Maria Montero

Investor Drives Momentum for Construction Tech.

Mary Ann Azevedo covers startups and technology on Crunchbase News.

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While not the most attractive industry, the construction sector in 2018 attracted not only attention but, more importantly, investor dollars.

Historically, the multi-billion dollar industry has been slow to embrace new technologies as builders rely on a variety of disparate systems to manage projects, traditional construction methods to build homes, and non-smart materials.

But a wave of startups is looking to capitalize on opportunities within the sector. Companies that have developed software solutions aimed at streamlining processes and increasing efficiencies are becoming more and more common. Pre-fab construction has evolved through innovation in that space, and 3D printing technology can create homes in a matter of days.

Investors are taking notice. According to data from Crunchbase, funding in US-based construction technology startups increased 324 percent, to nearly $ 3.1 billion in 2018, compared to $ 731 million in 2017. 2018 numbers are impressive, it is important to note that some large rounds took place last year and thus skewed the results. A single company, Menlo Park-based Katerra, raised $ 865 million from SoftBank Vision Fund, RiverPark Ventures and Four Score Capital in a Series D round last January. And, smart glass company View closed a $ 1.1 billion Series H in November. In addition, Procore, a (unicorn) provider of cloud-based construction management applications, in December raised a $ 75 million Series H round from Tiger Global Management.

Without those two rounds, the building technology sector only received $ 1.135 billion in funding in 2018, a 55 percent increase compared to 2017 totals.

The industry continues to see M&A activity. Larger software companies are recognizing that it makes more sense to acquire companies in this space rather than trying to reinvent the wheel from within. For example, in the fourth quarter of last year, 3D design software provider Autodesk announced plans to acquire two cloud-based software startups in the space: PlanGrid for $ 875 million and BuildingConnected for $ 275 million. Publicly traded software developer Trimble acquired the construction management software startup Viewpoint in July for $ 1.2 billion.

Jerry Chen, a partner at Greylock Partners, is optimistic about the sector and expects 2019 to only see more funding and acquisitions. His firm invested in San Francisco-based Rhumbix, which has raised $ 28.6 million to augment its mobile platform designed for the workforce of construction craftsmen. That company, he says, had a “record year” in terms of customers and users.

“2018 was a turning point for the construction technology industry,” Chen told Crunchbase News. “Investment in large companies and strategic mergers and acquisitions by incumbents continued… and I think they will see other major business software companies start investing more in construction in 2019.”

The founder of a construction technology startup, Nick Carter of Chicago-based IngeniousIO believes that despite the large numbers, the industry has a long way to go in terms of true startup growth. Part of that is simply down to one thing: Tech founders and some investors are intimidated by the space.

“A lot of people don’t get it,” he said. “There is a massive learning curve. Companies have been building buildings in the same way for hundreds of years and not everyone understands its complexities.”

The fact that construction is a largely unregulated industry is also a factor, Carter believes.

“Eventually, money will flow into the sector due to the sheer size of the market,” he told Crunchbase News. “The money is there. There are VCs at all angles who want to enter this space, but are looking for the right opportunities. There just aren’t a ton of startups in the space. “