On the face of it, the average construction site hasn’t changed very much over the past twenty years or so. A casual passer-by who manages to catch a glimpse of what’s going on behind the surrounding fencing will probably see a lot of people going about their labor-intensive tasks, aided and abetted by familiar pieces of equipment, such as excavators, bulldozers and concrete mixers.
And that same passer-by might conclude that this is an industry that remains largely untroubled by the disruptions of the innovation economy. Building is building, after all. One brick on top of another.
And when analysts put together lists of the sectors that are sucking in VC cash, these days it’s likely to be topped by deep-tech, biotech, fintech and variations on the distributed ledger theme. Construction tech rarely features in the rankings.
Which is why I was keen to find out more about Foundamental, a Berlin-based investor that specializes in the construction sector, not just in Europe but also in the Americas and the Asia Pacific region.
And as General Partner, Adam Zobler acknowledges, this is an industry that – reputationally at least – is thought of as slow to change. He recalls the process of looking across a range of sectors for investment opportunities. “When my partner suggested construction, I giggled,” he says. “But when we began to peel back the layers of the union, we began to see there were investment opportunities.”
Many of those opportunities stemmed directly from the very real challenges facing the industry. These included addressing the net-zero agenda, cutting waste, managing supply chains, and finding sufficiently well-trained workers at a time when retiring veterans of the construction trade are not being replaced at a fast enough rate by younger counterparts. So in the view of Zobler and his partners, this was an industry requiring new solutions. And those providing the innovation were in need of investment.
Understanding The Pain Points
Fundamental was established in 2018 and began raising funds in 2019. As Zobler explains, the limited partners are mainly big corporations who understand the industry. “We came from a traditional VC background and were generalists,” says Zobler. “We had to understand the industry and its deep-tissue pain points.” Today, Foundamental focuses on the Seed to Series B stages and has made 61 investments, totalling more than 50 million euro.
The goal of Foundamental was to find investment opportunities that would do more than provide small efficiency improvements or slightly better ways of doing things. There was a need to find startups that could not only make a difference but also shake the construction industry out of a gradual change mindset.
“The industry has been a slow adopter,” says Zobler. “It has been obstinate and has a tendency to say: no, we do it this way.”
What Does It Look Like
But what does “construction tech” look like in practice? Well, there’s a pretty wide range of solutions on offer within the Foundational portfolio. For instance, Mighty Buildings is a company set up to make affordable homes using 3D printed components. SafeAI retrofits site machinery with autonomous technology designed to combine greater productivity with safety. There are also software solutions, such as Graneet’s spend management tools designed for small and medium-sized businesses in the construction sector. Meanwhile, Indian company, Infra.Market styles itself as the Amazon of the construction industry, using technology to enable companies to procure materials more efficiently.
So are we set to see a revolution in construction, just as we have in other industries? Well, it might be a slow process, but Zobler says other VCs are beginning to show a greater interest in the sector. Equally, he argues that construction is proving increasingly attractive to founders.
And as for the industry itself. Arguably it has to change to meet the challenges ahead, and technology provides the means to drive efficiency, address labor shortages and cut pollution.