Often, industries that have great potential to be disrupted are also the most resistant to adopting bleeding-edge technology. While legacy sectors like transportation and energy have embraced new tech, innovation in the construction industry has been slow to take hold.
Even though many large construction firms manage internal R&D units, more than a third of employees say they’re reluctant to adopt new technology. “This is a structural problem of the industry, as there are fairly low margins and everything is project-based,” said Heinrich Gröller, a partner at Speedinvest. “It is difficult to find a project manager who is willing to take the risk to implement bleeding-edge tech on their project.”
All the investors we spoke to agreed that finding workers is one of the biggest challenges in the industry, but the pinch isn’t limited to job sites. Due to the Great Resignation and restrictions to immigration laws, “this labor shortage affects both blue-collar and white-collar labor,” said Sungjoon Cho, partner at D20 Capital. “We recently heard of a major construction company’s regional office that lost around 10% of their white collar workers last year alone to employees leaving the construction industry altogether!”
TechCrunch is widening the lens, looking for more, and more diverse investors to include in our surveys, where we poll top professionals about problems and challenges in their industry.
If you’re an investor and would like to participate in future surveys, fill out this form.
Even so, investors are backing startups bringing robotics, data management, automation and augmented reality into the construction process. With the industry representing about 6.3% of the U.S. GDP, the market opportunity is huge, especially as spending climbs — the U.S. construction industry saw spending reach an all-time high of $1.57 trillion last year, according to a recent Deloitte study.
The U.S. government wants to help boost innovation in this crucial sector, too. Its recently enacted $1.2 trillion Infrastructure Investment and Jobs Act includes only $100 million for digital construction technologies, but if new tech is used in public infrastructure projects, it could prove a boon for the industry.
To better understand the market forces driving this sector and learn about the opportunities they’re seeking, we spoke to five active investors:
- Nikitas Koutoupes, managing director, Insight Partners
- Heinrich Gröller, partner, Speedinvest
- Momei Qu, managing director, PSP Growth
- Suzanne Fletcher, venture partner, Prime Movers Lab
- Sungjoon Cho, general partner, D20 Capital
Nikitas Koutoupes, managing director, Insight Partners
What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?
We are excited about how the industry is shifting its mindset from simply digitizing workflows to transforming how projects get built using insights, automation and AI. Every important builder is exploring how these new technologies will drive productivity on the job site.
At this point, we’re seeing more interest in commercial projects. In large commercial projects, there are so many places where delays and other issues can pop up, so new technology providers can drive serious ROI by improving workflows.
Given the large scope and budgets of these projects, being more efficient can save a lot of money, and owners and general contractors (GCs) are willing to pay for innovative technology. What excites us about the timing now is, it seems GCs and owners are willing to adopt and pay like they haven’t before.
Where are you looking for opportunities in construction tech in Q3 2022?
We’re interested in investing across the entire construction lifecycle — from pre-construction tools like scheduling and bidding, to job site tools, including progress tracking and data and analytics to drive efficiency.
Given the flexibility of Insight’s platform, we’re able to partner across all stages — from seed to late-stage growth — so are looking to partner with interesting startups addressing the industry’s challenges at any stage in their growth journey.
“In large commercial projects, there are so many places where delays and other issues can pop up, so new technology providers can drive serious ROI by improving workflows.” Nikitas Koutoupes, MD, Insight Partners
Despite the current market conditions, we intend to stay quite active in Q3. We don’t think the long-term outlook on construction tech has changed and have several high-priority segments that we’re eager to make investments in.
For example, we haven’t yet partnered with any companies in robotics, procurement and finance, and labor management, but we’re seeing a lot of interesting early players emerge. We plan to stay true to our strategy and will continue to invest across a very wide range of stages.
How has this space changed since the pandemic began? How mature is the sector; are these still early days?
We’ve seen COVID as a tailwind for the construction tech industry. Due to the pandemic, many contech workers were unable to freely visit their job sites and realized they had less visibility than they’d like into what was happening onsite. For an industry that has historically been averse to tech, feeling this pain point was a real catalyst for adoption.
Across segments, we’ve seen field workers become more open to exploring digital platforms and to the ROI they can deliver to projects.
We think construction tech is still in its early innings. In the last few years, Procore and Autodesk have shown that the industry is ready to adopt software and capable of building big public tech outcomes, but there are still so many workflows left to be addressed. It’s an exciting time to be investing in construction tech.
A lot of this tech is focused on job sites, but given the need for data collection and analysis, what advances are you seeing in back-end technologies? Is there a killer app?
One of our portfolio companies, Versatile, is a great example of using job site data collection to drive actionable insights for GCs. Versatile is at its core a data science company, not just a data collection tool. Data collection from the perspective of the crane is Versatile’s wedge into getting structured data at a job site.
From there, they’re able to generate powerful insights into efficiency. So while there is a strong need for data collection, the real winners will be the companies that have a strong back end to provide actionable insights from all this data.
Which areas of the construction industry can tech help improve right now? Where do you see the biggest potential breakthroughs in the next five to 10 years?
We see a lot of companies in the data collection and analysis space. The market is very fragmented today, but we’re very excited about the potential of all of these systems to talk to each other and for one comprehensive suite of tools that can ingest data from all angles.
As these platforms consolidate in the next five to 10 years, we’re excited to see GCs using one single source of truth for their projects, which would greatly help track progress, efficiency insights, safety measures and more.
We’re also excited about the potential impact of cutting-edge robotics. Take layout, for example. Today, many project sites sketch out their layout using chalk and string — even for infrastructure projects that can span miles. Next-gen robotics companies are building robots to automatically print out precise models on the project floor. They’re meaningfully more accurate than the human-drawn layouts and are much faster.
This is just one example, but it’s illustrative of the way that new technology will dramatically change the way we build for the better.
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
We think a big part of why the industry is thought of as reluctant to adopt technology is because some construction tech tools have not been designed to integrate into existing construction workflows. Construction teams are first and foremost focused on project execution, and if a new tool doesn’t immediately help them execute and drive ROI, they have little bandwidth to explore it.
The other challenge is that most solutions have to be incorporated into the broader construction process. You can’t have half the team using one system and the rest using something else. The customer has to see how the change management will be seamless.
How easily tools integrate into existing construction workflows, and how quickly they can drive quantifiable ROI on a project (whether through time savings or cost savings) are two of the key things we look for in contech startups.
The $1 trillion Infrastructure Investment and Jobs Act the U.S. passed this year is expected to be a shot in the arm for construction tech. How large a role do you think governments will play in promoting construction tech via procurement, incentives, grants, subsidies, etc.?
We are hopeful that more public funding will come with mandates to use software to reduce project risk and improve job site safety. There is a direct corollary with Obamacare driving adoption on medical records.
That said, we believe buy-in on the field is essential, even if new tools are being procured by the office. It is difficult to push solutions on people, whether that’s a GC pushing it onto subs, or owners and government pushing it onto GCs — you must be able to show real value.
Are lower labor costs making construction-related automation a harder sell in some parts of the world? Conversely, in areas like the U.S., where there have been long-term labor shortages, where do you see this tech lowering costs and speeding up project timelines?
A lot of the technology is about helping keep labor coordinated, productive and on track more than its about replacing labor shortages. Even in markets with low cost of labor, the costs of mistakes, rework and delays are all material enough that contractors care about using technology to build correctly the first time.
That said, labor shortages can be a compelling reason for customers to procure new solutions, and we see a lot of new tech companies pitch the labor shortages as a positive tailwind.
How do you advise portfolio companies to approach potential clients who don’t see an urgent need to modernize?
The construction industry is skeptical of outsiders coming in to tell them they need to change, but they also understand they have to change to keep up with competition.
We advise our companies to make sure they are showing up as true partners to the industry and emphasize how their solutions can bring reliable and demonstrable ROI. A lot of our companies find success through deep partnerships with their early pilot customers — they’ll work closely with a large GC to design a solution that directly meets the needs of the customer, and then once proven, can work toward broader rollouts (both within their pilot customers’ projects and outside).
We’ve seen this “land and expand” approach across a number of portfolio companies and prospective companies.
When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?The biggest green flag we look for is exceptional customer feedback. We believe significant endorsement from customers and users is a better leading indicator than typical venture metrics for early-stage construction startups, particularly in light of the industry’s well-known hesitance to adopt technology.
In terms of founders, we have backed teams with deep construction experience and teams who came to the industry with tech backgrounds. Regardless of the founder’s personal background in construction, we find it is important that the leadership team has someone with a deep understanding of construction.
The best construction software companies are great at blending people from the industry who come with deep domain-specific expertise and can gain trust fast with software and SaaS experts.
Given the nature of the construction industry, the lowest bidder always retains an advantage. Are there any differences between the way you advise your portfolio companies to approach government customers versus clients in the private sector?
Our construction tech portfolio companies are not currently focused on serving government clients.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
We’re eager to talk to any and all teams working on problems in construction tech. If that’s you, please reach out directly to our contech focused team — Jake Horwitz (jhorwitz@insightpartners.com) and Amelia Miller (amiller@insightpartners.com).
Heinrich Gröller, partner, Speedinvest
What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?
The market is currently shifting from a buyer’s market to a seller’s market, and it seems to be a permanent shift due to a shortage of not only raw materials but also labor. This will lead to entirely new tech solutions that cope with such market changes, be it marketplaces, logistics platforms, etc.
In parallel, it puts a lot more pressure on the margins for construction firms, pushing them to rely even more on tech tools that facilitate efficiency and cost reductions. In DACH, specifically, the focus will shift to infrastructure, as there is a lot to be refurbished and replaced.
Where are you looking for opportunities in construction tech in Q3 2022?
We are seeing a lot of potential in marketplace solutions as well as operational efficiency tools, be it supportive analytics or new ways of building, such as prefab or module construction.
How has this space changed since the pandemic began? How mature is the sector; are these still early days?
We are still in the very early days in terms of technology adoption in the field. This is due to several reasons: a highly fragmented market, a lot of interfaces between players, low-margin business, etc.
The pandemic forced many to think about digitization in the industry, since suddenly many could not be present physically at the site. It is a bit too early to tell if this will be a lasting change.
A lot of this tech is focused on job sites, but given the need for data collection and analysis, what advances are you seeing in back-end technologies? Is there a killer app?
Given the broad range of topics that still need to be covered, I do not see a killer app arising. There are a lot of solutions for various use cases out there. That poses an additional problem to construction companies due to the high complexity, so I think we will see integrators of those solutions arising to offer full-stack solutions.
Which areas of the construction industry can tech help improve right now? Where do you see the biggest potential breakthroughs in the next five to 10 years?
The biggest breakthrough will continue to be the broad adoption of building information modeling (BIM) in the planning and execution of projects, as this will provide the necessary data for multiple tech solutions to plug in.
We have been talking about this for a decade, but I think it will finally happen — at least on bigger construction sites — in the next three to five years.
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
This is a structural problem of the industry, as there are fairly low margins and everything is project based. It is difficult to find a project manager who is willing to take the risk to implement bleeding-edge tech on their project. There is a lot to lose and not much to gain on a personal level. That’s why it’s usually only the big construction companies that are able to deploy bleeding-edge tech with a top-down approach.
The $1 trillion Infrastructure Investment and Jobs Act the U.S. passed this year is expected to be a shot in the arm for construction tech. How large a role do you think governments will play in promoting construction tech via procurement, incentives, grants, subsidies, etc.?
Governments, not only in the U.S. but also in e.g., Germany, will play a huge role.
- There is a massive backlog in infrastructure investments that now need to be pushed forward, which will trigger massive investments.
- There is a clear tendency to make BIM compulsory for public construction projects.
- There will be continued and growing pressure from governments to measure and minimize environmental impact and carbon footprint going forward, be it with recycling quotas or carbon emission targets.
All of the above will create new tech solutions and enable many existing ones to finally take off.
Are lower labor costs making construction-related automation a harder sell in some parts of the world? Conversely, in areas like the U.S., where there have been long-term labor shortages, where do you see this tech lowering costs and speeding up project timelines?
The labor shortage is now overtaking labor costs as the most pressing problem facing the construction industry in all markets. That’s why automation and efficiency gains are more relevant than ever, as the shortage will persist.
There is already a wide variety of automation solutions on the market, like robot scaffolding (Kewazo) or 3D printing (Icon, Cobod, AIBuild). But as of now, the main driver of efficiency improvements in construction still lies in the automation of management and support processes with production management tools (Procore, PlanRadar) supported by sensors and (visual-)analytics tools to track progress on site.
How do you advise portfolio companies to approach potential clients who don’t see an urgent need to modernize?
There are a few key elements for a strong GTM strategy. You need to be able to show a clear and immediate ROI. In addition, it helps to augment usability (UI/UX) for the user — be it the worker, planner or project manager — in order to create a pull from operations. It’s also very helpful if the new tool fits in the current workflow and does not require a complete shift to new ways of working for the user.
When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?
While it’s not required, it’s really beneficial to have some hands-on construction experience in the team. The construction industry is still largely driven by personal relationships and trust, so it is useful to speak the same language as your customer.
For us, it is most important that we get clear feedback from our construction network that the startup solves a tangible pain point they are willing to pay for.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you (feel free to include your contact details)?
We request founders submit their pitch on our website so our investors can review the company before setting up a call. Once we’re on the phone, I always suggest that founders be themselves and that they do not try to hide blind spots in their strategy. No seed startup knows everything. It’s more important to address and discuss problem areas than to try and sweep them under the carpet.
Momei Qu, managing director, PSP Growth
What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?
We are excited by technology that provides real-time visibility and analytics on the job site. There are a lot of great design and planning tools, yet over 80% of projects are delayed, and not many solutions can accurately track progress until it’s too late.
That is why we invested in OpenSpace, which automatically measures the work completed and shares that real-time information, online, with all stakeholders. Making this source of truth accessible anytime, anywhere has the ability to cut down on rework, better utilize labor, unlock faster payments and prevent costly delays.
We also think there are exciting developments completely reimagining the way things are built: creating new, more climate-friendly materials, 3D printing components, recutting/reusing space, robotics and many more.
Where are you looking for opportunities in construction tech in Q3 2022?
Materials and labor. Many materials, equipment and parts are over-ordered or thrown away. In an increasingly ESG-conscious world, there should be better ways of tracking and utilizing what you already have. The issue with labor is an ongoing but worsening problem in construction. Solutions providing a better mousetrap for recruiting, managing, training or automating are all interesting.
How has this space changed since the pandemic began? How mature is the sector; are these still early days?
The pandemic has definitely accelerated technology adoption in construction. Two years ago, many people would never have thought remote work can be applied to the construction worker, arguably one of the most physical jobs out there. But with advances in visibility, communication and workflow solutions, the industry is collaborating from all over the world, often in a hybrid fashion.
Yet, I’d say the sector as a whole is still in its early innings, and that combination means there is still plenty of value for companies and investors to capture.
A lot of this tech is focused on job sites, but given the need for data collection and analysis, what advances are you seeing in back-end technologies? Is there a killer app?’
We don’t think those are mutually exclusive, and as mentioned before, most of the cutting-edge technology is around data collection at job sites. In terms of back-end technology, we are seeing increasing adoption of Procore and Autodesk, which has been good for elevating the overall tech proficiency of the industry.
Which areas of the construction industry can tech help improve right now? Where do you see the biggest potential breakthroughs in the next five to 10 years?
Near term, we think construction tech can continue benefiting from and adopting better versions of analytical, workflow and payment tools — there’s plenty of low-hanging fruit. In the long run (five to 10 years), there will be game-changing innovations around new materials, automation techniques and robotics that could fundamentally change how things are built and create a better, safer environment for those in the industry, which will hopefully also help with labor shortage. I often look out my window at construction sites and think: “Humans should not be doing that.”
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
I think it’s a stakeholder problem. What owners want may be different than what GCs, subs, architects or lenders want. Technology that tries to cater to them all may struggle with a killer use case, while those who target one of those parties may struggle with scale and willingness to pay. When you have a solution that all (or many) stakeholders love, you get something special and a flywheel effect.
The $1 trillion Infrastructure Investment and Jobs Act the U.S. passed this year is expected to be a shot in the arm for construction tech. How large a role do you think governments will play in promoting construction tech via procurement, incentives, grants, subsidies, etc.?
I think it’ll play a large role in accelerating tech adoption. Our founder and chairman, Penny Pritzker, spent much of her time as former Secretary of Commerce on digitization initiatives, because they are so critical to our country’s advancement and competitiveness and have the ability to transform industries. We were pleased to see this act pass and have been advising entrepreneurs to position themselves to capitalize on it.
Are lower labor costs making construction-related automation a harder sell in some parts of the world? Conversely, in areas like the U.S., where there have been long-term labor shortages, where do you see this tech lowering costs and speeding up project timelines?
As with many things, there are puts and takes. There’s certainly urgency in the U.S. to explore solutions that could help with labor shortages, but sales and implementation cycles can be long due to the number of constituents involved.
On the other hand, we’ve seen that in international markets where decision-making is more centralized, the adoption process is more streamlined once they see the ROI.
How do you advise portfolio companies to approach potential clients who don’t see an urgent need to modernize?
If you are confident that they will love it once they try it, make it easy for them to say yes. Make sure your solution minimizes disruptions to their existing workflow and offer a trial period.
That said, some groups are naturally more conservative and behind the curve in terms of technology adoption. In those cases, early-stage entrepreneurs may be better off first gaining traction/track record with customers who understand the value of tech before approaching the “laggards,” who will most certainly ask, “Who else is using this?”
When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?
Building a great business in construction tech is hard. We generally focus on SaaS businesses and look for teams who have a balance of industry expertise and experience scaling software companies. If the founders don’t come from construction, we would look at their ability to attract others on the executive team who do come from industry.
On the other hand, a founder who saw a pain point firsthand as a GC and decided to build a product to address it will need support for building a tech business.
Given the nature of the construction industry, the lowest bidder always retains an advantage. Are there any differences between the way you advise your portfolio companies to approach government customers versus clients in the private sector?
For government as well as large private-sector customers, the sales cycles can be very long. That’s not a reason to not pursue them, because the winning contracts tend to be large and rewarding, but the companies do need to understand the implications. For example, you need to have enough cash to withstand potential delays in revenue, and you may need to balance it by pursuing a few smaller customers to gain a few quicker wins, who can then serve as reference customers.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
Email me at mqu@pspcapital.com or find me at a construction tech conference or event!
A founder should be able to articulate why his or her company has an “authentic right to win.” Most ideas are not new, but what is it about your team, operating plan, network or early traction that gives you an unfair advantage and lays the foundation for you to outcompete others in the space? We also use this lens when pitching entrepreneurs on why PSP is the right partner.
Is there anything we didn’t ask about that you want to comment on?
This is a great time to be an entrepreneur in construction tech! Many organizations who were traditionally laggards in technology adoption have started to embrace tech/hybrid work/efficiency during the pandemic. There are still so many problems to solve (labor shortage, housing crisis, carbon emissions, productivity), with plenty of white space to create and capitalize on value.
Suzanne Fletcher, venture partner, Prime Movers Lab
What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?
We saw a huge problem that needed to be solved with the almost 7 million single-family home shortage that currently exists in the U.S. housing market. That is why we invested in 3D home manufacturer Diamond Age. Diamond Age is building a suite of 26 end-of-arm robotic tools to offset 55% of the manual labor required to build a new home, reducing the construction cycle time from about nine months to 30 days.
Where are you looking for opportunities in construction tech in Q3 2022?
We’re looking more broadly for manufacturing breakthroughs that could revolutionize the construction industry.
How has this space changed since the pandemic began? How mature is the sector; are these still early days?
How we live and work has been totally impacted by the pandemic. It is an exciting time to reimagine space and its uses. Families of the future are going to use homes in vastly different ways — for many people, your home is now also your office, your school, your virtual doctor’s office. Restaurants, office buildings and retail — we see interesting construction tech applications in each of these categories.
Which areas of the construction industry can tech help improve right now? Where do you see the biggest potential breakthroughs in the next five to 10 years?
I’m interested in finding new breakthroughs to help builders quickly construct homes that are more affordable and environmentally sustainable. There is an acute need for single-family homes in the “attainable” price range (often $250,000-$300,000 on the outskirts of metro regions).
I am excited about startups like Diamond Age, a full-stack robotics company that makes 3D-printed houses.
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
You’re starting to see some innovative builders adopt emerging tech to solve the housing shortage problem. Century Communities signed an agreement with Diamond Age to build 72 homes in the Phoenix metro area this year. This represents a milestone for both companies, kicking off the first time Century Communities will use 3D printing to construct new homes.
The $1 trillion Infrastructure Investment and Jobs Act the U.S. passed this year is expected to be a shot in the arm for construction tech. How large a role do you think governments will play in promoting construction tech via procurement, incentives, grants, subsidies, etc.?
Most of the IIJA funding is for repairing crumbling roads, bridges and airports. I don’t see as much of that funding going into R&D. There is no shortage of projects for that funding. Some of the funding is unique because of its focus on climate change’s pending impact. More than $50 billion is designated for projects that protect against droughts, heat, floods and wildfires.
The fund I advise invested in ocean infrastructure startup Oceanix to help coastal communities prepare for rising sea levels. We could see some interesting technology be leveraged to solve these growing problems for homes along the wildland-urban interface and coastal communities.
I think technology breakthroughs are more likely than government action to address the affordable housing crisis in this country. As the average age for first-time homebuyers moves from the mid-20s to mid-30s, this has downward impacts on the rental market and personal wealth creation. Helping the next generation of homebuyers get into their first house faster helps the entire economy.
When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?
Some of the most interesting founders are coming from outside the construction industry. They have backgrounds in robotics or automation. I’m absolutely open to backing a repeat founder from another sector who sees an opportunity in the construction industry.
How do you prefer to receive pitches? What’s the most important thing a founder should know before they get on a call with you?
I love to get referrals from one of our technical advisers or someone in my network because that adds a level of credibility. If I know one of our advisers is interested or excited about a company, I’m far more likely to take a look.
Sungjoon Cho, general partner, D20 Capital
What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?
The most exciting development in construction tech is the rapid proliferation of digital tools in the last five years to the point where there is now nearly unanimous consent amongst builders regarding the importance of technology in the industry. The construction tech sector is still young enough that having broad buy-in from stakeholders is indeed an exciting development. Just in the last five years, we have seen most major general contractors set up centralized innovation offices and create executive titles such as “chief digital officer” and “VP of innovation.”
As the construction industry is still in the early innings of the digital transformation journey, the largest opportunities are still in data collection and progress tracking. Companies like Procore and Plangrid paved the way in normalizing digital tools on the construction site. Now companies like StructionSite (a D20 Capital portfolio company) and Versatile are enabling frequent, high-quality data collection and leveraging the data to provide actionable insights to builders.
Where are you looking for opportunities in construction tech in Q3 2022?
We are excited about the usage of robotics in construction. I do think there are challenges in scaling robotics operations on construction sites. But there is, and will be, labor shortage in the industry, and there are many tasks for which robotics presents a safer and more efficient solution, thus making it inevitable that robots will play an important role in the future of construction.
How has this space changed since the pandemic began? How mature is the sector; are these still early days?
One important development in construction in the U.S. is the labor shortage created by a combination of the “Great Resignation,” along with recent immigration policies. This labor shortage affects both blue-collar and white-collar labor.
We recently heard a major construction company’s regional office lost around 10% of their white-collar workers last year alone to employees leaving the construction industry altogether! This directly hampers construction companies’ ability to bid for new projects, which can cause broad downstream consequences, starting with increasing the cost of construction across all project types.
The usage of technology will be critical to counterbalance labor shortages. Software tools are needed to increase efficiency, transparency and accountability. Robotics are needed to automate dangerous and repetitive tasks. And creative solutions are needed to ensure construction projects have access to the right talent at the right time.
Our portfolio company, LinkedField, is working on a platform to provide remote white-collar services to construction companies. Although the concept of remote work is still a novel idea in the construction industry, we believe that opening up certain jobs to remote talent will open the door to increased efficiency and a broader talent pool — as we have seen in many other industries.
A lot of this tech is focused on job sites, but given the need for data collection and analysis, what advances are you seeing in back-end technologies? Is there a killer app?
The killer app today is automated progress tracking. Although a construction site is very complicated with many stakeholders and countless dependencies, it’s very difficult today to track what work has been completed and where delays may be happening. Consequences include budget overruns, expensive delays and stakeholder disputes, which erode trust and eat away at profits.
The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem or a product-market fit problem?
Construction is a sector where “move fast and break things” is a strategy that does not apply. There are extreme consequences for a new technology “breaking things,” and so the conservative approach to adopting new technologies makes sense. However, large construction companies often have central innovation teams that test new technologies and champion the adoption of new technologies.
We are seeing the pace of new technology adoption increase rapidly, but due to the conservative nature of the construction sector, a characteristic of construction tech is low initial ACV (average contract value) with strong NRR (net revenue retention) as customers deploy the technology on a handful of projects and expand usage as the technology has a chance to prove itself.
When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?
I believe that due to the relatively nascent stage of the construction tech sector, this is an industry where industry experience is more important for founding teams than other industries. There are very high stakes in adopting new methods to build our buildings and infrastructure, and deep industry experience within the founding team is needed to push the pace of innovation while adhering to the rules and regulations of the industry.