CONSTRUCTION | INNOVATION
VCs inject billions into construction technology startups
Silicon Valley investors are seizing the opportunity to tackle the challenges in the construction industry, which is plagued by cost fluctuations, labor shortage issues and overall lack of productivity improvements.
23.8.2018 // 4 minute read
$1.05 billion has been invested by venture capitalists in global construction technology startups in the first half of 2018, setting a record high. According to a recent report by JLL, Silicon Valley investors become involved to seize the opportunity to tackle the challenges in the construction industry, which is plagued by cost fluctuations, labor shortage issues and overall lack of productivity improvements. A recent McKinsey & Co. study has flagged up that the construction industry is among the least digitised, with only agriculture and hunting falling beneath it. Thus, technology startups around the globe are working to challenge the adoption of software, technology and computing power and ultimately disrupt the industry.
Global investment growth
The 2018 global investment volume is already up nearly 30 percent over the 2017 total, with six months still remaining in the year. Spending in the segment is also outpacing overall tech startup investment growth in the United States, the report found. While investors in the space are wide-ranging, the pack is led by firms known for backing startups, such as Y Combinator, which has 13 construction technology-based firms in its portfolio.
David Glynn, president and managing director of Glynn Capital Management, who invested in a US-based software startup, points out that, over the past 30 years, the construction industry has struggled with productivity challenges. “Within any project, labor is by far the biggest cost driver, representing over 50 percent of the total cost,” he said. “With profit margins of 1-3 percent, any improvement in productivity or efficiency makes a big difference to overall profits.”
Further, Todd Burns, President, Project and Development Services, JLL notes that "the construction sector is on the verge of major disruption as tech start-ups tackle head-on the industry's biggest pressure points. In his opinion, ”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.”
Use of funding
According to estimates by JLL, funding will be used to support construction technology-focused startups through approximately 120 deals by the end of the year. The pool of investors and VCs in the construction technology field remains diverse. “Off-site construction, cloud-based software and new, tech-focused hardware are capturing the largest investor dollars and customer bases,” the report said. “Artificial intelligence and big data solutions are a close second, but are positioned to make even larger impacts.”
Alongside other notable startups, including Katerra, a Silicon Valley-based construction tech startup, and the Chinese
e-commerce steel trading platform Zhaogang.com, SenSat is leading the way in the AI investment scene in the UK and recently announced its latest seed funding round of $4.5 million.
The funds will be used to further develop SenSat’s simulated reality technology, including its novel 3D computer vision workflows and cutting-edge dimensional interpolation. SenSat’s technology helps companies in construction to make more informed decisions based on multiple variables at a large scale and complexity, in this way tackling the major challenges in the industry.