Venture Funding in Construction Tech (Part 3 of 4)

The construction phase has experienced the least amount of innovation as a result of low adoption and budget constraints. Here, we find how digital collaboration tools pose the most attractive opportunity for construction tech and venture funding.

On-site construction innovation is the key to unlocking a fully enabled digital twin

Design and planning have made revolutionary progress.
Industry CAD leaders control the design phase, making it difficult for engineers, architects, and designers to make a switch to new platforms. However, many collaboration opportunities are present for start-ups such as tech-build, compliance, cyber-security, and data aggregation. With the progress taking place in the design and planning phase there are questions as to where venture funding can bring the most value to construction.

The next step to construction innovation is merging the gap between the planning and the execution phase. Contractors have yet to adopt the transformation that designers and planners are experiencing. This is a result of low adoption and construction budget constraints. The separation between design and production is causing a slow-down in BIM innovation. There is an imminent need to relay live data between designers and contractors.

Adoptable onsite solutions will bring the most value to the BIM life cycle.
Start-ups creating adoptable technologies that provide data exchange and collaboration between designer, planners, and contractors will bring the most value to the BIM life cycle. While complex on-site BIM technologies aim to alleviate adversarial relationships and fragmented processes in the value chain, the nascency, lack of capabilities, and slow ROI do not provide a compelling case for adoption. Studies show that contractors are attracted to simple and reliable methods to ensure their return on investment.

Complex BIM solutions will be more attractive in the future when BIM applications broaden (considerable life cycle phases), deepen (BIM levels), and diversify (the benefits of various analyses), bringing immense benefits. With BIM still developing, solutions must focus on the most immediate issues with the highest ROI to encourage adoptability.

On-site collaboration tools are the first step to on-site construction innovation

Subcontractor and contractor work relationships need improvement.
To improve performance on traditionally procured projects, the work relationships between main contractors and subcontractors need to change. Subcontractors play a significant role in the successful delivery of projects, executing between 80–90% of the volume of works on building and housing projects and need to be included in collaborative arrangements in the process.

General contractors complain that subcontractors have a habit of bringing inadequate workers to site, a practice which hampers work and fuels conflicts. Subcontractors on the other hand, experience harsh contract terms and clauses. For instance, the popular “paid when paid” clause allows the contractor to pay the subcontractor within a certain amount of time after receiving payment from the owner, taking on average 42 days. The blame culture between main contractors and subcontractors is so severe that it inevitably erodes trust and any form of long-term collaboration.

Miscommunication and poor project data accounts for 48% of all reworks on U.S. construction job sites, costing the industry over $31 billion annually according to FMI research.

Digital collaboration tools have seen 60% of all venture funding in the industry.
Diving deeper, the root cause of the blame culture between contractors and sub-contractors is lack of digital documentation and communication rather than training. Many contractors use a mix of paper and digital documents, and even if they are the documents are digital, they may rely on a mix of software applications — usually in the form of spreadsheets. This lack of digital documentation inhibits progress and quality of general contractors. Firms enhancing communication between general and sub-contractors will bring the most value across the supply chain paving the way for more complex BIM tools. In fact, the digital-collaboration and mobility solutions segment has attracted close to 60% of all venture funding in the construction technology sector.

Specific onsite collaboration issues

RFI submissions
In construction, a request for information (RFI) seeks the clarification of plans, drawings, specifications, and agreements. The construction RFI is a formal written process in which parties, such as the contractor and designer, clarify information gaps in construction documents. The process goes across all parties causing many delays and cost over-runs.

Garrett Taylor, field engineer at Clark Construction, finds RFI submittals to be a huge pain. To solve this problem, general contractors hire a third party to manage RFI’s. The third party receives RFI’s through emails from contractors update blueprints manually and send to Procore to continue the project.

Scheduling
General contractors work with several sub-contractors for each project. Effectively managing them, their timelines, compliance, documentation, and collaboration with other contractors are vital to their success. General contractors outsource 3rd parties to create and manage schedules for each project.

These third parties typically use Oracle’s Primavera P6 scheduling software which is not designed for construction projects.

Payments
Payments between contractors and sub-contractors are often delayed due to cash flow constraints. Cash flow is also an issue for the construction supply chain and is a common reason for contractors and sub-contractors becoming insolvent. This can be catastrophic for a project in terms of time and money.

Quality Assurance
When it comes to determining the quality of a construction project, there are typically several factors to consider. Among these are whether projects are completed on schedule and meeting the owner’s requirements within the agreed upon budget. Additionally, whether contractors have fulfilled the specifications laid out in the job’s contract — and avoided disputes in the process — is key to determining construction quality. The inspection process takes a lot of time and is performed intermittently throughout the project.

Identifying construction innovation

  1. Adoption from general contractors
    Since general contractors will always pursue a lowest-bid-to-win strategy, they are forced to seek and adopt technologies to lower costs. Contech collaboration tools purchased by general and/or sub-contractors indicate high ROI and simple adoption.
  2. Mobile data exchange
    Two-way data-exchanges between on-site and offsite workers is essential for implementation in the BIM life cycle. The recent availability of low-cost mobile connectivity has ushered in a new generation of “mobile first” cloud-based crew-mobility apps that can be deployed, even on remote construction sites, with real-time updates.
  3. Geographically diverse customers
    Customer acquisition is an universal green-light for all investments, but in construction any sign of traction should turn heads. Obtaining diverse networks indicates rapid adoption and more importantly interoperability — a feature that has limited the growth of start-ups in the past, e.g Pro-Engineer, Okibo, BIMsystems, seriouslabs.

Adoptability, data-exchange, and diverse customers are key indicators of a Contech unicorn.

Emerging collaboration solutions

RFI submission platform
PlanRadar, has developed apps for tablets and smartphones that allow changes in construction blueprints (RFIs) and plans to be relayed in real time to on-site crews. Site photos are hyperlinked to construction plans. This solution maintains a master set of documents with automatic version control and cloud access.

Communication platform
Construction companies of all sizes use Fieldwire to power clear communication on over 750,000 projects worldwide. With its easy-to- use mobile application, Fieldwire saves each user 1 hour every day by enabling more efficient information sharing onsite. Fieldwire’s key features include plan viewing, task management, issue tracking, reporting, and more — all accessible from one place.

AI powered scheduling
Disperse uses artificial intelligence to help contractors track progress and create efficient schedules. After scanning 360 degrees of 2D images in every room, images are uploaded to Disperse’s servers where Disperse’s artificial intelligence automatically detects anomalies and updates construction schedules.

Payment platform
Flashtract is a construction billing software that allows general contractors and subcontractors to effortlessly send and receive paperwork and payments. In the same app, general contractors can collect, review, and approve subcontractor pay apps, lien waivers, and other required billing documents in seconds.

Quality assurance platform
HoloBuilder allows contractors to easily capture, view, and control project progress with 360° photos, enabling teams to stay on schedule and on budget. Users can navigate their way through the entire construction project to view, annotate and collaborate.

Note: Snapshot of start-ups as of May 2021 — not conclusive of all start-ups in the industry or RHV pipeline.

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