INDUSTRY INSIGHTS
How to burn £10m in one year - Lessons from Modulous’ Downfall

The story of Modulous falling into Liquidation in November 2023 is one that surprised the entire construction tech scene. 

How could a company burn through over £10m in cash in just over a year, whilst only generating £92,000 in revenue?

The answer? 

Lack of focus, investor misalignment and lack of transparency.

But with every downfall comes a bunch of lessons. 

We were lucky enough to be joined by their ex Client Accounts Director who provided an inside-view on what happened during Modulous’ downfall. You can listen to the full episode here.

The Promise - Transforming Modular Residential Construction

Modulous aimed to transform the construction industry by developing a software tool that could streamline the design and planning process for residential projects. Alongside this, the company worked on creating a modular hardware system that could be efficiently manufactured and assembled on-site. The combination of these solutions held the potential to significantly reduce construction time and costs while improving quality and sustainability.

Funding, Growth and Expansion

Fueled by investor interest and a £10 million Series A funding round, Modulous experienced rapid growth.The company embarked on a hiring spree, expanding its team to around 60 employees within a short period.

Simultaneously, Modulous made the decision to expand into the US market, despite the challenges posed by differences in building regulations and market dynamics between the UK and the US.

The Cracks Begin To Show

As Modulous grew, several warning signs emerged.

The company struggled to maintain focus, with resources divided between software development, hardware design, and market expansion. The skillsets of some team members were misaligned with the company's immediate needs, leading to inefficiencies and communication breakdowns.

Moreover, the pressure to secure additional funding and demonstrate progress to investors led to questionable decision-making and a lack of transparency within the organization.

The Downfall: Modulus Enters Liquidation

The cracks in Modulous' foundation began to show when the company faced delays in design and manufacturing, leading to cost overruns and missed deadlines on pilot projects. As the company burned through its funding at an alarming rate, it resorted to delaying staff salaries and pension payments. In November 2023, just 15 months after its Series A funding round, Modulous entered liquidation, leaving employees and investors in shock.

Lessons For The Future

The collapse of Modulous offers valuable lessons for industrialized construction startups. here are the four key lessons learned from Modulous' journey:

Focus is crucial

Startups must maintain a clear focus and avoid overextending their resources across too many initiatives simultaneously. Modulous struggled to balance its efforts between software development, hardware design, and market expansion, ultimately leading to a lack of focus and efficiency.

Honest communication

Transparency and open communication with employees and investors are essential, particularly during challenging times. As Modulous faced delays and financial struggles, a lack of transparency within the organization contributed to its collapse.

Manage investor expectations

Startups must set realistic goals and manage investor expectations to avoid undue pressure that can lead to poor decision-making. Modulous' rapid growth and expansion, fueled by investor interest, created pressure that ultimately impacted the company's stability.

Align skills with needs

Hiring the right people with the appropriate skills and experience is critical for success. Modulous experienced challenges when the skillsets of some team members were misaligned with the company's immediate needs, leading to inefficiencies and communication breakdowns.

The story of Modulous serves as a cautionary tale for industrialized construction startups. While the company's vision was compelling, its rapid growth, lack of focus, and internal challenges ultimately led to its downfall. As the industry moves forward, it is essential to heed the lessons learned from Modulous' experience.

Interested in learning more? Check out the full episode with Chris Spiceley 👇

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