Investors are pouring money into construction technology start-ups at a rapidly increasing rate, and it’s making many in the industry stop and take notice.
Venture capital investment in construction technology companies has jumped to $6.1 billion in 2018, up from a paltry $352 million just two years before, according to market researcher CREtech. With another $4.3 billion already invested as of June 2019, this year doesn’t look to be slowing down, either.
Investment bank Goldman Sachs is at the forefront of this investment, having poured money into five start-ups in the last year, though the company says that the investments are coming from disparate, independent branches of the company. Still, it could very well prove to be a bell weather of things to come.
Among the companies Goldman has invested in are TopHat, a UK-based modular home maker, Pro.com, a marketplace for industry professionals, and Built Technologies, an online construction loan lender.
“I think that folks have realized how large the construction industry is and that there are extraordinary gains to be had from leveraging technology,” said Michael Berolzheimer, founder and partner at venture investment firm Bee Partners.
These investments have been paying off for investors. One of Bee Partners’ startups, Building Connected, was recently acquired by Autodesk, makers of AutoCAD, for $275 million, more than seven times Berolzheimer’s initial investment.
“It’s easier for investors to have conviction placing big bets because they have case studies of where it has successfully worked,” said Built Technologies Chief Executive Chase Gilbert.
While construction has been one industry that has been slower than others in adopting new technologies, the think tank Urban Future found that construction is one of the industries most ripe for automation.
They explain that in a booming economy, there is little motivation to squeeze profits out of every area, but now, when the industry is taking a little dip—and especially when the workforce is so small, with too many positions to fill and not enough people to fill them—automation is essential in stretching out for profits. This has led to treating the construction industry more like the auto industry: using machines to do as much of the work as possible. One company, Katerra, which builds wall and floor panels in a shop and can raise an apartment building from start to finish in ninety days, has raised $1 billion in investment capital.
Another factor pushing innovation is the increase of affordable housing: you can’t pass along extra costs to the consumer, so you have to find somewhere else to trim, and that trimming is coming in automation.
Said John Diserens, the founder of iMod Structures, a company that builds modular and customizable school classrooms “The demand is huge, and obviously capital has followed it.”
To learn more, read this article in the Wall Street Journal.