As construction tech gains momentum, 12 leaders from top investors, startups, and corporations in the sector discuss the state of the industry, from investment outlooks to new opportunities.
The construction industry has seen increasing levels of development and discussion in recent years with $1.08B invested across 207 deals since 2013. Investors and incumbents alike are paying more attention to the industry, as new crops of startups emerge to tackle industry pain points such as collaboration, labor concerns, and site safety.
We dug into discussions around the nascent construction tech space by gathering 12 perspectives from investors, startups, corporations, and industry leaders. (If we missed any perspectives that you think are worth highlighting, please let us know in the comments.)
We define construction tech as startups working on construction design, team collaboration, and project site management, as well as those using drones and big data analytics primarily to transform the traditional mapping and surveying of construction sites.
The Commentary
Marc Andreessen, co-founder of Andreessen Horowitz (the most active smart money investor in construction tech), recently highlighted the lack of productivity growth in the construction industry, among other industries, at Recode’s 2017 Code Conference in Rancho Palos Verdes, California.
Andreessen stated that he divides the economy into fast sectors and slow sectors: fast sectors being ones with dropping prices (such as media and retail) and slow sectors, including healthcare, education, eldercare, childcare, and government, trending downwards with rising costs.
Construction, Andreessen noted, falls into the latter category, with costs that have doubled since 2000 and high difficulty of penetration compared to other slow sectors. Andreessen also alludes to the integration of construction tech with smart cities, a theme that many of the following quotes echo.
“The price of all those things [construction, education, healthcare, etc.] is rising super fast…Those are also the sectors that have almost no productivity growth, right, as measured by economists. And left unchecked, those sectors are basically just going to eat the economy. 88% of all price inflation in the US economy since 1990 is entirely attributable to healthcare, education, and construction … these are not easy sectors to disrupt … Fully loaded construction costs have doubled since the year 2000 in the US… The big challenge that we’re all going to have to tackle in the long run is this question of cities.”
2. Joe Lonsdale, Founder of Palantir and General Partner at 8VC
At the CB Insights Future of Fintech 2017 conference, Joe Lonsdale discussed opportunities to transform the insurance industry and mentioned the possibility of leveraging new insurance technologies to ensure construction worker and site safety. Lonsdale mentions the potential of IoT to cheaply and efficiently verify safety standards, meet regulatory requirements, and ultimately decrease the cost of insurance for construction workers.
“If you’re a construction company, you can buy insurance for workers comp, and the workers comp insurance could change your pricing based on the safety you’re using … There’s a lot of new things going on in Internet of Things and other ways of … seeing what the processes are so you can … cheaply as an insurance company imagine putting in some sensors, putting in some cameras, watching this site, and verifying that they held certain safety standards and therefore, you’ll be able to charge them less for their insurance.”
3. Michael Marks, Chairman and Co-Founder of Katerra
End-to-end construction services provider Katerra is construction tech’s latest unicorn, having raised a $130M Series C mega-round in Q2’17. In a recent interview with CNBC, Katerra Chairman and Co-Founder Michael Marks expounds on Katerra’s strategy, remarking that Katerra has done for construction what Tesla has done for auto tech. By taking over the entire construction supply chain process and applying new technologies, Marks notes, Katerra is cutting costs and increasing efficiencies across the construction value chain.
“We’re doing what Silicon Valley does best, which is bringing technology into a very large market and in a lot of ways its similar to Tesla…by taking on a really big industry and doing it differently. One of the things they’re doing at Tesla which we’re also doing at Katerra is taking responsibility to do lots of things ourselves. They make their own batteries … their own engines. They make so many of their components, and that’s basically what we’re doing … We are fully integrated and bringing some tech tools that are not common in the industry … We’ve taken on the entire chain much like they’re doing at Tesla .. .and just taking costs out everywhere.”
4. David Gennarelli, Senior Director of Investor Relations at Autodesk
3D design company Autodesk has manvconstruction tech investments through both its parent company and venture arm. In a Q1’17 earnings call, Autodesk’s Senior Director of Investor Relations discussed the company’s overall focus on capitalizing on opportunities in mobile and cloud technologies, particularly for the construction industry, which is a new frontier for the 3D design giant.
“We are simplifying our entire go-to-market strategy and reducing our cost structure while we increase our ability to more effectively serve our customers. The second front of our transition is how we are building platforms to exploit the cloud and dramatically expand the size of our market opportunities. We’re well ahead of our traditional competitors on this front, and we’re investing to secure the future of Autodesk. These mobile and cloud technologies are opening up significant opportunities in the areas of construction and manufacturing that are completely new to Autodesk.”
5. Brendan Bechtel, Chairman and CEO of Bechtel
Family-owned construction and engineering firm Bechtel is one of the largest private companies in the world. Recently-elected Chairman and CEO Brendan Bechtel wrote an opinion piece in USA Today on the need for U.S. federal and state governments to prioritize infrastructure investment to prevent the country’s economic decline.
Bechtel states that today’s infrastructure is outdated, and new technology that augments infrastructure will provide benefits from economic growth to environmental sustainability. This leads into Bechtel’s call for the integration of construction tech and smart cities, via the production of “intelligent” facilities.
“Building materials and information technology are melding to produce ‘intelligent’ facilities that can interact with people and machines … A world-class approach to infrastructure will produce integrated systems that sense the environment, analyze Big Data and act autonomously … to increase efficiency and minimize risk … The world around us is transitioning from the age of industrial infrastructure to the age of smart infrastructure. A bridge is no longer a slab of concrete and iron. It is an interactive link in our bricks-and-clicks infrastructure network that communicates and responds…”
As the leader of a historically conservative company looking to maintain relevance amidst profound global change in the construction industry, Bechtel advocates for opportunities for “smart infrastructure investment” and partnership opportunities between governments and private sector innovation, noting that under-investment in the sector has gone on for too long.
“Chronic under-investment has led to closed and dangerous bridges, congested roads and highways, inadequate port capacity and poor rail safety and performance … The time has come for a change. Smart investment — that leverages private sector innovation and technology — will save money later, stimulate our economy through the creation of good-paying American jobs, and make our country more competitive.”
6. Elizabeth Heider, Chief Sustainability Officer at skanska usa inc
As alluded to in Bechtel’s quote, there has been increasing discussion on companies with the potential to make smarter, more efficient cities. In an interview with Construction Dive, Skanska USA Chief Sustainability Officer Elizabeth Heider notes the synergies between smart cities and construction tech.
Heider comments on the importance for construction firms’ involvement in dialogue around smart cities, as well as how IoT and other technologies are integral to “future-proofing” this development process. Heider states that if we do not engage construction professionals in this dialogue, the industry will be unprepared for the advent of new technologies.
“Any development/construction company should be paying attention to not only stand-alone technologies, but also IoT and how they connect. It’s important to make sure you future-proof the infrastructure … We’re in a position to build for tomorrow’s generations buildings that will last 50, 75, 100 years … Developers and builders … need to be engaged in this and need to be on the leading edge and even the bleeding edge, because what is bleeding edge [today] will be antiquated almost tomorrow.”
7. Tracy Young, CEO and Co-Founder of PlanGrid
Tracy Young capitalized on an opportunity to make construction more high-tech with construction collaboration platform and smart money VC-backed PlanGrid. In Construction Dive’s series on young professionals in construction, Young highlights the overall lack of digitization across the construction industry, especially compared to other sectors, and how PlanGrid sought to solve for this problem amidst the industry’s reputation for being slow to adopt new technologies.
“It’s a very simple problem that we’re solving. We’re taking all the construction information, which is incredibly fragmented … [and] we put it on our platform. To give you an idea of how bad the paper problem is, on a hospital project I worked on … we started off with something like 3,000 sheets of blueprints, and over the course of three years we were at 15,000 sheets — and that’s just the blueprints. There’s a lot of information required for projects to be built…
“When we look at all industries and sectors, by and large, everyone has figured out how to use software and computing power to be more effective. When you look at construction, we’re spending less than 1% of revenues on software while our counterparts … are spending closer to 3.5% to 4.5%. Over the last 20 years, everyone else has figured out how to be twice as productive, while construction has not only flatlined but declined.”
8. Thomas Goubau, CEO and Co-Founder of Aproplan
Thomas Goubau is the CEO and Co-Founder of Brussels-based construction collaboration platform Aproplan, which recently raised a $5M Series A round led by Fortino Capital. Recently, Goubau noted the relationship between the overall lack of trust in the construction industry, as well as the lack of communication and efficiency across the sector.
“The construction industry has been slow to adapt to technology. There are a lot of parties involved in a construction project and they simply do not trust one another. Actually, they trust each other so little that they still send documents via certified mail to protect themselves. Communication moves at a snail’s pace … Think of where marketing was 16 years ago before Salesforce came around … That’s where the construction industry has been up until recently.”
Goubau also noted the traction that Aproplan is gaining with construction corporates and countries who are committed to digitizing the Belgian construction industry. He recently signed an agreement with an alliance of Belgium’s 60 largest construction firms, to commit to the digitization of Belgium’s construction industry and using Aproplan in the process.
“We are already seeing our solution gain significant traction – we recently signed an agreement with the Association of Major Belgian Contractors, a federation of Belgium’s 60 biggest construction companies … They have committed to the digitisation of the Belgian construction sector and to use Aproplan to do so. Leading names in the construction industry like BESIX and BAM are already using Aproplan to improve on-time delivery and remain in budget.”
Track all the construction tech startups in this brief and many more on our platform
Startups working in construction tech have the potential to upend approaches to design, procurement, and operations. Sign up for a free trial and look for Construction Tech Startups in the Collections tab.
Track Construction Tech startups9. Shane Scranton and Nate Beatty, Co-Founders of IrisVR
Augmented / virtual reality tech has the potential to disrupt multiple industries, including construction, given great opportunities for digital modeling. IrisVR, a startup that has built a suite of virtual reality tools for the architecture, engineering, and construction industries, recently added a multi-user collaboration platform that offers a real-time VR environment to enable virtual meetings.
This functionality addresses multiple pain points within the construction industry, including cross-industry collaboration, as noted by CEO Shane Scranton, and construction safety, as highlighted by CTO Nate Beatty.
“Multi-user will change not only the logistics of in-person meetings, but it will help facilitate larger conversations and decisions. If you are a healthcare architect you can now invite the physician or nurse into a collaborative and intuitive environment of the proposed design. Then you can engage in a dialogue about space to evaluate the impact of decisions prior to construction, regardless of their physical location.” — Scranton
“Job site safety is a huge concern for everyone in the building industry. Having a multi-user experience creates an avenue for training and orientation to occur before setting foot on-site. Imagine the benefits of being able to guide a new oil rig worker through the complex spaces of a rig in a risk-free environment, prior to them traveling to a distant location.” — Beatty
10. John Carpenter, Global Construction Digital & Technology Manager at Caterpillar Inc
Startups are not the only ones looking to leverage AR and VR in construction tech — incumbents also recognize the potential for these frontier technologies to create new paradigms and greater efficiencies across their organizations.
In an interview with Engineering News Record, Catepillar’s John Carpenter spoke about his views on applying AR and VR to construction, oil and gas, and other industries. He visualizes a range of possibilities, from leveraging VR to experience an oil rig to using goggles to augment views of trucking transportation and data.
“So, true virtual reality is putting you in another world … You put it on, and you are in the cab of a wheel loader, and you are practicing how it works. There are virtual-reality annual reports now … [including one that] will take you out to an oil rig, but you are virtually somewhere else. Augmented, or mixed, reality is where we see an even greater opportunity. So, now you are seeing the real world through the goggles, but things are augmented or added to your view — for example, by immediately identifying that there is a model 777 truck and a 980 wheel loader and a Ford pickup truck. Maybe it’s programmed to give you the data off it: how many tons is it holding right now? Are there any service issues related to what I’m seeing?”
11. Mike Humphrey, Management Committee Member at DPR Construction
On the topic of construction labor, Mike Humphrey, a management committee member at DPR Construction (one of California’s largest contractors), noted that with the immense demand for construction work comes worker fatigue, which creates safety concerns. Humphrey suggested that efficiencies gained by new technologies, specifically highlighting trends towards prefabrication, are more important now than ever to automate labor and uphold construction safety standards.
“Everybody wants [the work completed] faster. Our subcontractors are literally getting fatigued. It’s getting dangerous, where if you try to force a job to get faster and faster and the subs are working double and triple shifts, people are getting hurt out there. The tolerance level for pushing speed using labor is getting lower. So there’s a huge push on productivity, efficiency, prefabrication — anything that we can do to use a little less manpower and a little more technology or intelligence.”
12. Eric Jacobs, Chief Development Officer of Marriott North America
There has been increased interest in prefab housing, with more and more companies marketing themselves in related niches. Marriott recently launched their first prefab budget hotel at the Fairfield Inn and Suites in Folsom, California, and has plans to sign up for another 50 prefab hotels by the end of the year.
The economies of scale in prefab housing have created efficiencies in the hotel construction process. Marriott Chief Development Officer Eric Jacobs discussed the labor benefits of prefab housing, citing the labor shortage in the construction and real estate industries.
“We’ve seen a lack of high-quality subcontractors after the financial crisis. Contractors and subcontractors left the industry and didn’t come back. What we’re struggling with is a labor shortage and a shortage of quality craftsmen and women who do finished work. The commercial real-estate industry is stretched thin right now.”
If you aren’t already a client, sign up for a free trial to learn more about our platform.