The Dawn of ConstrucTech

You might have seen that the week before last Balfour Beatty (here) and Mace (here) weighed in on the future of construction. Both are quite radical in the breadth and depth of impact they predict, whilst the technologies they choose are perhaps unsurprising to anyone immersed in the startup ecosystem. The Balfour Beatty piece is more detailed and they predict humanless construction sites by 2050 (which is admittedly a long way off – broadband is less than twenty years old) saying that drones, robots and 3D and 4D modelling will get us there.

Construction is a massive industry with low productivity that hasn’t seen much penetration of tech. Balfour Beatty and Mace clearly see that changing and towards the end of the Balfour Beatty article they herald the arrival of a “constructech” market. Fintech, and more recently proptech and insurtech are startup categories that many VCs and corporates are targeting and I’m guessing they are indulging in a bit of marketing to try and stimulate activity in their own backyard.

I think they will succeed. As noted, construction is a massive market, but it is messy and complicated for startups due to the bespoke nature of most construction jobs and heavy regulation. As technology advances these problems become more tractable, and there are parallels with healthcare and govtech which face similar challenges and are already enjoying more attention from entrepreneurs and investors.

I expect we will see two classes of constructech startup:

  • Startups selling tech enabled services to existing construction companies – e.g. site mapping services using drones
  • Startups leveraging new technologies to compete with existing construction companies – e.g. a new housebuilder which has radically different economics (maybe charging based on usage or building for a fraction of the cost)

This is a common pattern for startups bringing tech to new industries. There are some companies that support existing industry structures and some that disrupt them. When this battle played out in media the disruptors mostly came out on top, but in ecommerce and marketplaces (where we make maybe half our investments) the game is still on – Amazon is a winner, but it remains unclear who will take the rest of the seats at the top table. In financial services none of the biggest companies are recent startups, although that’s partly a matter of scale and large numbers of entrepreneurs are building great businesses.

It’s interesting to think how it will play out in construction. The reasons that startups have struggled historically aren’t going away and it’s hard to do big things in a small way, so I suspect incumbents have more of an advantage than they do in most industries.

 

  • Thomas Kircheis

    Construction companies indeed are very old-school, many lacking even the most basic IT systems such as a warehouse management system (disclaimer: we at PULPO WMS are selling one). At last years Websummit we were approached by a Project-manager of a large oil company, where a project can cost 50-250m US$. Their warehouse with inventory worth some 500m was managed with an Excel sheet (even though they ran SAP R3 as their ERP), resulting in chaos (and “losses”) as traceability was absolutely impossible. Same issue when material is moved to the construction site and then misteriously disappears as it is no longer tracked.

  • Interesting. There are opportunities doing what is really quite basic stuff.

  • Thomas Kircheis

    46% of SMB in the US that should have some system helping them with inventory do not have anything, imagine other countries and the TAM…

  • Interesting…