Why are VCs excited about construction technology?

May 12, 2021 1:01 pm

Construction is one of the largest industries in the world creating $1.3 trillion of structure a year, and while everything around us seems to be disrupted by new technologies, construction remains highly undigitized compared with other sectors. This match between huge markets and room for new solutions have created a gap that many construction tech startups are trying to bridge. These startups are meeting an industry that is conservative on one hand but on the other hand willing to spend high amounts of money for solutions that bring value and with a mid-market that is managing projects worth billions of dollars each year.

This industry faces several issues that desperately need to be solved. Construction sites are chaotic and often mis-managed: poor execution on site, inaccurate price quotes, and untimely deadlines cause unfinished projects to become more costly. In a 2020 study conducted by Levelset and Fieldwire, data shows that construction sites that don’t utilize proper construction technology are wasting valuable time and money (Construction Suffers From Wasted Time & Slow Payment, 2020).

61% of contractors are reporting that they aren’t completing projects on time and often are under budget. 80% of contractors report challenging coordination on jobsite work.

Larger class construction projects face the most losses due to inaccuracies. According to Mckinsey & Company, larger construction projects typically take 20% longer to finish than scheduled and are up to 80% over budget.

Main reasons why projects are not done on time and on budget

The biggest pain that contractors have today is the budget and timeline management. Missing those targets is driven by few obstacles in the planning and executing processes. It’s impossible to complete a construction project without clear communication between the project managers, clients, designers, subcontractors, suppliers, and engineers.

Even with perfect plans, sticking to the plan over time is challenging to say the least as the project faces scheduling issues due to bottlenecks and repairs that are usually caused by communication gaps. Poor communication is the main reason for onsite project failure one third of the time according to the A PMI study. So to put this into numbers, “Companies risk $135 million for every $1 billion spent on a project and new research indicates that $75 million of that $135 million (56 percent) is put at risk by ineffective communications, indicating a critical need for organizations to address communications deficiencies at the enterprise level.”

Finding the solutions to fix the industry

Today contractors will use 6 software solutions such as accounting software, project management software, project scheduling software, project estimating software, Bid management software, and client relationship software. on average and while this number is going to grow we also expect the solutions to become more and more advanced over time turning the construction sites to be efficient.

We see the change coming from 5 segments that construction tech startups have outstanding solutions for.

1. Outlining & Project management tools

While there are so many great solutions for Project Managers such as Monday.com and clickup. These solutions are not suitable when it comes to construction projects. The core of a construction project is based on the budget and is significantly more complex and lengthy compared to other tech projects. Today there are a few startups competing in this industry that is mainly dominated by Procure, trying to bring Monday.com’s feel to construction projects. Cemento for example is an Israeli mobile-focused construction tool for contractors, superintendents, and subcontractors who work on building projects. It provides a social media collaboration experience in the building site.

2. Collaboration tools

Most construction sites happen to have multiple languages being executed simultaneously which causes communication failure on site. There are tools and advanced technology to solve these issues. Trusstor has next-generation on-site command & control systems powered by real-time location and site condition sensors, enabling to monitor where everyone is on site, creating a safer and more productive working environment for the construction industry.

3. Safety on site

Safety is a big issue for the construction industry, working with heavy machinery in an incomplete construction site can cause tragic cases that contractors have the moral and legal liability to minimise as much as they can. Goarc provides a cloud-based Software-as-a-Service platform that tracks safety data, creates a constant feedback loop, and delivers personalized safety guidance.

4. New Building Methods:

Building the same way for decades has come to an end. New solutions to speed up the work and solve bottlenecks are offered by startups looking to disrupt this industry from autonomous cranes and painting robots to 3D printers. Israeli startup called INTSITE combines computer vision, deep learning, and aerospace algorithms with off-the-shelf hardware to transform heavy machinery into smart and autonomous robots.

5. Infrastructure technologies:

Inspections and monitoring is costly, new techy solutions can offer great solutions using technologies like drones and VR. TaceAir drones for example allow you to achieve site balance by staying on schedule, and track progress remotely from any location using their cloud based platform.

Is 2021 going to be the pivotal year

In parallel to teaching the older generation and toddlers how to use zoom this past year, maybe 2021 can be the start for contractors and construction sites to make the necessary transition to digital technology solutions for their construction projects. The post covid area is accelerating the process that was already there with digitalization coming into play, the Covid-19 pandemic has forced contractors to digitize and use technology platforms to keep their workers safe and boost productivity. This adoption of construction technology will likely be here to stay and accelerate.

Just a few years ago, you had to convince the contractors that they should adopt new technologies. Today the contractors are the ones looking for game changing startups.

The construction industry is due for a massive disruption. This sector needs to adopt many of the new technology solutions instead of relying on manual processes that utilize pencils and paper. For years there has been little to no innovation applied in this industry and today it’s time to make these changes.

By Oz Hassin & Avi Watson