Where Einstein Meets Edison

Interview with BluHome’s co-Founder, Maura McCarthy

Interview with BluHome’s co-Founder, Maura McCarthy

Nov 28, 2010

 I recently came across a brilliant t-shirt on campus that said:

“I’d like to change the world, but they won’t give me the source code”.

Luckily, a Boston-based entrepreneur has uncovered a portion of the source code and she, along with her colleagues at Blu Homes, aims to change the world (or at least the pre-fabricated home industry!)

Blu Homes was founded in 2007 by Bill Haney and Maura McCarthy with the aim to change the way Americans built and lived in their homes, by dramatically revamping the modern prefab home industry. Blu Homes’ proprietary computer modeling technology and its revolutionary folding technology have introduced a new industry business model and created a new opportunity for scalability, and a product that goes way beyond your parents’ “prefab”. I recently met up with Maura, Blu Home’s Co-founder and VP of Sales and Marketing, to discuss her path to entrepreneurship.

Rationally not-Exuberant

Maura’s path ironically began working for the man who inflated the housing bubble, that’s right… inflation’s worst enemy, Alan Greenspan.  From 2001 – 2003, Maura toiled in the number crunching caldron that is the Fed’s engine room – a forecasting group focused on helping the economy after the tech bubble. While initially believing that she wanted to be an economist, she realized that she wanted to be more involved in the activities of the economy and that number crunching was not her optimal work… a little too much “i.q.” and not enough “e.q.”.

May the (Five) Forces be with You

Maura looked north toward Boston and joined the research team of famed Harvard professor Michael Porter (the creator of the B-school staple template, Porter’s Five Forces). Her one and a half years with Porter’s group put Maura face to face with many inspiring entrepreneurs and awakened a strong interest in entrepreneurship.

Iron + Wood + Capital  = Prefab Technology Startup

Wanting to focus more on the entrepreneurial world, Maura saw venture capital as the key place to learn more about how companies grow. Ambitiously pursuing all channels remotely related to VC, she met some inspiring, like-minded venture capitalists that hired her as the first junior associate at Ironwood Equity in 2005. While at Ironwood, Maura participated in a handful of deals, the most influential being a leveraged buyout of a traditional modular home manufacturer and a buyout of a precast concrete panel company.  These venture deals were her introduction to the world of prefabricated home manufacturing, which laid the foundation for her next opportunity.  Although Maura enjoyed venture capital, she was more interested in the budding world of environmental startups and the ‘company side’ of deals. She felt removed from the entrepreneurial companies she worked with and was not getting as “into the dirt” as she aspired to. With her eyes open for her own entrepreneurial opportunity, she met Bill Haney while working together on a non-profit.

A Dorm Room Entrepreneur

Having sold his first company straight from Harvard at a young age, Maura described Bill as “a dorm room entrepreneur”, who started a high-tech environmental company at age 19 as an undergrad. Since then, Bill has founded a variety of technology-driven startups, including a numbor of successful environmentally-oriented startups.  Bill was considering starting a new venture and, in fact, had funded a research project at the Rhode Island School of Design. This project, which studied the history and current state of the prefabricated homes industry, identified that the prefab homes industry was a sector of unrealized potential in the U.S., compared to other European countries where prefab homes dominate the home building industry. The existing industry B2B business model minimized the level of innovation and profitability by commoditizing the product, and did not result in beautiful, high-tech, convenient homes… Maura joined forces with Bill in 2005 and together they seriously examined several potential greentech ideas, and settled on green prefab homes.  Shortly, thereafter, they were joined by Dennis Michaud, who was finishing his master’s in architecture at MIT, focused on digitally fabricated homes. Dennis was the technical force who rounded out the startup team for Blu.

A New Business Model Offers Opportunity for Profit

The prefab industry’s existing business model was to sell the product through a complicated system of intermediaries. The driving reason behind the inefficient supply chain was the existing technology, which prevented the product from being shipped over long distances due to its oversized nature and states’ varying road regulations. Networks of multiple low-tech factories frequently could only service a radius of 300 miles and kept the industry’s profit margin low. Maura and her colleagues realized that if they could use novel information technology and steel framing systems to “fold” the homes and thus ship much further distances on a typical semi truck, they could circumvent the existing issues facing the industry and create an opportunity for scalability of their factory and a vastly more enjoyable customer experience who will buy directly from the manufacturer. Based on this realization, they successfully developed a proprietary panel folding technology. This seemingly small enhancement opened the entire market and dramatically shifted industry economics.  This also had a positive impact for the customer because it led to increased product quality and decreased the on-site assembly time from 4-6 months to 8-10 days.

Launching Blu Homes to Blu Homes Today

Blu Home’s official launch was in 2007, and TJMaxx became the company’s first customer when they used a Blu Home’s prefab house as a mobile showcase for their home décor line. Maura describes the exhilaration of receiving Blu’s first revenue: “I can’t tell you how good that felt. Somebody’s going to buy something we’re building. [It is exciting] having people want to pay for what you are providing.” Today, things are heating up for Blu Homes. The company is expanding: they took advantage of the economic downturn to acquire Michelle Kaufmann Designs, the most successful brand in modern prefab green homes on the West Coast, in 2009, and recently expanded to a larger manufacturing facility in central Massachusetts.

The Toughest Part of Being an Entrepreneur

According to Maura, one of the main challenges to a startup is helping to keep everything together. She likens it to being “an umbrella, shielding your employees from the ‘noise’ so that they can focus on marketing and selling homes to our clients”. You must always keep your cool, and shield your employees from unnecessary stress, while appreciating all the work they do… staying compassionate and keeping everyone around you inspired and positive. You must also deal with all of the stressful bumps that come along with a startup, because according to Maura, there are many!

Maura’s Advice for Starting Up a Startup

#1. Capital is key for a startup. Maura does not recommend starting up without any resources. If you do not have the startup funding, then join with folks and resources who are similarly inspired by your concept.

#2. Once in a while, take off your rose-colored glasses. While startups are challenging and you need to retain your optimism even when everyone else tells you it is impossible, you should have the ability to be skeptical about what you are doing. Data is king!

#3. If you have access to capital, recessions are optimal times for startups. Recessions provide the opportunity to acquire valuable assets at reasonable prices. Also, the startup tends to be leaner and does not face the same problems that plague incumbents in a depressed economy.

#4. Be careful of who you involve in your startup. This includes both investors and employees. Aligning yourself with the wrong people can create more trouble later. One good philosophy is to bring in investors you trust so that common expectations and understanding already exist.  Another point is to only hire people who are totally on board and inspired by your concept.