The Ultimate 2021 Guide to Building Construction Technology Startup

31 min readJan 28, 2021

It’s already 2021 and the construction industry is still underperforming with its lagging productivity growth, low customer satisfaction and minimal profitability. It’s also merely innovating to change those metrics. For anyone willing to tackle this longtime status quo by starting an entrepreneurial journey, I’ve prepared the guide below.

This article is an easy-to-digest 30-minute read distilled from 20+ hours of videos and 50+ publications about construction tech & venture capital. The initial idea and core knowledge for this article were taken from the CanBIM 2020 Fall Summit: Building the Innovation Economy hosting the top contech investors and founders. However, I decided to further investigate this space and back it up with additional research. All resources that I used for that are attached at the end in the easily readable table. Please enjoy!

STUDY BACKGROUND

The idea to bring construction, technology and venture capital closer was at the back of my mind for some time already, maybe even longer than it should be without any action taken. However, I was probably more focused on getting my hands dirty and implementing digital technologies in construction than sharing the contech knowledge to a broader audience. My view drastically changed while seeing from the inside how the $12+ trillion industry was struggling to adapt to the NEW COVID-19 NORMAL and possibly to the NEW FUTURE that lies ahead.

Just until recently, experts agreed that successful innovation in construction should be coming from within the industry, preferably bottom-up and without much external pressure. The reality switched quickly with the worldwide pandemic taking over the globe. It forced everyone to get rid of their long-time resistance to change since, in a matter of days, technology became the inevitable driver for business continuity.

This got me thinking that in current circumstances, it would be ignorant to leave this forced innovation impulse alone. Construction got to the verge of disruption and contech investments are about to soar soon. Because of that, I decided to help with releasing the internal potential that has been hidden for so long. To do so, I’ve decided to start this long-term project aimed at bringing Venture Capital and Construction Technology. The project focused on fixing construction using both: available and yet-to-be-discovered technology. This is the first step of this journey that I believe will result in making our construction sites better places.

CONTECH DYNAMICS

Characteristics of construction

No matter how hard you try, you’re not able to escape construction products in your daily life. This particular industry erects buildings and infrastructure that shapes our lives: homes, offices, roads, water plants, cinemas and many more. It’s almost certain that when reading this article you are surrounded by something that was built by a construction worker.

And construction seems to be a pretty nice chunk of cake to put your hands on — it’s the largest economic ecosystem responsible for 13% global GDP, $11 trillion added value and 1.5$ trillion in profits. If you already calculated the 0.001% that your startup can take over from 11$ trillion mentioned - don’t get too excited, it won’t be that easy!

Savvy domain experts, likely have a different point of view on our built world. They know that construction:

is extremely capital intensive and slow,
tends to be particularly vulnerable to economic cycles,
is resilient to change and barely digitized.

On top of that, from the venture perspective:

Typical cycles in technology development are much shorter than cycles that construction is used to (12+ months at least).
Construction’s R&D spendings of around 0.5% are significantly lower than the average of 3% for the majority of peer industries.
Construction has an extremely low level of innovation pace.
Despite the presence of significant risk, the average EBIT of a construction company is around 5%.

Those well-entrenched obstacles can effectively stop your disruptive contech business. However, when looking on the bright side, the generational shift is coming. Currently, more and more young people are coming into construction and getting to decision making positions to make the change happen.

The most popular contech venture path

What brought my attention is that in contech, real innovation seems to have a very specific development path. The spectrum of success stories is very diverse but two scenarios remain much more common than others:

Products built as spin-offs from companies offering industry services
Products built around the specific problem instead of technology

I will specifically focus on the first approach since the latter is quite common among technology startups.

There is a good explanation of why so many successful startups in the contech space were developed from AEC service-providing companies. As mentioned before, development cycles in construction are significantly longer than tech development cycles and procurement cycles follow the same pattern. Within those market rules, proving the business value of your product may take longer than in other industries. Moreover, due to the industry characteristics, your hi-tech product is aimed at large players who purchase less often but with a larger budget. In such circumstances, having a steady income from your services gives you the comfort of keeping your product development undisturbed and highly focused on the result.

Also, services are your direct connection to the customer’s needs and feedback, and understanding the customer’s problems is likely the most important part of building a startup.

And finally, a huge base of sales prospects in the form of existing clients is a massive advantage in the early stages of your product.

This is why many contech entrepreneurs have followed this recurring path:

Employment contract at industry player.
Founding a company providing services around AEC.
Spinning off a tech product for the industry.

But I would not recommend following this path at all cost. As mentioned at the beginning, the spectrum of success stories is very diverse. In the end, it’s up to you to take your strengths and limitations into consideration and to decide which path to follow.

STARTING THE VENTURE

There is no working recipe for success but there are some well-tested patterns that can increase your success rate in the startup game. I will go through them below while sticking to the chronological order as much as possible.

Finding the right problem

“From an investor perspective, the first idea is not the idea that you get to.”- Shawn Hill, Partner at Moderne Ventures

Defining the problem is probably the hardest part of figuring out what your business is gonna be but there is particularly one, very effective and proven framework in place. As the most popular lean startup methodology recommends:

Talk to your customer before building your product.

Go talk to 100 customers and have 100 in-depth interviews. Talking to people seems to be by far the way to find the pain points of your customers-to-be. This is especially important in the industry that is constantly understaffed and lacks resources, thus returns from implemented innovation should be visible as fast as possible.

An awesome example of lean startup methodology was presented by Lauren Lake from Bridgit, contech company that grew to 55 employees and 21$ mln raised from VCs:

Lauren and her co-founder Mallorie Brodie noticed that the lack of technology in construction causes many setbacks for the industry. But instead of building a product directly on top of this statement, they decided to start something that they called Crane Hunting. That was basically driving around and looking for cranes that indicated a construction site with engineers to talk to, mostly about their biggest pain points, frustrations, and impediments of using technology for particular tasks. By deciding on Crane Hunting, Lauren and Mallorie kept their minds open and didn’t fall in love with their own ideas. Nor they tried to prove or to look for confirmations of their first idea at all cost. Crane Hunting was in fact deep research of end-users’ needs and resulted in multiple ideas for the product. Finally, after 500+ interviews, Bridgit launched a simple and easy to use mobile app for the large-scale problem of punchlists. That was the right take-off for a company that almost 8 years after became one of the largest players in their space.

As Bridgit’s story shows, intensive research of end-user needs seems to be a very effective way of finding the right problem to solve.

When doing your research, try to make it as wide as possible since there is nothing worse than building the product on top of a single customer which is a horrible strategy for selling it to somebody else.

And more importantly, remember that you should not chase solving all problems at once although desire might be large. The construction industry is too complicated, too many interdependencies are coming in and it is not feasible for a single startup to solve everything.

If you’re struggling to find your niche, I highly recommend taking the MIT Entrepreneurship 101 course available on edX.

Incentives

Incentives are everything.* — Naval Ravikant

Your motivation for founding the company may be almost anything, you may want to:

change the industry and its status quo,
bring autonomy and flexibility into your life,
remodel your 9-to-5 work life,
challenge yourself,
feel the sense of achievement,
raise your living standard and create wealth.

The truth is that almost any incentive is good, as long as it is strong enough to support you throughout the hardships of building the company. So it’s not the type of incentives you have that matter but rather the strength of it and your level of conviction, your determination to succeed.

And when you have your incentives figured out: JUST DO IT. There is nothing better to validate your idea than trying it out.

*taken from “Incentives are a superpower” made by Charlie Munger, an investor and partner of Warren Buffett at Berkshire Hathaway.

Founding team & industry experience

Founders are the core of every startup but before getting to building your founding team, you have to decide if you really need a co-founder. Although there are multiple articles on why founding a startup on your own is a horrible idea, there is also data stating the opposite. What convinced me to the former is Paul Graham’s list of the most common reasons why startups fail. Among those 18 things, a single founder happened to be the first one mentioned. Building a company is an extremely stressful and hard thing to do. Sharing those struggles with someone speaking the same tongues might be a true relief.

If you decide to join forces with anyone, you might want to know that relationship between founders is like being married. This is probably the most known cliche of startup founding, but also being very true, even those relationship phases correspond to each other.

So if you think of getting married, it’s a highly important decision who exactly you do marry. In around 20% of startups founded by YCombinator one of the founder have had to leave, very often due to conflicts between the team. And many disputes could’ve been avoided if founders had been more careful who they start their company with.

So how to describe your perfect other half?

Investors seem to have the best perspective on spotting the successful founding team. This is why they look for smart people who focus on the right problem. They also believe that founders’ skills should be somehow complementary. And finally, founding teams should be build to execute since:

“Vision without execution is just hallucination.” Thomas Edison

But it’s not necessarily only a skill that you should pay attention to. Try to look into the character of the person too. Verify the values that this person holds and if you are on the same page in the type of company that you want to build. Thinking of those areas early enough will get you closer to building a long-lasting relationship with your co-founders. To put it into perspective, I recommend following the Naval’s approach:

“If you can’t see yourself working with someone for life,
don’t work with them for a day.”

Should you or your co-founder have the industry expertise?

During the CanBIM’s Fall Summit, the majority of VCs described a domain experience as a distinctive advantage which they definitely look for in the founding team. Industry veterans understand and empathize with the end-user better. They also understand why particular problems occur and can be critical about go-to-market strategy while knowing the buyer’s profile and how to reach them.

Although you should be worried if your founding team lacks the industry experience, there are other ways to acquire those skills from outside. The most popular one is getting the right advisors on board. As long as you have those people close to you, the type of professional relationship may not really matter. However, having a co-founder with industry experience might be a game-changer in this space.

Hiring & retaining early employees (& advisors)

The key to the success of any startup or a company is having a diverse set of perspectives at the table, provided by your employees or advisors. This is especially relevant to early-stage companies where attracting and then retaining the right people is crucial for survival and success. An effective hiring process, especially referred to early employees, might be a hard nut to crack but it can become smooth when having the right set of guidelines in place.

Tightening your employee profile

No matter what your startup works on, the first step of building your team is determining the most important roles to fill and defining personas associated with those roles. First hires should be coming directly from your strategy. Whether you need to increase your sales or speed up the product development, your plan for new roles should be the result of company targets crossed against the founding team structure and skills. This is you who is looking for talents so make your hiring as tight as possible- be very direct with the profile of people that will take your business to the next level while being successful in their role.

Competing for highly skilled professionals

Young startups are usually unknown to potential candidates and perceived as a high-risk opportunity. Those unrecognized companies have to compete for talents with the largest tech players. Thus it’s important to have a well-prepared Employee Value Proposition to attract the top talents on the market.

This can be accomplished by creating an environment where people want to work- building a proper company culture. Free sodas and nice office space are not enough to not make a great company. You want to get to the point where people say: “I really like working there, I like the people”. Set the right values from the start. Ownership, openness, integrity, simplicity, optimism- those are just a few from many that a successful startup might pursue. Your company culture reflects your vision of the company so build it wisely and don’t hesitate to elaborate on your values. Support your ideas with examples and company stories just like the leading technology companies do! Having that in mind you would like to sustain your culture from day one of orientation by showing people how you work together and to cultivate your values.

Also working on challenging R&D projects is yet another hugely important part of your Employee Value Proposition. Many highly skilled and creative IT professionals love to pursue challenges instead of stability and they look for a certain degree of freedom in their work, those people will get your company on another level. Make sure you understand their needs and present opportunities that will fulfill their dream.

Finally, don’t forget where you operate- construction might be a hostile environment for young professionals. Hopefully not for long because this is changing fast. But as long as it is, it’s really easy for people to say: “I’m done with it, I’m done fighting the system and I’m gonna be a game developer and leave AEC.”. In this case, instead of focusing on being industry-friendly only, you should make your AEC company employee-friendly in the first place. And make sure that your employees understand that.

Remote hiring and working

With remote work becoming the new normal, another important hiring factor emerged- your openness to global talent worldwide.

There will be teams in your company where 100% remote is totally sustainable and even beneficial- think of areas like sales, marketing or customer success. However, there might be teams like Product where 100% remote work is arguable but not impossible (unless you develop hardware where being remote is almost impossible).

If you’re just starting with remote work, think about something easy. Sales positions in countries that you want to scale up in is a great way to take off. In the meantime, don’t forget about the proper remote work toolkit that will enable your smooth remote transformation.

Customer voice

Customer feedback is the key to leading your startup in the right direction and in this sector in particular you’re gonna have a lot of problems starting if you don’t listen to your users. Moreover, customers not only provide the feedback, they are the true litmus test for your product- providing the most sincere and direct market validation.

Craig “Tooey” Courtemanche, the Procore founder, had found out the power of customer validation when site staff told him that his beta product is the “future of construction”. Although it took Procore 7 years and breakthrough technology advancements to find the product-market fit and scale, real customer feedback was the trigger that gave the founding team drive to pursue their vision.

Collecting your feedback is rather easy, especially for an early-stage startup with rather small operations and a very custom approach to every customer. However, as your company and user base grows, involving customers in product development gets harder. Here are some ideas for effective customer feedback loops that might take your operations to the next level:

Talking to your customers on regular basis- by far the easiest way to understand your end-users needs.
Apps like UserVoice or Pendo where people can vote up their proposed product changes.
Design Thinking workshops where customers are invited to special design sessions with the whole team (account managers, engineers, UX/UI specialists, quality assurance specialist) to discuss improvements or redesigns of the specific product components.
Taking your software engineers and other office employees to the jobsites so they can understand what they are working on.

The next step is to make your feedback actionable- filter out noise, segment the collected data and prioritize the most valuable product changes. Those should be then implemented to your product roadmap or/and product management software like Jira.

Grabbing the right technology

I added this point just to emphasize the value of focusing on a problem instead of being tied to the chosen technology:

Focus on the problem, not the solution. Don’t start with the technology that you want to apply, it makes more sense to start with the problem. Then pick up the right technology to solve it. — Alice Leung, Investment Associate at Brick & Mortar Ventures

The AHA Moment

Don’t expect the AHA moment to come! According to the majority of interviewed startup founders, having a LIGHTBULB moment might be overrated. Many of them described their path to getting traction as a systematic and time-consuming process of constant iterations and customer validation loops. This does not particularly mean that you cannot have your lightbulb moment- just don’t expect it to come at all cost. Nor don’t think of it as an obligatory element of your success.

Switching to full-time commitment

You shouldn’t take risks for the sake of taking the risks. You should take risks because you want to get something accomplished. — Anthony Hauck, Founder and Chief Operating Officer at Hypar Inc.

I feel that the statement above is 100% true when it comes to switching to a full-time commitment for your startup. It’s essential to do it when you feel comfortable doing it and when you understand the goal of this transition. There is no strict rule when to leave your current job and invest yourself solely in your company. It really depends on your own situation, incentives, capital or market conditions. However, full-time commitment and complete focus on the product should always be your end goal.

Pricing strategies

There are three traditional ways of defining your product price:

Pricing based on costs — calculating your pricing according to spendings + desired margin.
Pricing based on a competitive landscape — adjusting your pricing to the competitors.
Pricing based on a value-added — measuring added value and then pricing accordingly.

It does not mean that you have to stick to only one of the frameworks above. The truly effective pricing considers all of the three elements. However, the pure value-added to your customer’s business is nothing that anyone can argue with.

On top of that, in the startup environment, your pricing framework should be crossed with your strategic pricing goals:

Maximization — priority on maximizing the revenue growth in the short term.
Penetration — priority on increasing your market share by pricing low.
Skimming — priority on profit maximization by starting with a high price broadening the product offering to address more of the customer base at lower prices (e.g. Tesla, Apple).

Combining those two frameworks creates the comprehensive pricing strategy for your product and shows the direction to which other parts of your business (like sales, marketing or product development) should be aligned.

Some contech companies uncovered pricing tips that are especially effective or beneficial in the construction sector. You can use those tips yourself when deciding on your strategy:

Product paid by the main customer who can invite whoever else to the platform- approach that allows to constantly increase your user base and get effective, almost free marketing when satisfied users pass the knowledge of the product to their next projects. This approach resonates well with multisided construction management platforms.
Pricing correlated with project (or construction site) size, especially effective for SaaS products.
Profit sharing- pricing directly or indirectly tied to the value or savings generated by the product, example: insurance savings.
Payment system adapted to procurement habits of customers, example: SaaS products billed on a project-by-project basis instead of annually.
No-fees policy for hard-to-acquire customers on multi-sided platforms like marketplaces.

In the end, whatever pricing strategy you choose, remember that it’s always the end-user who is buying your product so the pure value-added to the business is nothing that anyone can argue with.

Sales strategies

Sales are hard but get even harder when you aim at construction where typical sales cycles are multi-level and spread over time. The whole process can even get more challenging when trying to reach public entities with complicated procurement rules that may effectively stop your transaction.

What is the best best way to overcome those impediments on the path to traction and revenue? Here is the workflow :

Instead of targeting whole companies with your value proposition, discover and target specific, tight type of end-user PERSONA. However, your end-user might be different from the decision-maker, a person who will have the biggest leverage on the procurement. In such a scenario discover your decision-maker PERSONA too.
Understand the procurement rules limiting your PERSONA: security requirements, budget, billing rules, workflows. If you know those you can focus your sales pitch in a way that fits into their procurement rules.
Make everything as simple and easy as possible for your customer: make things like implementation and onboarding cheap, fast, simple and mistake-free. Reduce every barrier and demystify everything so the buyer can see the value really quickly.
Build a positive view of your company with values and culture so the customers will sympathize with your company and employees.
Prepare a strategy to reach your personas. Include every middleman in the process and build your sales funnel.
Acknowledge that sales is a process of many steps and everything takes longer than expected. Understand your sales funnel in a very operational manner, track the metrics at each stage, and measure how your flow is impacted by your actions.
Target your end-users and decision-makers, and build relationships with them by joining groups, associations, or conferences where those people can be approached. But don’t start your relationship with selling!
Boost your inbound marketing with free publications or e-books on topics directly related to your services, or topics that your PERSONA might be looking for.
Use arguments that resonate with your end-users or decision-makers, like: “While using our product you can work 40 hours a week instead of 60 hours and have a proper family life and better quality of life.”
Develop your sales department continuously as your company grows- start from your founding team selling the product and gradually switch to a more organized structure. At first hire salespeople, then account managers, up to the state in which your sales, onboarding and customer success teams are separated. In the end, you can even think of separating your customer acquisition from sales.

Partnerships

During the CanBIM Fall Summit, a question about partnerships was answered quite extensively. Panelists agreed that in the complicated and varied landscape of construction solutions, partnerships and fitting into existing business processes is essential for a perspective startup. Being able to fit into existing systems easily and to integrate with them brings your company much closer to becoming successful while removing many obstacles on the customer side.

And finally: Should you sell with pilot projects?

Rather not. Pilots should be your last resort. Those are usually extended in time and do not guarantee a purchase afterward. Construction technology should champion a change internally and assess the new tool in a faster way than it used to do in the past with pilot projects.

But if there is no other way than a pilot, try to be specific about the pilot’s objectives and particular actions that should follow. To make the pilot successful you have to be very detailed, have KPIs and targets which will result in buying your product. And don’t get into price slashing wars with your client from the beginning, if you know your value it’s okay to say no to some of the clients.

Summing up, I have to say that the sales plan above is barely scratching the surface of the topic. To get deeper I highly recommend jumping to the references of this publication since covering all nuances of sales in construction would require a separate series of publications.

GROWING THE VENTURE

What the investors look for

If you are seriously considering cash injection from VC or Angel, you may want to know what top investors look for when making their decisions. Luckily during the CanBIM Fall Summit, those top investors shared their views on success indicators that they look for in startups before stepping in with investment.

Panelists mostly agreed that at the very early stage, VC or accelerator are mostly focused on the founding team which is much more important than the idea itself. What they try to answer first is:

Motivation & Incentives: What is the founder’s “why” and why they do wake up every day? How big is the amount of engagement that founders are willing to put in? Are they are 100% committed to the idea?
Background & Skills: Where are the founders coming from? What are their domains and how do they complement each other? Does their past give a chance to success in a new role?
Embracing Uncertainty: Are they aware of what they know and what they don’t? Are they coachable? Are founders able to pivot and adapt to changing situations? How do they know that situation needs pivoting? Are founders able to make it lean: build, measure and learn, sometimes even several times before getting to the right solution?
Vision & Values: What is the founder’s vision and if they can articulate it clearly? Where do the founders want to take their organization? Have the founders identified the steps to get to their vision and why now it’s the time to do it? Are founders able to lead and communicate (to staff, customers or investors) their vision and value proposition? Is the organization build on culture and connection?

Secondly, and here our panelists mostly agreed too, your product is the next highly important element of the investment game. What they look for is:

Industry Validation: Is the problem real? Is the industry willing to change? Is the product based on the real problem or founders are just tied to the technology of their interest?
Commercial Traction: Are there signs of market validation with first clients on board?
Potential to Scale: What are the odds scaling the product around the world?
Competitive Landscape: Can the company differentiate itself from competitors and attract customers within quite packed contech or proptech space? Did founders discover how they can execute better than competitors or what learnings can you take from other companies in the space?
Future Trends: How the product fits into the general vision of the future? Does it focus on the area that will grow exponentially soon enough? Is it looking forward to new generations and their needs?
Potential to Expand Within a Market: How the product can grow within the industry and expand to fixing other problems? Did the founders find their beachhead market and did they assess the opportunities that can be built around?

And finally, the third element got to be the financials:

VC-grade returns: Is the problem you are working on big enough to attract VC’s attention? For VC there has to be ROI at some point and more importantly, your ROI needs potential for VC-grade level. Make sure that you can show it! Otherwise think if you really need venture funding, maybe your business is not a good fit for VCs but can still be highly successful without it.

Of course, there is no clear recipe for how to attract a VC but thinking carefully of the questions above might definitely take you closer to getting the investment.

As a bonus, many investors described an idea of increasing your credibility before the pitch, here are the concepts:

Built the relationship early enough and don’t pitch on the first meeting.
Don’t be shy to talk to your investors about the idea before you got the product.
Show how you execute: present a plan and realize it while updating on the progress. If you tell your targets in advance and then meet them- it’s already a very good impression made!
Do much with little resources, hustle, scrap. People who come a long way with grit and determination give hope for success.

Finding the right VC for you

I already covered what the VC is looking for in startups but a relationship with VCs shouldn’t be one-way only. As in your personal life, if you want your relationship to be successful, your expectations should be somehow balanced. There is one thing that stands out from others when speaking of expectations towards VC — it’s expertise. As a founder, you need people to test your ideas against.

I feel that quote from Anthony Hauck from Hypar expresses this best:

Literally the first conversation we had with Building Ventures, the first words out of my mouth were: ‘I don’t want your money.’ And really that has been the tone of our relationship ever since because what we wanted was their advice. Because that particular organization is full of folks who spent a lot of years in AEC and we were much more interested in their thoughts on: “we have this idea, is it completely crazy or do you think it might get some traction?” Because we thought it was a great idea but you really kind of need to test it against some industry veterans.

The above resonates well with the approach that the key to success of a startup (or any company in general) is having a diverse set of perspectives and advisors at the table.

This expertise from industry veterans may have to be brought in from outside and if it’s not delivered by hired advisors, VC could be the best source of it. Contech space is mature enough to offer multiple construction-focused Venture Capital Funds where industry and venture capital veterans work side-by-side providing the best set of skills that early-stage startups might crave.

Secondly, having a chance to pilot your products or acquire customers through VC is also a big advantage. You may want to look for VCs that bring you those opportunities by having onboard institutional LPs coming from the industry. Those companies are willing not only to invest their money but also to internally pilot the products that they invest in. Something that would require your company to put a lot of resources into, might be accomplished just by choosing the right partner. As an example, that’s exactly what Suffolk made by starting corporate venture capital Suffolk Tech- being investors, advisors, development partners, and using their own construction sites as testbeds for pilot projects.

And to end up with, something that is not pure value added to your startup but an important factor when choosing the VC: your alignment with the investor.

Your investors are going to be with you for quite a long time so make sure that you get along, that you can work together. — Tony Van Bommel, Senior Managing Partner at BDC Capital

Try to assess how your values and vision resonate, and if you are planning to build the company in the direction that both of you will be satisfied with. Figure out if your interests are aligned and where clashes may occur.

Angel Investors

When looking for the first financing, is it better to find an Angel Investor first or go with your idea directly to VCs?

It’s hard to give a straight answer as everything depends on your particular situation but in general Angel Investors, as very independent and risk-tolerant individuals, can give you a hand before your company is ready for VC-grade investments. Besides, Angels are very often motivated by not only financial gains but also personal achievements on top. This makes them great development partners for your business at the pre-revenue stages.

I have found two industry stories uncovering how beneficial the relationships between contech startups and Angel Investors can be:

Lauren Lake from Bridgit went a long way with the process of getting investment and finding the right partner. Bridgit’s first investments were coming from angel investors in convertible notes, backing that does not require setting the valuation of a company at the early stage. Those investments were rather small and allowed the company to function in very lean conditions, to meet initial targets, and to prepare for proper investments from VCs. That’s how the company’s reality looked like until 2016 when Bridgit collected the seed round based on already proven traction and growing revenue, something that wouldn’t be possible without angel support.
Anthony Hauck from Hypar disclosed that his company was backed by the SPATIAL SYNDICATE (angel syndicate) focused on the built environment. What was critical for Anthony is the angel’s deep roots in the construction industry that allowed Hypar to acquire not only capital but something more valuable- top-tier industry advisory. For Anthony, the experience and knowledge of investment partners are much more important than their money which was clearly stated from the beginning of their negotiations.

So if you think that it’s too early for you to reach out to VCs who usually look for growth-stage businesses, try finding your domain-experienced Angel Investor to help you grow your product.

LOOKING INTO THE FUTURE

Trends & opportunities

This is personally my favorite part of this research which gave me a lot of fun when discovering. Hope you will enjoy it as well!

There are 5 the most articulated trends in construction:

Industrialization of production: Prefab & modular construction

The trend that we already see accelerating fast is the industrialization of production in many forms: prefabricated, modular or panelized construction. The idea that was adapted from the manufacturing industry is taking over construction sites and will only gain importance in the coming years.

Despite being mentioned frequently, some important challenges lies ahead utilization of those technologies:

Creating demand — the biggest problem for prefab companies which are very often measured by how much demand for their products they can generate.
Switching industry to component-based design early on to utilize prefab the most effectively.
Making prefab construction highly agile and adaptive so it can answer people’s needs of living in interesting spaces instead of identical buildings.

Machine Learning and Artificial Intelligence

Looking at almost every industry around, AI is making an impact. No difference in construction, but with the amount of unstructured data that the industry generates, AI is just taking off. Those huge numbers of data that can be fed into AI predictive algorithms- that’s something already done by Procore with their massive sets of anonymized data giving performance insights to users.

What’s a harder nut to crack is how to implement computer vision algorithms into architectural offices, jobsites or existing facilities. Construction is unique and custom, and it’s hard for AI to keep up. If you compare your jobsite to the public roads where AI computer vision algorithms are trying to solve the vehicle autonomy concept, you might understand that what’s already super hard in a quite standardized environment with not too many degrees of freedom (public roads), will be extremely hard in much more complex habitat such as a construction site. Still, a long way to go here.

When thinking of AI in construction, I come back to the comment made by Clifton Harness, CEO of TestFit.io and one of the current domain leaders:

Everyone talking about GANs* needs to realize that the industry hasn’t even adopted basic parametrics, much less the far more practical procedural algorithm.
There are some basic technologies that need to be trusted and adopted before any designer or client is going to trust a black box GAN

The hype of AI made everyone’s expectations high, some still believe that AI can solve everything but it’s likely not possible in the nearest future. However, AI solutions that tackle small domain problems are gaining momentum to eventually develop into cross-functional solutions. However, the success of those companies should be measured in value-bringing use cases that they discover instead of the size of the “AI” slogan next to their logo.

*GANs = Generative Adversarial Networks

5G network

5G is probably the earliest trend of all mentioned here. 5G’s high bandwidth is not about downloading your 4K Netflix movie, LTE is already good enough for that. Instead, 5G will enable many technologies that the current bandwidth was a limitation to. Things like machine-machine connectivity, drone deliveries or IoT will flare-up in the coming years. Delivery chains might be changed and many things reserved for the construction site so far will be handled in the office.

I highly recommend following this space since it opens many opportunities that were not available or feasible until now.

Internet of Things

We have been talking about IoT in construction and real estate for a long time already, and many industry reports predicted the exponential growth of this sector. Now, those past predictions seem to be over-optimistic but the trend is likely to stay the same- high growth rates in the coming years.

IoT sensors will enable on-site activities monitoring, smooth handovers, improved safety tracking, real-time machine communication, or remote equipment control. It’s not hard to find a pressing problem that can be solved with IoT sensors and it’s just a matter of time to find yourself surrounded by this particular technology in construction.

Digital Twins

Digital Twins evolved from BIM and the simplest definition of the concept is the virtual representation of existing infrastructure (BIM model). But the definition evolves continuously, nowadays it may even mean building equipment existentialism where single components know their relations to other elements and complete systems (this is the concept of Deep Digital Twins presented by PassiveLogic).

Despite the evolution of the concept, the core remains the same- having a deep understanding of existing infrastructure during operations. By meeting this goal, opportunities to optimize will come up while making our buildings more sustainable, energy-efficient and user-friendly.

On top of those five leading trends, there are a few highlighted quite frequently:

Systems interconnectivity

When no single software can meet all your needs forever, you have to enable communication between them. Where the construction software industry might be going to, is an interconnected ecosystem where every stakeholder can choose the software that suits its best while being able to collaborate and smoothly exchange information with parties utilizing completely different solutions.

Augmented Reality

AR is already doing well in the contech space although industry-wide aversion to innovation and hardware or bandwidth limitations prevent the technology from growing. 5G network together with generational change in the industry should become a new trigger for AR during construction and operations.

Robotics (human-assisted)

Experts mostly agree that we should not expect automated construction in the foreseeable future but the next 10 years might be characterized by the growing deployment of cobotics (a collaboration between humans and robots) and autonomous vehicles assisting human workers on the construction site.

Energy-efficiency (materials, design & operations solutions)

Energy efficiency is a hot topic in worldwide politics and business as well. Tesla disrupted the stagnant automotive industry by partially betting on innovative energy solutions. This ripple effect might be even stronger in the building industry where implications in terms of energy are much larger than in automotive.

Although there is still no visible business value for contractors or owners, governmental pressure on energy-efficient solutions, especially visible in Europe, is making a significant impact in the industry. By some, this is picked as a signal to invest in companies that may improve energy consumption in the process and bring value in the coming years. And there is much room for innovation here- some part of environmental impact can be offset at almost every stage of the construction process.

Innovative materials and building solutions

Throughout history, we have seen construction building techniques evolving from stone-based pyramids to steel-based skyscrapers covered with glass. Those changes were only possible because of advancements in material science and construction solutions. However, since the development of reinforced concrete, we haven’t seen a breakthrough in those areas but some ideas give hope. Just think of cross-laminated timber, biobased building materials, solar roofs, translucent wood, self-healing concrete, polymer-based or recycled construction materials.

In a world where natural resources are becoming more and more scarce, innovative approaches to construction materials and solutions will only get more important with time.

Lifecycle integration

Information flows in construction are crooked. Typically design guys do not talk much to construction guys who avoid talking to operations guys- that’s the common standard in the industry. Getting the alignment between various teams from day one and determining the outcome is the real value that the industry needs right now. The quality of a final product may be hugely improved with lifecycle integration which is no more than making people across the project communicate and exchange lifecycle information better.

Data Integration

With the amount of information that construction generates, we are still behind in utilizing it. Current information is often not-digitized or spread around many silos so before doing anything with it we must spend some time on getting the data in place, connecting the various sources, and building the integration platforms. Right now we are already starting to see data alliances focused on open sharing data between companies and we should expect a popping out of private and profit-focused data integration products as well.

Sustainability

Same as energy efficiency, sustainability is on everyone’s lips today and became one of the main disputes in worldwide politics. However, the perception of sustainability varies around the world- in the EU many products develop solely around sustainability while in the US it’s “nice to have” but not really the preeminent driver behind why you buy. That’s why from an investor’s point of view it’s not enough to have the sustainability tag next to your name. What really matters is the business model connected to what you’re doing and how you prove the value of your sustainability. In other words: how you make your sustainability important enough for customers. If you get this equation right, you will definitely become successful.

Democratization of digital technologies

When looking at statistics of BIM and technology utilization in construction, you can say that the digital revolution is already there. But what is noticeable for big-name companies, is not so obvious for smaller players. Subcontractors are not penetrated that much with the technology and not many SMEs have the resources to innovate internally. On top of that, BIM is true for large projects but still not that obvious for small ones.

The prediction is that technology in construction will become less and less visible and more and more essential while making everyone in the value-chain digitally enabled. This particular niche has a lot of space for new companies to mark their presence and grow. Although existing companies can also utilize those opportunities by creating easy to deploy solutions and by supporting clients from day one of deployment. This will soon become the new normal.

Senior Living

With western societies getting older, senior living solutions are still overlooked by the founders, especially considering the possible addressable market size. What investors might be looking for in this space is reimagining senior living which might be addressed by a combination of built technology and software solutions.

If you want to dig deeper into predicting the future of construction, you can start by looking at similar industries that overcame the same digital revolution in the past. Investigating the history of manufacturing, logistics or aerospace might be a good prediction on how things may turn out for construction (and the real benchmark that no one is talking about is shipbuilding- an industry very similar in terms of manufacturing process workflows, financials and customer segments).

CREDENTIALS

I wanted thank greatly all people without whose works this article wouldn’t be possible:

Adam Bridgman, Adrian Bartha, Alice Leung, Andreas Schwarzenbrunner, Andrew Ackerman, Angelica Krystle Donati, Anthony Hauck, Arash Shahi, Arta Momtazi, Atul Khanzode, Ben Blumer, Ben Liao, Brad Keast, Brigit Knecht, Catherine MacInnis, Chris Hobbs, Christie Bates, Clifton Harness, Dave Kim, David Bowcott, David Lod, Dominic Sévigny, Frank Auddino, Gregg Wallace, Hadrien Laporte, Heather Widman, Ian Hall, Jack Liu,
Jean-Francois Dupuis, Jill Fearman, Jimmy Plante, Johan Palm, Kevin Forestell, KP Reddy, Kris Lengieza, Lauren Lake, Lisa Cashmore, Luan Ha, Lynette Keyowski, Mark Cichy, Mark Masongsong, Matt Man, Maximilian Franz, Michelle Killoran, Mike Hollinger, Monika Jaroszonek, Nate Loewentheil, Nick Kurth, Noah Dolgoy, Raja Ghawi, Roddy Handa, Ryan Wakefield, Ryan Yee, Scott Ellison, Scott Kaplanis, Sen Sachi, Shawn Hill, Steve Zahm, Thano Lambrinos, Thomas Strong, Tony Van Bommel, Troy Harvey, William St-Pierre

I hope that you will continue developing the contech space by sharing your knowledge with people!

RESOURCES

FINAL WORDS

Building the Contech together

I truly hope you find this article useful. This one is the first part of a long-term project that I am pursuing to bring Construction Technology and Venture Capital together, and to understand how to fix construction using both: available and yet-to-be-discovered technology.

If you want to stay up-to-date with the project, I highly encourage you to follow VCmeetsConstruction where I plan to share my work.

And if you’re also exploring this space, I’d love to chat! You can find me on Medium or Linkedin.