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Venture Capital is Betting Big on Construction Technology


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As the construction industry continues its technological renaissance, largely casting aside its technophobic reputation and embracing the digital revolution, the industry has become an attractive target for venture capital and tech investment dollars, where billions have come pouring in in recent years.

It’s a textbook case of the investment adage “buy low.” Construction has until recently been behind the technological curve relative to adjacent industries, which means there’s more room for those investments to grow than those made in an industry with a more established digital presence.

“Construction is one of the least digitized industries, so many startups are seizing the opportunity to build technology that would increase efficiency within this market,” Michael Wholey, an intelligence analyst for CB Insights told Curbed. “As a result, funding and deal activity in the construction technology space has been increasing steadily over the past few years.”

“Construction is one of the least digitized industries, so many startups are seizing the opportunity to build technology that would increase efficiency within this market."

“Steadily” might be a bit of an understatement here, as the amount of tech and specialty venture capital dollars making their way to construction has truly skyrocketed over the last decade. According to CB Insights data, 2008 saw just $4.5 million in global investment, spanning just two deals. Last year, investors pumped $882 million into the industry over 103 total deals, and by August 1 of this year, the construction industry has already snagged $1.38 billion across 61 deals.

Much of this investment is around efficiency, both in constructing modern, tech-heavy buildings laden with sensors and automation, collaboration software that helps workers communicate and do their jobs more efficiently, worksite monitoring, safety technology and more.

Construction is an industry ripe for digital disruption, and many companies have found efficiency gains by implementing the latest technologies. A recent McKinsey report identified areas of improvement and investment of particular interest, including field productivity and site-performance management, Curbed reports. McKinsey wrote that if technology can help construction bridge the productivity growth gap, it would add approximately $1.6 trillion to the industry’s output each year.

Much of the investment dollars are supporting startups working on a variety of proprietary technology with applications in construction, such as companies that make drones for site surveying, virtual reality tools and project management software.

"The construction sector is on the verge of major disruption as tech start-ups tackle head-on the industry's biggest pressure points," says Todd Burns, President, Project and Development Services with global commercial real estate professional services firm JLL. "These startups can provide technology that helps deliver projects faster, cheaper and with fewer resources than ever before, effectively addressing the existing challenges in the industry."

 We’ve even seen the formation of VC firms whose sole focus is the building industry, according to CrunchBase. Boston-based Four Score Capital deals strictly in real estate technology, San Francisco’s Brick & Mortar Ventures invests in startups developing hardware and software solutions for real estate, hospitality and construction, and Los Angeles-based Nativas Capital focuses on real estate and construction technology.

Billions of dollars worth of fresh capital being invested by companies whose core interests lie outside of construction might be just the push the industry needs to give certain technologies a second look, and for others to finally find widespread adoption, according to David Glynn, president and managing director of Glynn Capital Management.

“The construction industry has been historically very slow to adopt technology and has been very resistant to change,” Glynn said to CrunchBase. “To the extent that [some of the] emerging companies in the space can provide real value and ROI, we think you will start to see an acceleration of adoption of technology in the industry.”

“The construction industry has been historically very slow to adopt technology and has been very resistant to change."

All in all, outside investment in construction technology and startups creating platforms and tools to make the industry more efficient will likely be a good thing. It will expose more managers and firm owners to the technology’s potential impact on jobsite efficiency and safety. Projects will wrap up closer to on-schedule and on-budget, and mistakes made by relying on pen-and-paper or endless email threads will slow to a crawl. Once it’s proven definitively that increased reliance on technology can actually make the industry better, resisting that change becomes more difficult.

Construction is changing. The coming workforce generational shift will only accelerate the industry’s adoption of digital technologies, as younger workers arriving fresh on the scene are more comfortable with technology than many of the veterans. This surrender of sorts to the inevitable digital future has caught the attention of startups, investors, and even newly formed construction-focused VCs, who see real opportunity in construction’s future as a technological powerhouse.

If you liked this article, here are a few eBooks and webinars you may enjoy:

How Construction Technology is Saving Time, Money, and Jobs

Adapt Before You Fail: Embracing Technology in a Face to Face Industry

Technology Trends in 2017 that Will Transform the Way You Work

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