Built World Market Opportunity, Part I: Construction Tech

Construction is one of the largest, but also one of the most inefficient industries in the world — creating a multi-trillion dollar opportunity for construction tech companies and their investors.

Kiddar Capital was founded by construction and real estate industry veteran Todd Hitt, who has $50 million of his private capital at work in built world technologies modernizing the world’s most fundamental built world industries: construction, real estate, logistics, and automation.

THE INDUSTRY

Construction is one of the largest industries in the United States economy. It employs 6 million people and creates $1 trillion worth of structures each year.

It is also one of the most inefficient industries in the United States. Large construction jobs typically take 20% longer to finish than scheduled, and cost up to 80% over the original quoted budget.

Why? A lot of it can be boiled down to coordination and complexity, including (among other factors) organization, communication, resource management, scheduling, accountability, and risk management.

  • Real estate and infrastructure projects involve a multitude of stakeholders — including owners, architects, general contractors, subcontractors, material suppliers, government agencies, and building inspectors — all of whom need to coordinate with each other.
  • Projects are also notoriously complicated because of the sheer amount of labor and materials involved. Specification manuals are thousands of pages, and large structures take years to complete. Due to uncontrollable variables like weather and permits, even the best-managed projects require constant updates to GANTT charts and critical path diagrams.

The bigger the project, the bigger the task: 98% of projects worth over $1 billion incur delays. Since these megaprojects are going to make up 77% of construction projects by value over the next 15 years, the issue is a pressing one.

Despite the value add and efficiency of tech, the construction industry is slow to adopt new solutions: it only spends 1% of its revenue on Research & Development (compared to 3.5% by the automotive industries) and receives sub-average corporate venture funding. Variation across construction sites and firms also hampers the adoption of new technologies.

As a result, construction is currently the second-least digitized industry in the world. It lags behind the general economy in both productivity and efficiency.

That means the opportunity for construction technology companies, and their investors, is absolutely enormous. McKinsey estimates that technological efficiencies could save $1 trillion a year in infrastructure spending alone.

THE TECHNOLOGY

Construction technology is still a young industry, with three-quarters of its venture capital investments made at the Seed and Series A stages. However, with Iron Planet, Textura, and ConstructConnect all acquired for a half-billion dollars or more in 2016, it’s starting to gain recognition.

Procore Technologies is one of the earliest and most successful construction tech companies. Its mobile application includes cloud document storage, budget analysis, and daily logs, and is the most popular construction management software in the world. Founded in 2013, the company is now worth $1 billion.

In addition to collaboration technologies like Procore, other major construction tech trends include prefab housing, drones, robots, IoT-enabled analytic tools, and virtual/augmented reality (VR/AR).

  • Prefabricated housing is finding new traction in niche markets like sustainability and high-tech homes.
  • Drones can access, map, and analyze large areas or hard-to-reach places much more quickly and easily than human beings.
  • Robots can perform repetitive and dangerous tasks more quickly and safely than people.
  • VR/AR allows people to virtually present on remote or risky sites, provides an immersive and realistic training platform for workers, and allows architects and designers to see and construct projects in a way never before possible.
  • IoT-enabled analytic tools are cheaper and more ubiquitous than ever before, and have the potential to create an entirely interconnected construction site: location tracking of workers, for example, provides data for productivity tracking and construction site safety. Smart construction equipment can prevent theft and alert employees to maintenance needs.

THE NEXT INDUSTRIAL REVOLUTION

Construction is expected to grow to $1.5 trillion by 2020, and infrastructure construction is growing at a similar rate: by 2030, the global investment in infrastructure will top $70 trillion. Technology is advanced enough to provide real advantages to that market, and cheap enough that those advantages create real savings.

The tech is there; the price is right; and the opportunity is enormous. The next step is widespread adoption.

Kiddar Capital is an active investor in construction tech and plans to place additional capital into this sector. Kiddar Capital construction technology investments to date include:

  • BuildingConnected, whose software is revolutionizing the construction bid management process.
  • Kanler, which caters to millennials with a technology-based homebuilding and renovation process as seamless as a smartphone app.
  • Rhumbix, an all-in-one construction management platform.

“We are on the verge of the next industrial revolution,” says Kiddar Capital CEO Todd Hitt.


The Built World Market Opportunity Series

Part I: Construction Tech

Part II: Real Estate Tech

Part III: Logistics Tech (coming soon)

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