CONSTRUCTION | INNOVATION
Investor Momentum Building for Construction Technology
2018 witnessed a marked development in Construction Tech. From IoT sensor integration to cloud-based workflow apps, construction's digital transformation is well underway.
4.4.2019 // 4 minute read
According to a recent McKinsey study, adopting new technology could add a massive $1.6 trillion in value to the construction industry by improving its lagging productivity.
This hasn’t gone unnoticed by VCs with investor capital flowing into the sector globally. Data from Crunchbase shows that for the entire 2018, the US alone recorded nearly $3.1 billion in investment, more than quadruple that of 2017 ($731 million).
“Construction is a multi-trillion dollar industry that is beginning to adopt technology aggressively to reduce costs and increase productivity” Jerry Chen, Partner at Greylock Partners
Why Construction Tech is Attracting Investors’ Attention
In 2018, PwC produced a digitisation index which identified the impact that technology has had on productivity over the last 30 years. The report outlined what you would expect - digitally native industries such as Finance, Telecoms, and Media have seen mass productivity uplift due to digital influence.
Industries that are inherently more physical - where tasks tend to be more manual, such as construction, real estate, and utilities - haven't been able to participate in this digital revolution on the same scale.
Construction is the most laggard of these sectors and is primed for technical disruption.
A Shift in Market Approach
“With profit margins of 1-3%, any improvement in productivity or efficiency makes a big difference to overall profits…To the extent that…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.” David Glynn, President at Glynn Capital Management
Implementing innovative software systems – and budgeting for them – is becoming critical for construction companies to remain competitive in the industry, especially when bidding for projects. This technology can be deployed across the lifecycle of the build from business case to maintenance, providing a single source of truth and digital asset for asset owners.
Accuracy, speed and collaboration are key driving factors for contractors seeking construction software. They provide them with competitive advantages when making bids, improving estimation and organisation. Given this, it’s no wonder why the market is shifting towards integrating technology solutions that benefit the day-to-day way of working, distinguishing early adopters from competitors. This early adoption has lead to significant capital inflows to the sector as startups and venture firms seek to benefit from first mover advantage.
VC Funding of North American Construction Technology Companies
The unicorns that have propelled to success thus far:
Procore sells a cloud-based construction management program that helps contractors keep track of projects. In 2016, the company was valued at more than $1 billion after raising a further $50 million of investment; this was double its $500 million valuation from the previous year. The $50 million fundraise, led by Iconiq Capital, which had invested previously, brings Procore’s total funding to $179 million.
Founded in 2015 by a group of real estate and technology chiefs, Katerra offers a technology-first fully integrated service model so that builders don’t need to depend on numerous partners and vendors. As of January 2019, they are set to receive a further $700m investment from Japan’s SoftBank, putting the four-year-old company’s value at more than $4bn.
Founded in 2014 by Groupon's co-founder, Brad Keywell and his investment partner Eric Lefkofsky, Uptake offers a predictive analytics SaaS platform and works with heavy equipment companies like Caterpillar.
In 2018, Uptake closed a Series D round of $117 million led by Baillie Gifford to give them a post-money valuation of $2.3 billion. Along with the participation from existing investors, Revolution Growth and GreatPoint Ventures, it brings the total funding to over $250 million.
The Time is Now
“I’m very excited about the prospects for technology to modernise the construction industry…we are at a critical transition point where adoption in the industry is about to pick up substantially” Kent Ho, Founder at S28 Capital
Construction is a key pillar of the economy that’s been operating with a 0% productivity uplift over the last 30 years.
The firms set to further implement technology in the future are primed to swallow market share as they can bid lower, leveraging efficiency gains, to deliver on budget, on time, with improved health and safety. This means more projects and higher profits for stakeholders. Firms who are resistant to change face losing market share to their competitors who are prioritising innovation and being the Blockbuster of the construction sector.
SenSat is on track to achieve 1,300% year on year growth and turned a profit within its first quarter of trading.
Read more about SenSat’s latest seed round here.