Firm latest in line of MMC firms to sink into administration
Modular housebuilder Modulous will formally enter administration today after a 鈥渄evastating鈥� race to secure more funding took it to what chief executive Chris Bone described as the 鈥渆nd of the cash runway鈥�.
Bone, who said the company was 拢4m in debt, blamed 鈥渢he vagaries of the venture capital markets鈥�. He told 好色先生TV the firm had 拢30m of pledged funding, but when one funder pulled out and the remainder prevaricated the business 鈥渃ouldn鈥檛 bridge the gap鈥�.
Modulous is the latest modular business to fail, following Ilke Homes, House by Urban Splash and last year鈥檚 closure of Legal&General鈥檚 modular arm. Bone was one of five co-founders of the 52-staff housing business which made all its staff redundant at the end of November.
Modulous consisted of a physical kit of parts that could be used to deliver multi-storey, multi-occupancy housing, and a digital design tool called TESSA - an acronym for Tech Enabled Solutions for Sustainable Architecture 鈥� which launched in October.
鈥淲e raised money [拢10m of Series A venture capital] in 2022 and built a software platform [TESSA]. We launched that platform already knowing that we were getting very close to the end of the cash runway, but made a decision to launch it anyway because it would maybe help with some of the investors,鈥� Bone said.
鈥淲e were raising a further 拢10m but we actually had 拢30m committed and then all of that was delayed until the new year. Sadly, we weren鈥檛 able to bridge the gap to the new year and that鈥檚 why we had to go through the process that we鈥檙e going through now of administration.鈥�
The 拢10m Series A funding included venture capital investors including Regal London and Cemex Ventures.
Bone declined to name the funders who pulled out or delayed but described them as 鈥渉ousehold name investors within the construction market鈥� and 鈥渢he richest families in the world鈥�.
Bone added: 鈥淲e thought we were home and dry and that鈥檚 why we pushed it and pushed it.
鈥淚t looked like we had very, very sound prospects at the end of October. Then at the end of November, one [investor] pulled out and the whole thing fell apart.
鈥淚t literally happened on a Thursday night and we let the team know on the Friday afternoon [that they had lost their jobs] with immediate effect. It was devastating.鈥�
Modulous bosses had previously described the business as nimble because it operated without a factory and 鈥渟o doesn鈥檛 have a single point of failure.鈥�
It has also previously been described by staff as a technology company as much as it is a construction firm, having secured its workforce from among former Google, Microsoft and Netflix staff.
Despite five years of work and investment, the firm鈥檚 only client for its physical kit components was Bristol County Council which had been involved in a pilot scheme to build 12 homes on Romney Avenue.
>>See also: Modulous set to go into administration
>>See also: What went wrong for Ilke Homes?
>>See also: Briefing: Modulous, the MMC provider without a factory
Bone reveals that the Bristol project has been another pain point for the business due to delays with finding a site. 鈥淭he project is now half built. I鈥檓 not sure what鈥檚 going to happen to it but the modules are all manufactured and waiting to be at site. We would love to see that completed because we鈥檝e made a huge commitment to the people in Bristol,鈥� he said.
Another venture capital-backed MMC provider, Ilke Homes, collapsed last July after 15 prospective investors failed to make commitments. Bone worries there is a wider issue with using venture capital to fund innovation in housebuilding.
鈥淲hat we discovered over the last two or three years is that the venture markets want to move very fast and the UK construction market doesn鈥檛,鈥� he said.
鈥淚t鈥檚 very difficult to satisfy venture funders with their appetite to get to revenue and grow quickly when the planning processes and all the usual inertia in the UK construction market prevents you from doing that effectively.鈥�
He added: 鈥淚f you鈥檙e going to build something new and innovative, game changing, it takes venture capital or private equity to fund that, because nobody can fund that out of profit, not even the big contractors or the big developers. So it does take a venture capital structure to fund that, but if it just doesn鈥檛 work at the same speed as the construction industry, what do we do?鈥�
Modulous has appointed administrators Opus Restructuring and its assets are due to be sold off. Its employees are yet to discover if they will receive a redundancy payment. 鈥淚t鈥檚 in the hands of our administrators now, but I really feel for everyone. We were a great group, a friendship group really, but now understandably there are some disgruntled feelings. It鈥檚 been a very torrid time,鈥� Bone said.
