Technology

Ground Control: Creating A Digital Marketplace To Move Dirt

A $100 billion-a-year lending pool to acquire and develop the ground for homesites partially supports a parallel universe $50-billion addressable market that begs for a solution to a pain point: moving dirt.

Technology

Ground Control: Creating A Digital Marketplace To Move Dirt

A $100 billion-a-year lending pool to acquire and develop the ground for homesites partially supports a parallel universe $50-billion addressable market that begs for a solution to a pain point: moving dirt.

June 18th, 2024
Ground Control: Creating A Digital Marketplace To Move Dirt
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Pain point. Two words, right? Merriam-Webster defines them as a single noun.

That noun is everywhere these days. In homebuilding, it goes with the turf, literally.

For instance – roughly, on the back of an envelope – homebuilders bank on a little over $100 billion a year in commercial real estate financing to put lots on the ground to build new homes, and now you're seeing what happens as 10% or more of the capital pool to acquire and develop that dirt just isn't there to tap into.

That's called a pain point, and homebuilders commonly face them and overcome them as their stock in trade. They go with the turf, literally.

In home building, that ballpark $100 billion-a-year lending pool to acquire and develop the ground for homesites partially supports a parallel universe, $50-billion addressable market that begs for a solution to a pain point: moving dirt.

Soil Connect: The Origin Story

Enter Cliff Fetner, the son of a builder who was the son of a builder. Fetner's grandfather and father got started back in Brooklyn, N.Y., in the late 1950s, in the decade-long runway to the completion of the Verrazano-Narrows Bridge in 1964. A connective tissue of pain points, from his grandfather to the present-day, plays a part in Fetner's biographical arc – after 30-plus years as a homebuilder himself – into a next chapter as a construction technology platform founder. The genesis of Soil Connect and the pain point go hand in hand.

He'd say, 'Fill is something you don't have when you need it, and, when you don't need it, you have it,'" Fetner tells us.

Once the iconic Verrazano bridge from Brooklyn was complete, Fetner's grandfather and father concentrated their construction business in Staten Island, which was relatively undeveloped and offered a blue-sky opportunity for builders.

I'm that kid who grew up on the job site with my grandpa and my father," recalls Fetner. "Always in the way, and never where I was supposed to be. That was me. I was always intrigued by the cranes, the excavators, and the dump trucks. That was me. I went to college. I have a degree in economics. I never did anything with it other than put the diploma on the wall, bent down, put my work boots on, and spent many years in the family, generational business. My DNA is a homebuilder."

Those formative years led to his starting his own building company in 1991, Jaco Builders, which leveraged Fetner's master-builder skillset to deliver many high-end custom residential properties Out East in Long Island. Mixing in some retail real estate development and construction, a little industrial, and some multifamily projects along the way, homebuilding was Fetner's primary focus, but his grandfather's nugget of wisdom about fill spun like a hamster-wheel in his brain the whole time. His father, too, repeated an aphorism that spun that hamster-wheel even faster in Cliff Fetner's mind.

He'd hang up the phone in the evening after trying to make a deal to buy or sell dirt, and he'd say, 'I don't know if I made a good or a bad dirt deal. All I know is that the dirt is moving tomorrow.'"

The asymmetry and opaqueness – being blocked from knowing whether a deal, selling or buying the removal or addition of dirt was either fairly-priced or a complete rip-off – rattled around in Fetner's mind for years.

A mercilessly frigid "bomb cyclone" made for a very bad moment to be excavating for a new residential project in the winter of 2018, but for Fetner, it was a light-bulb moment.

I had a big hole in the ground, and everything was frozen over," Fetner recalls. "Nobody was doing anything, but I had thousands and thousands of yards of dirt everywhere, and I had the foundation guy yelling at me in a language that I didn't understand, but I knew he wasn't saying anything nice. Roughly, he was telling me he couldn't get his men, tools, or equipment anywhere near the home site, and that I had to get rid of the dirt. So, I snapped back, 'It's winter. Nobody was doing anything. Nobody wanted the dirt. Nobody needed it. And yet, I have to get rid of it, right? And so how do we get rid of dirt? As seasoned veterans, we call everybody we know, and we try to figure it out. So, here it was in 2018, and we're still doing it like they did when they built the pyramids in Egypt. There had to be a better way. And so I had this aha moment, right? We take everyone who plays in the dirt and put them all in one place and one time, just like Airbnb and Zillow, apartments.com and eBay, and thousands of other marketplaces and platforms. You aggregate information and people, and if you're interested in the information, you go to the site."

Soil Connect, Fetner likes to say six years since its wintry birth as an enterprise model, is a dating app for dirt. He counts 22 different types of dirt, aggregates, rocks, mulch, millings, and recycled concrete.

Any materials you need to move and haul each and every day is what we have in our marketplace," Fetner quips. "Swipe right if you like what you see."

Soil Connect's user million-plus user data base network today supports construction writ large – commercial, industrial, institutional, and residential, etc. – with concentrations of homebuilders in Texas, Florida, Colorado, and the Pacific Northwest, not to mention 26,000 users "who play in the dirt market" within a 75 mile radius of Central Park in New York City. Fetner says the portfolio of clients today includes two national public homebuilders and a growing list of regional and single-market builders. But just how big a pain point, and how big a market is there for a dating app platform for dirt? And early business development exercise calculation takes a $1.5 trillion per year construction spending macro number and filters it done to an estimate of 5% of that number as total spending among all players in the industry who're paying to move dirt either in or out of their job site.

We backed into estimating a range of about $40 billion to $60 billion annually," Fetner says. It's an all-encompassing universe. It inclues home builders, developers, general contractors, drainage guys, the earth movers, the truckers, right, the asphalt guys, the foundation guys, the quarries, the sand pits. And when you get out of the box and start to think about who else needs and or wants dirt. Farmers. They need to fill in a ditch. They need to get rid of dirt. So, we have a tremendous amount of farmers in our database."

Fetner started the business with his son Daniel – a finance and investment whiz, and after bringing on Jonathan Alvarado as CEO earlier this year, Fetner's begun to pull back from the day-to-day, keeping a role as a Board member. The secret sauce, Fetner says, is bringing light and financial rationale for this expense in a project's budget, based on a validated market rate price for the material and/or the service. The real-world messiness and frustration – as Fetner's grandfather and father colorfully expressed – was in the great unknowing.

Soil Connect is giving the marketplace transparency into better understanding the risk profile of finding and moving the dirt," Fetner says. "And they love the analytics. By giving them data, they can now say, 'I'm going to be done by such and such a date, and deliver 100 of the 300 lots to that national home builder.' They love that certainty, and it has a financial business impact. Single-family builders who want to buy 100 lots or 200 lots from the land developers traditionally don't want that dirt risk, but by giving them transparency into the dirt world, they are now starting to rethink how much risk they are willing to take. If I'm giving them access to the information they've never had before, then I can mitigate whatever risk profile it can fall within. So there's a there's a whole different story here, though, John, about what we're doing and where we're going in terms of understanding dirt, risk mitigation. There's another whole level of technology coming online that will make the risk mitigation even less."

Mitigating timing risk—especially when bringing lots online—means performing more predictably and better. That sounds pretty good to every homebuilder right now, so it's quite a pain point to remove from the mix.

A 2018 bomb cyclone may deserve some credit, along with three-plus generations of ground-level solutions seeking.

ABOUT THE AUTHOR

John McManus

John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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John McManus

President and Founder

John McManus, founder and president of The Builder’s Daily, is an award-winning editorial, programming, and digital content strategist. TBD's purpose is a community capable of constant improvement.

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