Yeah "founded to build software to fix Britain’s housing crisis."

There was literally zero hope for success.

Planning permission is partly a political issue, partly down to expertise. You need experience, you need to know the rules, you need to know the tricks, you need to know how to draft the application. You need to know the game. Indeed this is not something that is waiting for a technical solution.

It's great that they tried, though. But it strikes me that they seem to be 20 something students (not meant disparagingly) with no experience in this so perhaps lacked the insights and understanding of the pain points. It does seem that VCs were happy to fund based on an AI play, though ;)

The deck was stacked against them because nobody understood why the conversion process was so expensive or even there in the first place. It would have been easier to identify the handful of organizations that'd benefit from labeling this a political problem and embed themselves as vendors.

Their business model made sense for America, where sprawl is embraced.

NIMBYism is not unique, but the importance of house prices to the UK economy is more severe than other countries.

- The UK has a very strong household wealth affect (consumption is tied to house price growth / decline). The US and UK borrowers borrow at a rate against household wealth not seen in other nations (look at the chart on page 6 - https://www.ecb.europa.eu/pub/pdf/scpwps/ecbwp1117.pdf)

- It has had dramatic, sustained house price growth (400% real price growth since 1980) vs US (200%), France (200%), Germany (150%), Spain (Collapsed in 2008), Italy (Stagnant since 2008)

Some Links:

- https://www.bankofengland.co.uk/-/media/boe/files/working-pa...

- https://www.imf.org/en/Publications/CR/Issues/2016/12/31/Uni...

Supply is somewhat constrained and demand is also artificially inflated (at national level it is 100% caused by immigration, which is kept high by the successive governments).

Everyone relies on the property market going up. Beyond the obvious reasons, another important one is that fixed rate mortgages are not fixed for the life of the mortgage but only for, usually, 2 to 5 years after which rates jump so everyone is continuously worried about remortgaging.

It's true that the general public have a revealed preference for the housing crisis to continue forever.

However in principle, as with many social issues, a motivated actor such as a startup could still have a chance of fixing it.

One of the ways in which supply is artificially restricted is that getting planning permission is difficult, so you’re not actually disagreeing with OP

It looks like this startup tried to hack the system by streamlining one of the key mechanisms of artificial constraint: the difficulty of getting permits.

Not a fundamental cure, of course, but it sounds like a promising hack to squeeze out a few more building permits than would otherwise have been issued.

I agree with you that that's probably the real problem, but not that the situation is unique to Britain (although maybe it's worse in Britain then elsewhere)...

I think you're describing NIMBY, which is more of a US/SF thing (but also is a case in Europe to some extent).

is that a very special thing? it seems like that in the US too imo

Depends on whether you think renting a home is a way to solve the housing crisis.

If your definition of “solved housing crisis” is “everyone can buy a home,” a ban on corporate ownership could help a little.

If your goal is instead “everyone has a place to live,” no, corporate ownership is not inherently problematic.

I am a realtor and sit on my state's realtor association legislative steering committee, which this year sough to work with legislators on a bill that would limit mass corporate control over housing units... it's surprisingly more complicated than it first appears, and an area where realtors take a view that might be contrary to consumer expectations - we generally like the idea of limitations on corporate ownership, as it in theory creates the greatest opportunity for individual homeownership...

Anyway, some of the scenarios we ran into are things like the 2008 mortgage crisis - what happens if you end up in a market where there is a lot of inventory that no one can afford to hold? In my market, it's starting to look like a lot of builders (read: corporations) built too many houses either that weren't what consumers wanted or demand has shrunk (it is a town with a lot of federal jobs that are evaporating at the moment...). So can a builder hold that inventory indefinitely (assuming they can afford that) as a corporation? Likewise, people often don't want to hear this, but landlords do create efficiencies in the market - there are people out there that either don't want to own a home or can't qualify for a mortgage, and a landlord makes it possible to provide housing for those people as a kind of intermediary. We can argue over what it takes to qualify for a mortgage, but that's really a separate issue. We of course get into the issue of vacation homes or even situations like can I as an individual own a place for my business and a home - after all, they are both real estate, so how tight can we make these rules around ownership? Point being - the basic idea is sound, and some states like CA apparently already have laws on the books, but it's a more complicated matter than just one person == one house.

Why would that be a solution? What's the difference between the LLC that buys a bunch of homes and the LLC the builds bunch of homes. When the homes are done being built the LLC has morphed from an LLC that builds homes to an LLC that bought a bunch of homes.

The solution to me is to stop preventing people and companies from building homes.

https://www.youtube.com/watch?v=cjWs7dqaWfY

Effectively, goverments and nimbyism prevent houses from being built. Even when some laws change to supposedly allow it other laws continue to prevent it. It's got nothing to do with LLCs buying existing houses, it's got to do with not enough houses period.

I agree that the core problem of housing affordability is that housing serves a dual role as an investment and a place to live. But I think this policy will not do very much and in isolation would even be counterproductive.

Why focus on single family homes? If corporate ownership is as bad as you are framing it then why is it OK for someone who lives in an apartment to be advantage of? Worse still, these entities would still want to invest in real estate so presumably they would invest even more in multi-family properties. If their ownership is what causes unaffordability, are you not making things even worse for people who live in multi-family housing?

One cause of the UK's 'housing crisis' (or rather un-affordability), just like other countries I suppose, is simply that if I buy other properties, I get: capital appreciation on the asset, and return on investment (by renting it out).

Offer me a £500k passive investment that makes the same returns with the same guarantees, and I'll take that over a house.

Except they don't. No other investment comes close for the British middle classes with that sort of extra cash. And the UK government will tax you to the hilt on everything else.

Exacerbating the problem, is that you can get a bank loan for additional properties.

The solution to the housing crisis is letting people build "not quite up to code" structures and relaxing zoning.

This means heavy handedly forcing local municipalities to change zoning.

A lot of people don't like that.

Why would that solve a housing crisis? Functionally making it impossible to rent a SFH seems like a dick move.

Reducing the problem to ‘people coming from overseas’ is an equally reductionist argument.

There are properties going unused, for very many reasons. Second homes, holiday homes, etc. This also drives the price of properties up. This is one of the inputs to the problem. Planning permission laws is another input. The size and change of size of the people needing housing is another input.

Nottingham city, the pure "legal" definition, is actually quite small and not what most people think of when you say "Nottingham".

For example, it doesn't include Beeston, West Bridgford, Stapleford, Clifton, Ilkeston, Arnold, Long Eaton, Hucknall and more.

Even though no outsider could draw a line where Nottingham city stops and most of them start.

> I couldn't find one.

A parliamentary publication from 2018 estimated the uplift factor to be 93x outside London and 287x inside [1]. Found via ChatGPT.

I would think that the north-south variation has flattened a little bit by now, but I can't immediately find any similar document from the last couple of years.

[1] https://assets.publishing.service.gov.uk/government/uploads/..., page 12.

[2] https://www.progressive-policy.net/publications/gathering-th...

I have not researched this but someone I know at one of the big house-builders pegged the cost of building a 3 bed at around £35-40,000, so in the south east land with PP is 10X more valuable than what's sat on it.

"Farm" land, even in the SE is about 12K an acre, and you get 6-8 houses to the acre so you should be able build a three bed and sell it for £50K on the outskirts of London, Cambridge, Oxford or Brighton (just by example) still making a profit if we liberalised planning in those areas. That shows you how extreme this situation of fake constraint is.

It could therefore never be allowed to happen. The big house-builders wouldn't build and sell at that price, the locals wouldn't allow it as they've bought their houses for 500K, 10X as much and would literally all go personally bankrupt...

Success is when you get paid. If the product is unprofitable, you lose out on a bunch more money, and your investors lose out on most of their money, but you did your job and got paid for that, and as long as it was a reasonable rate, what's the failure on your part?

I don't think the last paragraph is correct, many unicorns don't generate profit, yet are hugely successful by any other metric. In many cases, generating profit is actually undesirable for tax reasons.

I would agree but I doubt it will become more of a thing, too many seem to not be willing to accept failure or show vunerability. This will always be rare in the start up market as long as bravado and fake it till you make it is still a thing, which it is.

Why 10 years? Is it not typical with startup founders to plan a lucrative exit in a much shorter time frame?