Manila-based Revolution Precrafted had what seemed like the trappings of a poster-boy startup – a charismatic founder, celebrity endorsements and the hallowed status of being the Philippines’ first unicorn.
But five years from inception, the company has yet to deliver on its promise of quick-to-build luxury homes in its home market, at least not at a rate that befits its towering valuation. Existing and external investors have also been hesitant to invest in the company during an unusually tiny fundraising round for what is supposed to be a billion-dollar business.
A unicorn’s tiny fundraising
Revolution burst onto the scene in 2015 with its grand vision of ultra-sleek and modern modular house designs, all of which would be prefabricated (prefab) homes designed by award-winning architects such as the late Zaha Hadid, Daniel Libeskind and Philip Johnson.
Its chief executive and founder was Robbie Antonio, a photogenic and eloquent man who hung out with Hollywood stars and hails from the family behind Philippines-listed Century Properties Group, Inc. Antonio told the South China Morning Post in 2018 that he wanted Revolution to be the “Ikea of homes,” creating residences that can be built in 60 to 90 days, instead of two years.
It was a dream that Antonio successfully pitched to investors. In October 2017, K2 Global, a Singapore-based venture capital firm, invested an undisclosed sum in the company, catapulting Revolution to stardom as the first tech unicorn out of the Philippines. (Disclosure: K2 Global was earlier an investor in DealStreetAsia. The VC firm exited this investment by selling its shares to Nikkei in April 2019.)
The halo did not last long. Sometime between 2017 and 2018, Revolution was back on the fundraising trail, approaching Southeast Asian venture capital (VC) firms such as Qiming Ventures and Openspace Ventures for funds.
In September 2018, Antonio told the audience at DealStreetAsia’s Asia PE-VC Summit that Revolution was considering raising $100 million in its Series C round the following year.
“We will probably do a Series C next year when we have thousands of homes installed and reach more market than where we are right now. That’s obviously part of the gameplan,” Antonio had said, hinting at the possibility of the firm hitting a $10-billion valuation mark in three to four years.
According to an email exchange seen by DealStreetAsia, Antonio was seeking as little as $1 million to $3 million at a $1.85 billion valuation for his business in 2017.
It is extremely rare for billion-dollar businesses to raise such small amounts given their presumed scale. At that investment size, a full equity deal of that nature would either give an investor a minuscule stake of just thousandths of a per cent in Revolution or imply that Antonio was taking a drastic haircut on the value of his own shares.
A prominent Indonesia-based VC said the firm did not respond to a fundraising pitch from Revolution in 2018 as unicorns would not be raising capital as low as $1 million.
“I can create a $1 company and ask someone to invest another $1 in my company and give him 0.00000000001% of shares. Hence I can be a billionaire on paper,” explained a partner at this VC firm.
Qiming Ventures and Openspace Ventures are understood to have rejected the offer. Both declined to comment or verify those figures.
K2 Global, which gave Revolution its unicorn status, is also understood to have declined to reinvest. According to an industry source, the VC firm had committed to a follow-on investment in 2018-19, but did not do so as it had ‘no visibility on the company.’
Revolution could not comment on the deal in time for publication.
One source close to Revolution’s past fundraising efforts told DealStreetAsia that Antonio retains significant control over the company. Its other shareholders include 500 Startups, which joined its $15.4 million Series A in early 2017, and Filipino angels such as Xurpas co-founder and business tycoon Nix Nolledo.
The source added that Revolution’s valuation was based on multiples of future sales on the contracts signed rather than previously delivered projects. That explained the rapid rise of Revolution’s valuations, which spiked with every contract that Antonio signed.
Revolution was understood to already be valued at $128 million during its seed round with early investors. This doubled to $256 million during its Series A, joined by 500 Startups in early 2017. When K2 Global joined in October 2017, the unicorn’s horn was already showing.
While K2 had valued Revolution based on its order book, its investment is learnt to have come with full ratchet downside protection, which meant that if Revolution were to raise a “down” round in the future, K2 would receive additional shares in the company.
It is not unusual for investors to base valuations on future revenue projections during a startup’s early years. But showing proof of execution is crucial if the startup needs to successfully raise more capital further down the line.
In March 2017, Revolution was reported by Tech in Asia to have booked $110 million in orders. After a flurry of deal announcements in 2018 in international markets ranging from the Middle East to the Caribbean, the company said it had bagged contracts worth over $7 billion.
In a 2018 interview with CNBC, Antonio said that he was only getting warmed up. “I’ve told my team I want to be in 25 different countries this year, 55 by next year, 85 in 2020 and possibly go public then.”
We reached out to several companies the Filipino firm announced deals with across the world, including Seven Tide in Dubai (a $3.2 billion deal for The World Islands), the KT Group in Myanmar (the $1.2 billion Okkyin project), Bahrain’s Property One Investment Company (a multi-million-dollar deal to supply residential villas) and BC Estudio in Spain (project to build 50 hotel villas in Catalonia).
None of the companies we reached out to responded to our queries on project status.
In its home market at least, Revolution does not appear to be building homes at the pace that Antonio was pushing for. Industry observers shared with DealStreetAsia that orders for its Philippine units have not been brisk. These include Flavorscapes at Lakeshore, in Pampanga province; Revolution Hills in Rizal province; and Batulao Artscapes in Batangas, which is being developed with Century Properties.
When DealStreetAsia visited the Philippine projects, the sites looked incomplete and unoccupied. This seemed to be at odds with Antonio’s comments about erecting prefabricated homes in months rather than years.
At Flavorscapes Lakeshore, a $750 million project that officially broke ground more than a year ago in November 2018, there seemed to be little progress made on construction. We managed to visit the site despite being redirected a couple of times – first by a security guard at the showrooms to a homeowners’ association, then by the association to the sales team, which did not pick up the phone.
The 140-hectare site was originally envisioned to be a sprawling complex of residential and commercial buildings, with the beautiful lake of Lakeshore Pampanga as the central focus of community activity. Flavorscapes was to be the world’s first livable food park, with roughly 14,000 homes to be built onsite.
Instead, we found rows of derelict, bare-faced modular structures and not a single construction worker in sight. People on site told us that Central Country Estate (CCEI), the developer of the project, recently stopped sending sand and gravel to location.
Banners revealed plans for three types of units, named Nest, Alcove and Spaces. Only Nest units seemed to have been built so far.
There were 39 units out of a projected total of 379 Nest homes scheduled for completion. A close inspection inside one of the homes showed gaps in the structure.
A former Revolution employee told DealStreetAsia that technology and cost limitations made it difficult to reach the prefab ideals that Antonio had been pitching.
“Robbie has always sold the image of prefab as something that can be easily assembled, like the ‘Simple’ home designed by Jean Nouvel. The assembly was completed in Paris in 48 hours,” the former employee said. “Those luxury pre-fab homes can be done, but not at Robbie’s price point.”
Not quite as planned
It is unclear if progress has been affected by slow construction, or possibly weak sales delaying project starts.
Former suppliers and employees told DealStreetAsia that Revolution was aggressive in driving down its costs by haggling. One supplier griped that payment was withheld on the premise of failing to deliver on time. Revolution would also try to barter by paying in kind in the form of homes, rather than in cash.
As a result, Revolution’s practices made it difficult for the company to maintain long relationships with suppliers and contractors. The sources added that it also affected the ability to uphold quality in the homes.
There are also questions about Antonio’s priorities. In May 2019, Antonio became the CEO and founder of Resident Holdings, which he describes in his Linkedin profile as the parent company of Revolution Precrafted and a host of other businesses including fintech, fashion and beauty retailing and medical and accounting services.
A presentation deck seen by DealStreetAsia showed that Resident Holdings has been pitching itself as an international dealer for a total of 26 Resident brands, including Revolution Precrafted, which remains its flagship product.
Whether Revolution is still the main focus, or whether it is now part of a new project, is unclear. DealStreetAsia has yet to receive responses from Revolution and Antonio on this matter.
This is a developing story.
Mars Mosqueda and Andi Haswidi contributed to this story.