The European Construction Tech Start-Up Landscape

Intro & Methodology

The construction industry is often regarded as one of the least digitized industries, as many processes are yet to be disrupted by technological innovation and numerous tasks still rely on old-school pen and paper or Excel tables at best. Because of that, the multi-billion dollar construction industry lags behind other, already more technologically sophisticated industries, creating a huge opportunity for fierce entrepreneurs with (literally) ground-breaking ideas. Construction tech remains one of the last frontiers to finally take a step towards a bold future!

Together with my colleagues at seed + speed Ventures I have identified the construction industry as one of the most exciting spaces in today’s tech world and felt the urge to map the European ConstructionTech Startup Ecosystem. The result is a landscape which includes some of the most promising ventures in that space. 

Methodology

We did not just want to map startups from a typical investor’s point of view (e.g. by investment stage or geography) but analysed our findings according to construction industry standards by developing a framework based on the HOAI (a German industry standard for architects and engineers).

The resulting framework consists of three distinct phases which map to on-site processes: “Planning”, including the whole architecture process and usually every step before a general contractor is mandated, “Sourcing”, including the sourcing process of materials in preparation of the actual construction phase as well as sourcing of subcontractors and finally “Construction”, including every step on site and terminating with the final handover from general contractor to owner. 

We excluded anything focussing on already existing properties after the building process as we consider that space as Prop Tech. Additionally, we found multiple companies focussing not only on a specific phase of the construction process but aiming to support during all the phases and therefore built a category “Multi-Phase” for every company we could not match with a specific phase. Furthermore, we distinguished between actual Materials, Collaboration, Robotics and Procurement. While most clusters are rather self-explanatory our Collaboration cluster includes classic project management tools, BIM software solutions as well as all kinds of (communications) software that connects different stakeholders of the building process. Furthermore, the robotics cluster not only includes robotic solutions but also expands into drones as well as scanning technology.  

Our research was conducted by analysing data from Crunchbase, Angellist and other publically available sources. While we did our best to end up with a comprehensive overview, we are aware that we might have missed a few relevant companies in the ecosystem. The data includes startups from Europe (including Israel), which were founded after 2010. If you know of a startup that we have missed in our overview or you are building a construction tech startup yourself, please do not hesitate to reach out to either Markus, Jan or myself.

The Construction Tech Landscape in Numbers

  • We identified 136 European ConstructionTech Startups in total funded by a total of roughly USD 249m. Unfortunately, funding data was not publicly available for all the companies in our list. The Collaboration cluster represents a full 64% of all construction tech companies we identified with 97 companies, and generated 70% of the funding the whole space received. 
  • An interesting insight for us was that even in that cluster – which includes all ConTech-specific project management software solutions – only about one third (29 companies) seem to have a holistic or widely holistic approach to the construction process, while the majority of solutions are phase-specific or focused on specific stakeholders like construction companies as general contractors that usually are not that much involved in the earlier phases of project creation.
  • Next to Collaboration, the Procurement cluster represents another 15% of the companies we mapped and 18% of total funding. As the construction market is quite fragmented, with different stakeholders in different phases on the one hand, but also an incredibly large number of specialized service providers, especially in the Construction phase on the other, complex contracting structures involving contractors and subcontractors are widely common.
  • Given these structures, procurement tools and marketplaces for services and materials might have great disruption potential in the industry providing both smoother processes and a more transparent market.
  • As the construction industry lags behind most other industries in terms of digitization, entry barriers for new technologies are high. Therefore, it is no surprise that robotics and drone startups received the smallest funding amount. Although we see huge potential, for example in on-site tracking, both the maturity of robotics technology and the readiness of the industry are not given yet to achieve broad acceptance.
  • We only identified 6 companies focussing on (new) materials, which did not come as a surprise given VCs’ reluctance to fund hardware-related and R&D-heavy non-digital businesses. 

Top 15 funded construction tech startups

As stated above, funding is heavily flowing into the collaboration segment. 11 out of the top 15 startups (by funding) are from this segment:

  1. PlanRadar (35 Mio. $) – Collaboration
  2. Spacemaker.ai (25 Mio. $) – Collaboration
  3. Disperse.io (16,6 Mio. $) – Collaboration
  4. Klarx (16,5 Mio. $) – Sourcing & Procurement
  5. Buildots (16,0 Mio. $) – Collaboration
  6. Schüttflix (15,7 Mio. $) – Sourcing & Procurement
  7. Sensat (15,1 Mio. $) – Robotics
  8. habx (10 Mio. $) – Collaboration
  9. XYZ Reality (9,2 Mio. $) – Collaboration
  10. Alasco (8,4 Mio. $) – Collaboration
  11. Capmo (7,5 Mio. $) – Collaboration
  12. Building Radar (5,4 Mio. $) – Collaboration
  13. Fieldly (4,7 Mio. $) – Collaboration
  14. Fonn Construction (4,4 Mio. $) – Collaboration
  15. Doozer (4,1 Mio. $) – Sourcing & Procurement

Industry-related Findings & Insights 

We identified three critical factors the startups and the industry as whole need to address:

Many partial solutions lack an integration layer

Across all segments, but especially in the collaboration segment we found a lot of competing solutions focussing on different use cases within their respective segment. As the industry (especially in Germany) is pretty fragmented we feel that the industry is missing an integration layer connecting all solutions and providing intercompatibility. A craft company might be forced to use Capmos App in one project, while the next customer requires it to use another solution. This will leave the craft company using multiple applications, which erases (at least partially) the gains in efficiency. If there was an integration layer, craft companies could stay with their preferred application and just plug into the solution used by the customer. In any case we would assume that products that offer relevant integrations will perform better than their rivals.

Unclear data ownership along the value chain 

From the early planning phase to the handover of the completed property all kinds of data are generated by numerous applications. While it might be clear who owns the data in a specific phase it is not quite clear who is (and will) be the gatekeeper and long-term owner of those data and how data-usage will look once the property is finished, handed over or resold in the course of time. Construction tech startups need to have an idea how data will managed throught the lifecycle of the property.

Fragmented industry difficult to scale 

One of the key challenges for startups entering the construction tech industry is scaling their business once they have completed the product and acquired first pilot customers. As the industry is both very fragmented and not digitised yet, “normal” sales tactics do not work well here. Traditional sales approaches heavily focus on building up a sales organisation that has their feet on the ground and approaches customers directly one by one. From our view this seems to be a tough challenge given the unit economics of many of the solutions we looked at. Startups capable of attracting the critical funding needed to do so and execute well or solve the problem in a clever way will have a big edge over their competitors.

Conclusion

The construction industry is about to be disrupted by digitalisation just like every other industry of our economy. Given the enormous size of the industry and the prevailing old-school paper-based processes there is a huge potential for construction tech startups to create value and turn the industry upside down. Venture capital investors have funded more than 130 companies with a focus on collaborative software solutions in Europe. However the high degree of fragmentation and the missing digital affinity are big obstacles for startups to scale rapidly. Providing an integration layer for the numerous competing solutions along the value chain could boost the acceptance of digital applications. To get the full value out of the data generated in the different phases, a central gatekeeper is needed to collect and coordinate all data and make sure it can be passed on once construction is finished.

About the authors

Markus Börner

Markus joined seed + speed Ventures in April 2020 as an Associate. Prior to my time at seed + speed, I worked first as an Analyst, later as a Junior Investment Manager, at Technologiegründerfonds Sachsen (TGFS) and S-Beteiligungen Leipzig completing both Venture Capital and Private Equity deals. Before starting my VC career I studied Economics and Management Science at Leipzig University.

Jan-Soeren Zinke

Jans journey at seed + speed Ventures began in June 2020, as the youngest member of the investment team. At seed + speed, I’m sourcing investment opportunities, supporting existing portfolio companies and analyzing investments. Before joining seed + speed, I studied business administration and finance at the ESB Business School and at Poole College of Management at North Carolina State University. During my studies, I worked in consulting, for a startup and in venture capital in Berlin, Munich and New York City. You can find me on LinkedIn and on Twitter (@thisisjansoeren).

Mathias Bosse

I joined the investment team of seed + speed Ventures in July 2019. Prior to that, I worked as a Senior Investment Manager at Brandenburg Kapital, the CFO of an e-health startup and Senior Consultant at the Transaction Advisory Services branch of Ernst & Young. Since 2017 I managed 17 portfolio companies, working with a diverse set of incredible founders. Along the way I have been lucky to complete two exits from my portfolio so far. I’m a graduate of HHL Graduate School of Management, where I earned my MBA and am a CFA charter holder. 

About seed + speed Ventures

seed + speed Ventures is an experienced seed investor focussing on B2B software startups in Germany, Switzerland and Austria. As a lead or co-investor, we initially invest up to €500k in our portfolio companies and support the development of sustainable, successful sales structures through tailored sales coaching by our in-house sales trainers. Thus we actively add value to the operational business of our portfolio companies to enable faster growth.

As a single LP fund, seed + speed combines the advantage of the flexibility of a family office with the professionalism of an institutional VC investor.

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