GARY: Next on "Start Up," we head to Pittsburgh, Pennsylvania, to meet up with Brian Gaudio and Drew Brisley, the founders of Module, a company that builds customizable, energy-efficient, modular homes.

All of this and more is next on "Start Up."

♪ ANNOUNCER: Spectrum Business recognizes the importance of small businesses to local communities, so we're investing $21 million to help small businesses access funding to help them grow.

Spectrum Business.

More than an internet, phone, and TV provider.

♪ The first time you made a sale online was also the first time you heard of a town named... MAN: Dinosaur.

We just got an order from Dinosaur, Colorado.

MAN: No way!

ANNOUNCER: Build a website to help reach more customers.

WOMAN: Wait, wait, wait, wait!

One more.

ANNOUNCER: GoDaddy.

Tools and support for small business firsts.

♪ My name is Gary Bredow.

I'm a documentary filmmaker and an entrepreneur.

As the country continues to recover, small business owners everywhere are doing all they can to keep their dream alive.

So we set out for our tenth consecutive season to talk with a wide range of diverse business owners to better understand how they've learned to adapt, innovate, and even completely reinvent themselves.

♪ This is "Start Up."

♪ A modular building is a prefabricated structure that consists of repeated sections called modules.

Modularity involves constructing sections away from the building site and then delivering them to the location.

Installation of the prefabricated sections are then completed on the building site.

Today, I'm heading to Pittsburgh, Pennsylvania, to meet up with Brian Gaudio and Drew Brisley, the founders of Module, a company that builds customizable energy-efficient modular homes.

I'm well aware of the challenges that exist in the current housing market, and I'm excited to learn more about how Module's trying to find a solution to an extremely complex issue.

♪ What is happening in housing right now?

BRIAN: In the United States, we have a huge shortage, so we're basically short four to five million homes.

So when the, you know, 2008 crisis happened... GARY: Mm-hmm.

BRIAN: ...we basically stopped building new homes at the same pace.

GARY: Sure.

BRIAN: So when you do that for a decade of building far fewer homes, you have this huge backlog of homes that haven't been built.

GARY: The population continues to increase, more people come to the country.

BRIAN: Yeah.

GARY: It's not getting better.

It's getting worse.

BRIAN: Yeah.

Basically it's a supply and demand problem.

And then you have, you know, the pandemic hit.

So even fewer homes went on the market at that point, so costs went up.

And so it was really, really hard for buyers.

GARY: Supply chain issues.

Just astronomical prices.

BRIAN: Yeah.

GARY: Like, unbelievable, truly.

BRIAN: Yeah.

Lumber prices went like this.

And then for the while, interest rates were really low, but now they've started to go up.

And so it's really, really challenging for a homeowner in today's world.

GARY: What is Module?

BRIAN: So Module is a start up company.

We're a construction start up based in Pittsburgh, and our goal is to bring good design to more people.

So we have a product which is what we're sitting in here.

So a super energy-efficient, beautifully designed product that's tailor-made for a lot of these infill lots.

Infill meaning, like, there's a ton of vacant lots in a city like Pittsburgh or like Detroit.

GARY: Mm-hmm.

BRIAN: So we've designed a product that can turn those vacant lots into new sustainable homes.

But then what's unique about our homes is they're built in a factory.

So compared to traditional construction where you buy your lumber from the local lumber store... GARY: Yep.

BRIAN: ...we're actually procuring these homes from modular factories.

And there's a lot of benefits to that.

We can build the project more quickly, and we can do it with better quality control.

So the process of construction in the factory is very short.

It's a couple of weeks.

GARY: What?

BRIAN: To build this takes a couple of weeks in the factory.

GARY: A couple of weeks?

BRIAN: Yes.

GARY: That's amazing.

BRIAN: It is.

It's really surprising to see how quickly this can happen when it's in a controlled environment.

GARY: I think months when I think of construction.

That's kind of mind-blowing.

Two weeks?

BRIAN: Yes.

So the actual house that we're sitting in was built in two weeks.

However, the foundation, the site work, all the other parts of construction that happened on-site still take as much time.

GARY: Sure.

BRIAN: But if you're able-- The one benefit with prefab is that the same time the guys are building the foundation, you're building the home, we're building it in the factory.

You can really shrink the time to build a new house.

GARY: What made you want to do this?

What made you think of the idea?

BRIAN: Since the fourth grade, I knew I wanted to be an architect.

So there's this famous architect, Frank Lloyd Wright, has this famous house near Pittsburgh.

Visited that, and I was like, "I'm gonna be an architect."

So, I went to architecture school at North Carolina State, which is where I met one of my co-founders, Drew.

I was always fascinated by design, and I had these kind of two interests of design and how do we make the world a better place?

I wanted to use my skills as an architect to create better housing solutions.

I said, "Okay, what if we started "a start up company?

"What if we took that mindset versus "starting an architecture firm or a nonprofit?

"Maybe we could grow more quickly, get more houses into the hands of more people."

So, that's why we chose like the vehicle of a start up.

GARY: Yeah.

BRIAN: Um, and I just said, I'm gonna move back to Pittsburgh because it's my hometown, and if I'm gonna create a company that creates better cities and better housing, why not do it in my hometown?

GARY: Sure.

BRIAN: We started in 2016, moved back to Pittsburgh, moved into my, you know, parents' house for a year, lived there.

And I called up my shop teacher, and I said, "I want to, you know, I want to work on this idea."

So he let me use the shop to build these little architecture models that I took around in a shoe box, you know, showing people my idea.

Like, "This is what I want to do."

So that's where we started.

We got into some local incubator programs.

GARY: Was it challenging to move back into your parents' house as an adult?

But that was a sacrifice, right?

BRIAN: Yeah, oh, absolutely.

I mean, I was thankful that my parents, you know, would put me up, right?

They didn't charge me rent.

GARY: Sure.

BRIAN: But, yeah, I was in the Dominican Republic, you know, living in a two-bedroom apartment and then moving back to my parents' house and going to the local library and going to the local high school to, you know... That was a lot of humble pie.

GARY: Go back in time.

BRIAN: Yeah, it was.

I worked part time in an architecture firm to try to save a little bit of money.

But, yeah, that was certainly... You know, you got to make sacrifices if you want to start something.

♪ ♪ GARY: Early on, what were some of the big problems that you guys had to overcome?

DREW: Yeah, I mean, I think any company starting out, it's the financing, right?

Brian didn't take a salary for a while, and so it was kind of, you know, leading that in terms of saying, "You know what?

"I believe in this so much that I'm willing to live with my parents," and I certainly wasn't willing to do that, so.

Homes are expensive, and you can't, you can't just kind of 3D print something, a home, full home, get people to be like, touch and feel it.

You know, do you want to buy this or not?

We had to actually go out and get customers without ever as a team building a house together.

And so that was, you know, was certainly the hardest thing.

BRIAN: This project, this was four units that we built here.

Mixed-income housing, so market-rate and affordable housing.

This project was over a million dollars.

No bank was gonna give us a loan to build this, so we had to basically get two banks to... We leveraged them off of each other.

So two lenders.

We said, "Hey, this lender said they'll give us half the money if this other lender comes in."

And so we basically got two banks.

GARY: To work together?

BRIAN: To work together... GARY: That's brilliant.

BRIAN: ...to fund this project.

And then on top of that, we had to get over $100,000 in grant subsidy to make one of these homes affordable.

So, what did we do?

We reached out to the local government, pitched them on the project, and had to basically go through a lot of paperwork to get the subsidy to sell one of these to a first-time, you know, minority female homebuyer who was making less than 80 percent of the median income.

And not only that, we pitched corporates.

So we went to Lowe's, Ikea, DuPont, Mitsubishi, and we said, "This is gonna be "a great project for you.

"You want to support the future of construction "and you want to support affordable housing?

Give us some free stuff."

And they did.

So that's how we funded the first project.

GARY: Tell me about that very first home that you guys built.

DREW: Yeah, it turned out to be a beautiful, very super energy-efficient home.

But realized that, you know, something that small of a space, you know, financially, we need to kind of readjust and not maybe go so far on the passive house end of the spectrum and come back to more like a zero energy programming.

So Hallie did a phenomenal job designing that house.

You know, we won some awards for it.

GARY: What is the material?

BRIAN: So it's wood frame construction.

GARY: Okay.

BRIAN: So, similar to, you know, how a traditional home is built.

Built to the same building code, but our homes are super energy-efficient.

GARY: So drywall, everything's the same?

BRIAN: Yeah, everything's pretty much the same, honestly.

We just are speccing better quality materials and super energy-efficient features in the house... GARY: Okay.

BRIAN: ...that make the operating costs, your utility bills lower.

Our homes are also all electric.

GARY: No gas whatsoever?

BRIAN: No gas in this house.

So that's, you know, it's easier to go net zero.

But then... GARY: Safer.

BRIAN: Yeah, safer.

And indoor air quality.

It's really more about how can we build right-sized houses that are low cost to operate and incredibly fast to build.

♪ ♪ GARY: I was invited to take a tour through the very first home built and sold by Module, talk to the owner, and find out firsthand about the experience from start to finish.

♪ Tell us your name, and where are we standing right now?

SID: Well, my name is Sid Riggs, and we are standing in the living room of my Module house in Pittsburgh, Pennsylvania.

GARY: I understand you're the first owner of one of the Module homes.

SID: I understand that, too.

Yeah.

GARY: What made it attractive to you?

Like, as you were watching the building process, how did it seem different?

SID: Well, I like modern prefab architecture, or modular architecture in this case, because I just like the building process.

I like that this house is super energy-efficient.

I even put solar panels on it to make it even more energy-efficient.

GARY: Wow.

SID: And I just like that whole idea.

GARY: Yeah.

SID: And so this checked all the boxes.

GARY: So if anyone is considering buying a home like this, should they be confident in their purchase?

SID: I think so.

Yeah.

Definitely.

♪ GARY: What's the difference between this and a "modular home" that people think?

BRIAN: So, that's a great question.

I'm glad you asked that.

So, people hear the term "modular," and they think, "Oh, it's a trailer home."

GARY: That's what I think immediately.

BRIAN: Exactly.

GARY: There's a brand perception with that word.

BRIAN: That's correct.

So there's actually a separate code for mobile homes.

And it actually has to have a chassis built into it so it can be moved.

So that's actually not what we build, but that's, people hear the term module, and that's the first thing they think of.

GARY: Mm-hmm.

BRIAN: So our job, you know, at Module is to show that modular construction as opposed to manufactured housing can actually be higher quality, better performing house, lower utility bills, and beautiful.

So that's really the task that we're charged with at Module.

GARY: Is there any cost advantage outside of utility savings?

BRIAN: The cost advantage comes in the time of construction.

So if you think about getting a loan or getting investors if you're flipping a house, you have to pay them interest.

And the longer it takes for you to build that, the more interest cost that is, so we're basically shortening that time frame.

In terms of actual physical construction cost, what we found is it's actually about the same, at least today, as traditional construction.

And the money you save by building off-site, you still have to-- so for this, we actually had to rent a crane and ship the home from the factory to here.

So that cost savings in the physical construction costs is kind of eaten up by crane and shipping.

This is two boxes, and this showed up on a truck, and we had a crane outside, and that crane lifted it, set it on the foundation, and then stacked it like Lego blocks.

That takes a day, or a morning, really, to do that.

But in the long term, we're gonna have our own-- so we're currently contract manufacturing, working with existing factories.

But we recently received an investment from one of the 50 largest foundations in the world to help us open a factory in the Pittsburgh region.

GARY: Congrats to you.

How does that feel?

BRIAN: So that's really exciting.

GARY: Yeah.

Right?

BRIAN: Because it helps us control our own destiny, own more of the supply chain.

But then we think it's actually a great way to create more advanced manufacturing jobs, I'll call it, in the Pittsburgh region.

We talk a lot about that.

We're a Rust Belt town, so we are used to building things and making things.

GARY: Of course.

BRIAN: You'll see that just in the landscape of Pittsburgh, all these old industrial buildings.

So we're pretty excited about that.

GARY: When is that happening?

The new factory.

BRIAN: End of 2024, we're gonna have it operational and build 200 homes a year and employ about 95 people.

GARY: Congrats, man.

That's really fantastic.

How many homes have you put up in Pittsburgh start to finish?

DREW: We just, yeah, finished our tenth unit.

GARY: Tenth?

DREW: Yeah, yeah, so.

GARY: Okay.

After doing ten, I mean, you can sort of tell at that point, is this company going to work?

Will it be profitable enough to sustain?

DREW: Yeah.

GARY: Is this a volume-based business, or do you make money off every house?

DREW: Yeah, we make money off every house.

I think as we scale, that will improve.

And I believe there's other kind of revenue streams that we can be looking at as we get this to a point, the development side and us serving, selling the product, there's other opportunities to improve the experience because this industry is entirely, it's incredibly fragmented.

GARY: Yeah, it is.

DREW: And everyone-- the architect, the builder, you know, the factory-- they all have what they want to get out of it.

And they set up their business to be as efficient for themselves as possible, which is obviously very fair.

But nobody's really looking at the entire ecosystem, all the stakeholders.

And I think that's what is unique about us is we're trying to say, "How do we make this all work a lot better?"

♪ ♪ GARY: Let's go check out one of the construction sites of one of the homes that you're doing right now.

Give me a little bit of background information on this particular property.

BRIAN: We came across it a year or two ago, and it's two beautiful vacant lots.

They're three stories with a full finished basement.

GARY: Nice.

BRIAN: And they're built, again, built off-site in the factory.

We installed them with the crane last month, so that was pretty cool to see.

They're zero energy ready homes, so they're all electric, no gas, super insulated.

And what's nice about these homes is the top story is a full owner suite.

So there's actually a rooftop deck in the back.

GARY: Oh, cool.

BRIAN: And a kind of walk-in closet.

So that's a bit more higher end than some of our standard homes.

So it will be fun to see these finished.

And these will be two market-rate homes.

We're probably 60 percent complete in construction.

They're actually already under contract.

GARY: Nice.

Oh, so you already have buyers.

BRIAN: Yes, they're already, you know, because the market is so dry these days, any time we put up, you know, homes on our website, then we get a ton of inquiries.

So that's one of the, you know, benefits of being a home builder in today's market right now is like there's just not... GARY: Guaranteed sale pretty much.

BRIAN: Yeah.

♪ ♪ ♪ GARY: Start by telling us your name and how you first met Brian and Drew and came to work with Module.

LAUREN: Sure.

So my name's Lauren Holmes, the owner of Blockhouse Residential.

Three years ago, we started on a project that Module was a part of.

GARY: Okay.

LAUREN: We worked really well together, and it kind of went from there.

GARY: General contracting company for the most part?

LAUREN: General contracting.

Yes.

GARY: So you're basically, you're coming in and working with the trades, coordinating basically every aspect of the project.

LAUREN: Yes.

GARY: In comparison to sort of ground-up new builds, what's the difference in terms of timing and speed?

LAUREN: Well, modular construction definitely moves a lot faster.

GARY: Yeah.

LAUREN: With stick-build, there's always pauses.

There's always something that happens.

GARY: Always.

LAUREN: Between inspections for everything.

But with modular, a lot of the inspection process is done beforehand before it's delivered on-site.

GARY: Wow!

LAUREN: And so a lot of that is streamlined.

GARY: And modular gets a bad rap because you think modular, I automatically think like, you know, maybe an assembly or build that, that maybe cut some corners so it would be cheaper.

Is that true?

LAUREN: Not at all.

No, no.

It's a very involved process, so it's certainly not like that at all.

♪ GARY: And so looking at something like this, you have the foundation obviously first, right?

ANDREW: Correct.

GARY: And then what mechanicals?

Is there any plumbing or anything that goes in ahead of time?

ANDREW: Well, ahead of time, we do anything underground.

So all of our stormwater, sewer, things like that.

GARY: Connecting to all the city stuff.

ANDREW: Yeah.

And then when the product shows up, most of, most of all the mechanicals are complete.

GARY: Wow.

ANDREW: And the house gets set.

And what we have to do is we have to connect floor to floor and then the house to the foundation.

GARY: How does it connect floor to floor if you don't mind me asking?

ANDREW: Well, I mean, it's pretty interesting, the electrical-- GARY: A latch.

Just [click].

ANDREW: Kind of.

But the electrical has plugs labeled, and all you got to do is go up in there and find one and one, stick them together.

GARY: That's it?

ANDREW: And you're done.

So there's maybe 13 of those.

GARY: Wow!

ANDREW: And the plumbing is, it all comes together to a single point.

And look at the plans.

GARY: PVC connector.

Screw it.

Tighten.

Done?

ANDREW: Done.

GARY: That's unbelievable.

ANDREW: Yeah, it takes about a day.

GARY: What's the big difference, you know, as a contractor yourself, between a regular traditional stick build and modular build?

What are the real advantages, I guess?

ANDREW: Well, I think the real advantages is for these houses, these houses are extremely well built.

GARY: Yeah.

ANDREW: You have the advantage of they're built in the factory, so we have a controlled environment.

They use jigs, so we get very square walls, very square houses.

GARY: So it's better actually?

ANDREW: It's much better than stick frame.

Very little time in the weather.

GARY: Yeah.

ANDREW: If I'm stick-building a house, I might frame it in a month, and then I have another two or three months that I'm worried about what's happening to that house.

This one shows up, it's under roof, ready to go.

No worry about the storms coming through or anything like that.

GARY: What type of impact do you think that, that modular could have on the housing market?

Is this a potential answer?

ANDREW: I think it's a real potential answer because you're able to set up a stable workforce at the factory who can produce a quality product.

We're able to then use this to infill.

GARY: Yep.

ANDREW: It makes it much easier.

Plus if you get into a project where you're doing scale, you can, you can cut the time down, and when you're talking tens of millions of dollars, the interest on that starts to rack up and you get done in half the time.

Everybody's happy.

♪ GARY: What's the biggest challenge that you're facing right now?

BRIAN: Biggest challenge we have right now is the cost of materials have gone up.

So we've signed contracts, right, or gotten bank loans for X amount and then... GARY: Goes up.

BRIAN: Things go up.

And that's really tough.

That's really hard.

GARY: If you could go back to the beginning of starting this, what would you do differently?

BRIAN: [laughs] Maybe... GARY: Not do it?

No, just kidding.

[laughs] BRIAN: I think...

I wouldn't spend as much time pitching tech investors.

A lot of entrepreneurs, whether you're watching "Shark Tank" or whatever, you're like, "Oh, I got to get investors.

And tech is the thing to do."

GARY: Mm-hmm.

BRIAN: And I think for the first three years of the business, we went through a couple incubator programs, which helped teach us, you know, really valuable lessons.

But a lot of their network of capital was with venture capitalists.

And this business is not a business for venture capitalists.

We spent so much time creating pitch decks.

"Oh, well, how is home as a recurring revenue stream?"

"Well, you know, you can buy the house, "and we'll sell you the upgrades, and you can replace your fridge."

We tried to fit ourselves into that box.

GARY: Yeah.

BRIAN: And that was a waste of time, but sometimes you have to learn the hard way.

GARY: What do you think of the future of this company?

What's your goals?

DREW: If we are successful or when we are successful, I would say that people will look at us as like, they really changed the real estate development industry.

It's really more about integrating the existing trades, the existing network of folks that are out there and supplying them with the best tools.

GARY: Instead of disrupting them, assisting and making things easier.

Working with instead of against?

DREW: Yeah, enabling them.

Because off-site construction is, it's, we think everybody wins, right?

You can be a general contractor, you're not losing business.

You're actually able to build more homes.

So it's really more of a collaborative approach that we want to be taking, and we want to be the name and the brand and the system behind it to power that.

So it takes a lot of education, but I think being somewhat industry outsiders, I think we're the right team to do it.

We're young and a little crazy, naive to ask these questions of like, "Why are we doing... Why are they doing that that way?"

And we don't have those kind of baked-in, deeply rooted ways of doing things.

Like, "Oh, this is how it's done."

No, we're saying, "What's the best way to do it?"

But back to the question is like, we want to be building homes everywhere.

GARY: Yeah.

DREW: And we want to be able to look at every home and say, "We're very proud, proud of that," whether it's the first or the thousandth.

♪ GARY: It's very rare that you meet someone who knows exactly what they want to do from the time that they're young.

But Brian always knew that he wanted to make a difference in the world through architecture.

And that's exactly what he and his team are doing.

They're trying to find a solution to the housing crisis by building more affordable energy-efficient homes.

And although Module is facing a world of challenges, they're doing all they can to establish a new way of cutting costs and timing by building smart homes that fill the gaps in small, vacant neighborhood lots.

I have so much respect for their mission, and I truly believe that their intention is pure.

Real change starts with passion and experimentation, and Module is on their way to creating something that could affect the lives of millions of people that strive for ownership and a real chance of achieving the American dream.

For more information, visit our website and search episodes for Module.

♪ Would you like to learn more about the show or maybe nominate a business?

Visit our website at startup-usa.com and connect with us on social media.

♪ ♪ We got a long road ahead of us ♪ ♪ A long road ahead of us ♪ A long road ahead of us before we pay our dues ♪ ♪ We got a long road ahead of us ♪ ♪ A long road ahead of us ♪ A long road ahead of us before we pay our dues ♪ IAN: Awesome!

♪ WOMAN: Like, no, no, no, don't touch this.

GARY: Oh, for you.

Yeah, okay.

MAN: Aw!

That's cheatin'!

GARY: Piggybacking off my bull!

[woman laughs] ANNOUNCER: The first time you made a sale online was also the first time you heard of a town named... MAN: Dinosaur.

We just got an order from Dinosaur, Colorado.

MAN: No way!

ANNOUNCER: Build a website to help reach more customers.

WOMAN: Wait, wait, wait, wait!

One more.

ANNOUNCER: GoDaddy.

Tools and support for small business firsts.

Spectrum Business recognizes the importance of small businesses to local communities, so we're investing $21 million to help small businesses access funding to help them grow.

Spectrum Business.

More than an internet, phone, and TV provider.

♪