Entrepreneurship

Tech disrupts the €2tn construction market

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Technology innovators and entrepreneurs across Europe are increasingly eyeing the construction industry.

It helps that construction is a mega market of almost €2tn on the continent alone. But founders, and their investors, aren’t attracted only by market size. They’re betting on the impact of digital transformation in an industry that has been, so far, a sleeping giant.

Construction accounts for a whopping 9% of the EU’s GDP and employs 18m people. It’s also one of the least digitalised industries in Europe, with almost stagnant productivity over the past two decades, growing at only 1% — a fraction of the improvement in other traditional industries like manufacturing — according to data from the European Commission.

“The biggest challenges the construction industry faces today are productivity, trash and costs,” says Alban Mallet, founder of XtreeE, which uses 3D printing techniques to produce everything from walls to bridges.

“Productivity because it has barely improved over several decades; trash because the construction industry is faced with a pressing need to figure out waste management; and costs because there is major potential for productivity and time gains in this sector.”

There is huge waste and inefficiency on today’s construction sites that software, data and devices are well-suited to eliminate.

French startup Hiboo — which provides a platform to help companies manage heavy equipment, trucks and vehicles — found that across 15k pieces of equipment that it tracks, there’s on average a 40% rate of ‘idling’: meaning engines are on but the equipment is not being used.

“That’s a huge amount of time spent doing nothing,” says Charles Bénard, Hiboo’s cofounder. “At the end of the year if you take a fleet of 50, it’s a million dollars saved and hundreds of tons of CO₂ avoided.”

Working with corporates

Despite a growing toolbox of gadgets, from virtual reality headsets and connected devices to high-tech tablets, the reality at most building sites is that pens and clipboards are still the most popular tools of the trade.

“There’s a lot of comms about sensors, the internet of things, data and all sorts of modern gadgets being deployed in the construction space,” says Emeric Mourot, a French entrepreneur who cofounded My Digital Buildings, which makes ‘digital twins’ of construction sites for virtual viewings and data capture. “The reality is that this tech concerns only a small percentage of the overall market.”

Like Mourot, entrepreneurs across Europe are out to change that. With Covid-19 serving as an accelerator, startups are spotting opportunities to become vectors of change, addressing longstanding sector woes from squeezed profit margins to massive amounts of waste — estimated at 374m tonnes last year alone.

Startups are now coming up with dedicated innovations to address the challenges facing the sector’s well-established leaders, including France’s VINCI, Spain’s ACS and Sweden’s Skanska.

Data analysis by Foundamental, a construction tech investor, indicates a sector poised for massive growth. The firm compared venture funding in construction tech relative to other business-to-business (B2B) and business-to-consumer (B2C) markets. They found it takes each sector two to four years to move from $5bn to $10bn of investment, and then another two to three years to move from $10bn to $50bn.

“Construction just crossed the $10bn mark and it took 3.5 years,” says Patric Hellermann, general partner at Foundamental. “That’s one of the macro indicators that shows us that in the next two to three years construction tech will break out to reach $50bn or more. We think it’s the most exciting sector to be in alongside healthtech and pharma tech.”

A different approach to innovation

But innovation timelines look very different in construction compared to faster-moving sectors like consumer tech.

“The construction space is definitely going through its digital transformation, but it’s a conservative world. It’s a step by step process,” says Mourot. “It’s still a relatively new trend and when you think about it, it makes sense: the digital world is, in essence, dematerialised. So, there’s bound to be friction when you bring digital into an industry like construction, which is all about the physical, the material.”

Still, the industry has to change. Operational profitability is often 5% at best among Europe’s construction giants. That leaves little room for error when experimenting with new technology and limits budgets for innovation upgrades. At the same time, it shows exactly why companies must use technology to figure out how to do more with less.

Conservatism is also a product of the market’s fragmentation, with many different players involved at any given phase of a project’s life, from architects to contractors, developers and suppliers. This makes for messy coordination and communication mishaps, leading to reworks, delays and unforeseen costs. This serves as both a starting point for innovation, and a barrier to uptake.

Covid wakeup call

Covid-19 might be the shock the industry needs. Construction sites around the world emptied out due to lockdowns and the economic slowdown. With the path to recovery still uncertain, both for the sector and the broader economy, improving productivity is key to companies’ resilience.

Last year, McKinsey listed Covid-19 as a major accelerator for the transformation of the construction industry and predicted that the sector will look radically different in five to ten years.

According to a survey by construction software maker Procore, 66% of construction companies polled in the UK adopted a new technology during lockdown, with 94% reporting operational improvements as a consequence.

“It’s like an old dinosaur that is finally ready to move,” says Lucile Hamon, the founder of construction tech startup Backacia, a marketplace for offloading unsold materials based at startup campus Station F in Paris. “The well-established players are becoming very active in making innovation happen, and that’s visible in the kinds of conversations that we, as startup founders, are now having with executives at the big corporates.”

Construction tech startups worth knowing

Here are some of the names worth knowing in construction tech. For more, read Sifted’s 30-page deep-dive into construction tech in our reports section.

Sustainable materials

Provide environmentally friendly materials for construction — for example, from recycled or natural materials.

Startups worth knowing: Combo Solutions, Ricehouse, Lick, Nanogence, Celloz, Sustonable and System 3E

Modular construction

Develop building concepts based on modular components produced in off-site factories and assembled on-site.

Startups worth knowing: Novito, Brette Haus and Modulous

Online marketplaces

Connect construction companies with third parties offering various services.

Startups worth knowing: Warmango, Bobtrade, Doozer and Relok

Project management software

Simplify construction project administration by focusing, for example, on safety, site supervision, budgeting or a combination.

Startups worth knowing: Hiboo, AOS, Voyage Control, Viibee, Fieldly, Buildsafe, Myades, Smartbeam, Bulldozair, PlanRadar, Reinvent, Capmo and Alasco

Building information management

Facilitates collaboration between construction stakeholders by generating 3D building models.

Startups worth knowing: Infogrid, Bimspot, Wizzcad, 3D Repo and XYZ Reality

Data analytics

Generate insights about construction projects based on either historical or project-specific data.

Startups worth knowing: Converge, Spacemaker, AI Clearing, Contilio, Qualis Flow, NPlan and Aprao

Marie Mawad is Sifted’s French correspondent. She also covers AI, and tweets from @Marie_a_Paris. Kit Gillet is Sifted’s eastern Europe correspondent. He tweets from @KitGillet

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