His $20M Startup Failed. Now He’s Back With an AI Architect to Solve the Same Problem.

Nick Donahue, founder of the custom-home startup Atmos which raised , shut it down nine months ago. Instead of taking a break, he immediately launched another company to fix the exact same problem, but this time, he’s swapping human designers for . His new venture, Drafted, is an -driven software that generates residential floor plans in minutes, aiming to disrupt the costly and slow home design industry.

The First Attempt: The Rise and Fall of Atmos

Coming from a family in the construction business, Donahue was obsessed with why custom homes were so expensive and time-consuming. He founded Atmos, a Y Combinator alum, to streamline the process with technology. The model involved in-house designers working with clients while software handled the back-end.

By many metrics, it was a success. The company raised from investors like Khosla Ventures and Sam Altman, grew to , and hit in revenue, building . But Donahue described it as an "extremely operational business" that became a "glamorized architecture firm." Technology never fully replaced the humans. When the Federal Reserve began hiking interest rates, clients could no longer afford the homes they’d spent months designing, forcing Donahue to shut down.

The AI Pivot: Drafted's Lean Machine

Just five months old, Drafted is everything Atmos wasn't: no designers on staff, no operational complexity, just pure software. Users input their desired specs—bedrooms, square footage—and the generates five design options instantly.

Drafted has already raised a seed round at a post-money valuation from investors including Bill Clerico and Stripe's Patrick Collison. The pitch is to sit between expensive architects and inflexible online templates. A complete plan from Drafted costs between .

The Big Questions: Market and Moat

Key challenges remain. Of the new homes built in the U.S. each year, only are custom designed. Investor Bill Clerico argues this is a chicken-and-egg problem: make custom design cheap and fast enough, and the market will expand, much like Uber expanded the market for on-demand car rides beyond traditional taxis.

Then there's the defensibility question. What's to stop a major player from creating a similar product? Donahue points to brand as the moat, citing his friend David Holz, founder of Midjourney. Despite a flood of new competitors, Midjourney's users remain loyal. Donahue believes if Drafted moves fast enough, it can become the go-to brand for home design.