Closing the trillion-dollar productivity gap in construction: our investment in Disperse

Christopher Steinau
Oct 22 · 5 min read

Today we are excited to announce our investment in Disperse, leading a $15 million Series A round. Disperse uses computer vision to fundamentally change how to measure progress on construction sites, helping to close the trillion dollar productivity gap in the construction industry.

This is a summary of the investment thesis that Northzone Partner Michiel Kotting and I have developed, that has shaped our thinking on building game-changing companies in the construction tech space.

The promise of AI

As an investor in 2019, there is a moment in most company pitches when you hear the words “…and that’s where our AI-powered solution will disrupt the current industry”. And it is true that recent advances in computer vision, language processing and predictive analytics are unlocking possibilities that only existed in the realm of SciFi as recently as 5 years ago. It’s no wonder that we are suddenly able to dream about fundamental industry changes in areas where there is more complexity than say, automating the selling of socks online. It is equally true, however, that when deeper questions are asked, the answer often becomes “the AI is on the roadmap” or “the impact is right now still limited to a number of small number of use cases”, and the promise of AI pretty quickly turns into just that.

Lagging productivity

Construction is one of the industries that has been largely immune to recent technological innovation. Although, at $10 trillion of annual spend, it equals almost 10% of global GDP it is notoriously lagging behind all other industries in productivity improvement.

Construction lags behind other industry in productivity gains

Taking a closer look, you can see that this lack of productivity corresponds with the lowest level of digitization of any industry apart from agriculture and hunting. And if you walk around on a construction site that is quite evident.

Construction is one of the least digitized sectors

But why is this the case? The simple answer is: construction projects are complex. On some construction sites there are hundreds of different parties involved, many of whom are working together for the first time or on an ad-hoc basis. Imagine the challenge of getting all the stakeholders to adopt a single piece of software at the same time.

This problem becomes evident when looking at construction tech companies. If, like us, you have been talking to dozens of them, you know that they stand apart from other software companies in their long sales cycles and low adoption and engagement rates.

Strong product market fit

Enter Disperse. The family of founder Felix Neufeld runs a construction firm building homes for Russian immigrants in their adopted home Germany. Growing up on a construction site he struck (after some hands-on pivoting) on a model where he could bring the benefits of automation and AI to the construction site, without everyone having to change the way they work.

The idea is simple: do a weekly site run-through with a 360-degree camera, and use state-of-the-art computer vision to determine detailed progress (or lack thereof), and link it deeply into the existing planning system. In doing so, Disperse are able to provide invaluable data and insights for complex construction projects, providing tangible ROI out of the gate on every project they have been deployed on. This strong product-market fit is enabling them to scale with the speed of a consumer software product in a hugely complex and traditional industry.

Disperse provides super powers

What started as an indispensable tool for planners (who care about reporting on progress and bottlenecks) pretty soon became a valuable companion for construction managers (who care about what needs to happen), financial administrators (who care about who needs to be paid), and project managers (who care about documenting issues and mistakes). That’s not only useful for the current project, but for future ones as well. Now you finally have a single source of truth for how a specific subcontractor is performing, or for how long it is actually taking to install the plumbing, as opposed to relying on manual tracking by a splintered set of unrelated parties.

This is fundamentally unique about Disperse’s approach: instead of trying to change workflows and add to channels of communication on a construction site, Disperse harmonises workflows and communications between all parties. As one client phrased it during our due diligence: “It’s like having super powers”.

Taking the long-term view: closing the trillion dollar productivity gap

As venture capitalists we like to throw around terms like “system of record” and “platform play”, and we like to look for endless potential and future upside, as much as many companies do with the promise of AI.

But in Disperse, we believe that we have found this rare beast. Here is a company that creates a new source of data, with the right set of relevant analytics on top, to deliver on the promise of real productivity improvements for the diverse parties on construction sites around the world. We believe that they can be a game-changer in helping to close the trillion dollar productivity gap in construction.

Christopher Steinau

Written by

VC at Northzone

Northzone

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