Reaction Housing raises $1.5 million to make cheap, reusable disaster relief shelters by Erin Griffith @FortuneMagazine March 6, 2014, 3:39 PM EDT E-mail Tweet Facebook Google Plus Linkedin Share icons FORTUNE — In the midst of the partying, marketing, and mindless app launches of SXSW, an Austin startup that’s actually really revolutionary will be showing off early prototypes to investors and advisors. The startup is called Reaction Housing, and the product is called an “Exo Housing System.” It’s a shelter that’s inexpensive, reusable, portable, and “smart.” Designer Michael McDaniel conceived of the idea after Hurricane Katrina. He was surprised that the thousands of people displaced from their Louisiana homes were being evacuated 350 miles away in Houston, with garbage bags full of their most valuable possessions and sleeping on army cots at an indoor baseball field. It was neither secure nor comfortable. Eventually the refugees were given vouchers for hotels or RVs, which the government paid an average of $65,000 each for and were not reusable. (Some cost as much as $229,000, which is cheaper than a new house in many areas.) “They spent more than the Coast Guard’s entire budget on relief housing,” McDaniel says. As he researched the situation, he was surprised to find that two basic human needs — food and water — were handled almost redundantly buy NGOs, but shelter was in short supply. MORE: Bitcoin’s digital tip jar: Microtransactions reborn Meanwhile, in his day job at Frog Design, he’d designed a kiosk for the MD Anderson Cancer Center in Houston. Watching cancer patients react positively to the kiosk led to his lightbulb moment. After observing a patient, he says he realized that, “every aspect of her (visit) was orchestrated and designed, and she never knew it. She looked at her parents and was actually excited to go to a chemo treatment. She was like, ‘This is amazing!’ … That’s the power of design, to change people’s lives for the better.” So, in the wake of Katrina, he designed the Exo as a sort of rigid teepee, consisting of two parts: a base and a dome. The Exos are 80 square feet and sleep four adults. They weigh less than 400 lbs, so that four adults can lift them and set them up without machinery. They’re stackable, so that 28 can be transported on one semi-truck. They can be customized to attach multiple Exos together, and different base panels and internal fixtures can turn a unit into a kitchen or a bathroom. There is a software component, which gives the units “smart” features like digital door locks, and remote monitoring of temperature and fire detection. Best of all, they cost just $5,000 each, an amount the company arrived at by working with FEMA. The government’s disaster unit spends around that much per month for a housing voucher for a family of four. MORE: The bull market in vintage college pennants The Exo is certainly unique amid the startup world’s sea of look-alike social networking apps, payment processors, or data analytics solutions. If successful, it could completely change the way non-profits and governments respond to natural disasters. On the commercial side, it might even change the way festivals and events like Formula 1 races house their temporary populations, too, McDaniel says. It could also totally belly flop, like many ambitious startups. McDaniel points out that he tried to give this idea to the government on numerous occasions and was turned down. Besides, hardware, industrial design, and large-scale products are some of the most challenging areas for fledgling startups. But McDaniel believes Reaction Housing has all the right elements in place. In addition to ffVC, Reaction Housing has taken investment from Rothenberg Ventures, Riverwood Capital, MI Ventures, and angel investor Michael McCartney, bringing its total fundraise to $1.5 million. The company’s advisors include Doreen Lorenzo, president of hardware startup Quirky; Kip Thompson, a former VP at Dell; and Michel Wendell and Risto Kuulasmaa of Pivot Partners. McDaniel did industrial design at Fd2s, an agency, before joining Frog Design as a principal designer. But $1.5 million isn’t much capital for such a big idea. McDaniel says the capital is to lock in the company’s core team and line up manufacturing and a supply chain. In nine months to a year, the company will raise more funding to cover the costs of production. MORE: Who will occupy RadioShack’s retail desert? McDaniel isn’t worried about demand. Over the past 16 months, Reaction Housing has gotten inbound sales inquiries daily, from places like the United Nations High Council on Refugees and Rotary International, to commercial groups like oil and gas companies and festivals like Bonaroo or even South by Southwest. Last week, a woman called from a Rwandan orphanage — flooding had displaced 200 children. “We get calls like that all the time and it’s just heartbreaking because we’re not in production yet,” McDaniel says. Since production won’t start for another nine months, Reaction Housing plans to send prototypes of the Exos to displaced people around the world. For that, the company has launched an IndieGogo campaign, where every $10,000 raised will deliver a prototype Exo. The campaign will also serve as a pre-sale for individuals.