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Construction Tech: Boom or Bust

Money makes the world go round—and it can help get new construction-technology ventures up and off the ground. This has been a growing trend in recent years where investors recognize the value of construction technology, and they are putting their money where their mouth is.

There are several different iterations of this. Some construction companies have developed investment wings for their business. For example, since 2019, Suffolk Technologies has backed 24 companies across automation and robotics, supply chain marketplace, sustainability, financial technology, and smart building themes.

As another instance, earlier this year, Hensel Phelps announced the launch of Diverge, an investment company specializing in construction innovation and technology. Here the construction company says by investing in these startups and their products in the early stages of development, it can help influence construction technology in a positive way.

While construction companies investing in tech companies is one example, another is technology companies have also made strategic investments in other technology companies. One example of this is Bentley iTwin Ventures, which is a part of Bentley Acceleration Initiatives, and is the internal incubator for strategic investments by Bentley Systems. Prioritizing seed to series B investments, this $100 million corporate venture capital fund co-invests in startups and emerging companies that are relevant to the objective of advancing infrastructure through going digital. Investments made here ultimately accelerate digital twin capabilities.

And then, of course, there is the traditional model, where a VC (venture capital) firm invests in an up-and-coming tech company to give it the boost it needs.

One example of this is the recent investment of Florida Funders in Togal.AI, which is an AI (artificial intelligence) construction software that automates the takeoff within the construction estimating process. Florida Funders invested in Togal.AI’s $5 million Pre Series A SAFE round at a $50 million valuation cap from the Florida Funders’ Fund 2, LLC., alongside a roster of new and existing investors including Coastal Construction and executives from Meta, Goldman Sachs, and Minitab.

The money will be used to hire and do ongoing product development. The technology reduces errors and labor costs with its machine learning engine that automatically and accurately detects and measures project spaces in seconds—a process that used to take hours or days.

U.S. VC investment in construction tech startups totaled $1.3 billion in H1 2022, up 44% from H2 2021. OF course, the source for this stat comes from none other than Silicon Valley Bank near the end of last year, as it suggests construction tech remains a promising area for VC investment over the long term because of opportunities for efficiency gains and tech adoption in the industry.

Silicon Valley Bank isn’t wrong, but the future is murky for all as economic conditions remain uncertain for nearly every vertical market. Certainly, there are also still opportunities to be had, as construction technology does bring value to an industry that contributes right around 4% to the GDP—which represents more than $1 trillion. Do you see challenges or opportunities? Perhaps that is the question we should be asking as we head into the rest of 2023.

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