TechCrunch Construction Tech Survey

We have been bullish about construction tech since the inception of D20 Capital. The industry is in the early innings of technology innovation and we have been fortunate to participate in StructionSite and LinkedField’s journeys over the last few years. TechCrunch recently conducted a survey with other investors with experience investing in construction tech. Shared below are the answers that I provided to TechCrunch in its entirety as I thought the questions they asked were thoughtful and comprehensive:

What’s the most exciting development in construction tech right now? Where are you seeing more interest from investors and founders — residential or commercial?

The most exciting development in construction tech is the rapid proliferation of digital tools in the last five years to the point where there is now nearly unanimous consent amongst builders regarding the importance of technology in the industry. The construction tech sector is still early enough in its development that having broad buy-in from stakeholders is indeed an exciting development. Just in the last 5 years, we have seen most major general contractors set up centralized innovation offices and create executive titles such as “Chief Digital Officer” and “VP of Innovation.” Therefore, as the construction industry is still in the early innings of the digital transformation journey, the largest opportunities are still in data collection and progress tracking. Companies like Procore and Plangrid paved the way in normalizing digital tools on the construction site. Now companies like StructionSite (D20 Capital portfolio company) and Versatile are enhancing tech driven efficiencies by enabling frequent, high quality data collection, and leveraging the data to provide actionable insights to the builders.

Where are you looking for opportunities in construction tech in Q3 2022?

We are excited about the usage of robotics in construction. I do think that there are challenges today in scaling robotics operations on construction sites. But there is, and will be labor shortages in the industry, and there are many tasks for which robotics presents a safer and more efficient solution, thus making it inevitable that robots will play an important role in the future of construction.

How has this space changed since the pandemic began? How mature is the sector; are these still early days?

One important development in construction in the U.S. is the labor shortage created by a combination of the ‘great resignation,’ along with recent immigration policies. This labor shortage affects both blue collar and white collar labor — we recently heard of a major construction company’s regional office that lost around 10% of their white collar workers last year alone to employees leaving the construction industry altogether! This directly hampers the ability of construction companies in bidding for new projects, which can cause broad downstream consequences starting with increasing the cost of construction across all project types. The usage of technology will be critical in counterbalancing labor shortages. Software tools are needed to increase efficiency, transparency, and accountability. Robotics are needed to automate dangerous and repetitive tasks. And creative solutions are needed to ensure construction projects have access to the right talent at the right time. Our portfolio company, LinkedField, is working on a platform to provide remote white collar services to construction companies. Although the concept of remote work is still a novel idea in the construction industry, we believe that opening up certain jobs to remote talent will open the door to increased efficiency and a broader talent pool as we have seen in many other industries.

A lot of this tech is focused on job sites, but given the need for data collection and analysis, what advances are you seeing in back-end technologies? Is there a killer app?

The killer app today is automated progress tracking. Although a construction site is very complicated with many stakeholders and countless dependencies, it’s very difficult today to track what work has been completed and where delays may be happening. Consequences include budget overruns, expensive delays and stakeholder disputes which erode trust and eat away at profits. StructionSite’s software allows builders to easily compile a Google StreetView type visualization of the construction site and then automatically extract progress tracking data through the use of artificial intelligence. Whereas, builders previously had to walk the construction site and track progress by manually marking up a floor plan, tools like StructionSite’s SmartTrack allows builders to address delays before they occur.

The construction industry has been fairly reluctant when it comes to adopting bleeding-edge tech. Is this a marketing problem, or a product-market fit problem?

Construction is a sector where ‘move fast and break things’ is a strategy that does not apply. There are extreme consequences of a new technology ‘breaking things’ and so the conservative approach to adopting new technologies makes sense. However, large construction companies often have central innovation teams that test new technologies and champion the adoption of new technologies. We are seeing a rapidly increasing pace of new technology adoption, but due to the conservative nature of the construction sector, a characteristic of construction tech is low initial ACV (Average Contract Value) with strong NRR (Net Revenue Retention) as customers deploy the technology on a handful of projects and expand usage as the technology has a chance to prove itself.

When investing in a construction tech startup, what green flags do you look out for? Are you open to backing founders who don’t have experience in the industry?

I do believe that due to the relatively nascent stages of the construction tech sector, construction is an industry where industry experience is more important for founding teams than other industries. There are very high stakes in adopting new methods to build our buildings and infrastructure and deep industry experience within the founding team is needed to push the pace of innovation while adhering to the rules and regulations of the industry.