Can tech disrupt the construction industry?

The construction industry is attracting major investment at the moment, much of which is being ploughed into exciting technology innovation.

In July 2019, The Wall Street Journal described venture capitalists ‘pouring money’ into construction tech. And in August 2019, construction-tech-specific firm Brick & Mortar Ventures launched a £97mn fund ‘to invest in both hardware and software for construction-related industries.’

According to TechCrunch, funding in US-based construction tech startups surged by 324% in 2018, compared with the previous year.

High-tech construction company Katerra, tintable-window startup View, and cloud-based construction management application unicorn Procore, all benefitted from hugely successful funding rounds towards the end of 2018. And among construction tech companies, there was a lot of M&A activity, with software providers acquiring smaller startups.

Modular construction technologies are seen as a potential solution to the shortage of skilled labour affecting the industry. This year, Goldman Sachs invested £75mn into British modular housing firm TopHat. It builds modular homes out of its factory in south Derbyshire, then ships them to the site fully made.

Likewise, in May 2019, Japanese housebuilder Sekisui House took a 35% stake in a Manchester-based regeneration company. Sekisui House invested £22mn in Urban Splash House Holdings, a new operation established to increase modular home development from 200 to 2,000 homes a year.

The construction industry is also challenged by rising construction materials costs and an overall lack of productivity improvements, leaving it ripe for disruption.

Judging by mid-year reviews, 2019 is not necessarily on track to hit the same heights as 2018 – but that’s largely due to a few outsized investments. The trend of construction tech investment doesn’t look like it’s going anywhere, with VC firms clearly stating continued interest in this area.

The companies that are attracting investment aren’t just improving efficiency and the ways in which we already do things, they’re entirely reinventing and disrupting the industry.