Bay Area startups see big opportunity in construction technology
The industry has seen a torrent of investment in 2018 as startups seek to inject much-needed innovation into the sector. During the first half of 2018, investors pumped a record $1.05 billion in contech startups, which is 30 percent more than the 2017 total, according to a recent report from real estate firm JLL.
Managing construction sites is hard work. The industry is plagued with high costs, labor shortages and slow progress. Construction is one of the least digitized industries in the world, according to a 2016 report from McKinsey Global Initiative. Many construction companies still use paper blueprints and 2D modeling. Investors see that as an opportunity.
“There’s a massive labor shortage, there’s more work and construction schedules are compressed,” said Tracy Young, CEO of construction tech startup PlanGrid, which is based in San Francisco. “The only way to help with that is to use tools to be more productive and software is a big piece of that.”
PlanGrid makes an cloud-based app that construction crews use to view blueprints, instead of blueprints on paper.
The construction industry has taken so long to digitize, Young said, because it’s taken years for hardware to catch up to software. The use of mobile devices that construction workers could use on a construction site didn’t become possible until 2010. Construction companies used software, of course, but that was largely confined to a desktop away from the actual build site.
“The technology really just wasn’t made for mobile workers, or workers who stand on their feet,” Young said. “The first time this industry could have really benefited from software was 2010, when the iPad was announced.”
Companies that cut down on the cost of materials, construction time, or the number of workers needed to complete projects have been the most successful, according to the JLL report. Startups are focusing in three areas, according to the report: big data and AI, collaboration software and offsite construction.Katerra, a Menlo Park-based construction company, has raised more at $1 billion since it was founded in 2015 and continues to make big acquisitions. But reports indicate that the company has struggled to deliver what it’s promised clients so far.
Another Bay Area-based startup, Vallejo’s Blu Homes, has also seen growth due to its ability to speed up building through offsite construction. Offsite construction involves making as many pieces as possible in a factory, then shipping those pieces to the building site to be assembled.