Construction Tech Leans on Innovation to Scale Industry Transformation

We’ve heard of InsurTech, FinTech and more — but there’s a new player on the block.

Meet construction tech: the latest iteration of the 21st century’s digital-fueled innovation renaissance.

“Five years back, if you talked about construction tech, very few people knew about it. I went to a conference and said, I invest in ConTech. And people are like, is this conference tech? What exactly are you doing?” Vivin Hegde, co-founder and managing partner for North America at Zacua Ventures, told PYMNTS.

“But the reason it’s so important is that construction is the second largest segment in the world. Most of the pressing issues that the world faces today are addressed by construction, and they cannot be solved without the construction space being much more innovative,” he said.

After all, the sheer scale of the construction industry, which encompasses real estate, infrastructure, and industrial structures making it one of the top largest industries in the global economy, underscores its significance in addressing pressing issues across both society and business, like affordable housing, climate change and infrastructure resilience.

From automation and robotics to prefabrication and new materials like green concrete, the spectrum of innovation opportunities within construction is vast, Hegde said. Moreover, emerging technologies such as artificial intelligence (AI) are beginning to play a pivotal role in reshaping the industry.

Understanding Construction Technology

One of the fundamental shifts in the construction technology landscape is the exponential increase in funding over the past decade, reflecting a growing recognition of the sector’s potential.

Just a decade ago, the sector was nascent, with only a handful of startups — and now that is starting to change.

“There’s been a huge explosion of startups, both in terms of quantity as well as quality. And it’s not just one or two geographies. The U.S. is obviously doing a lot, Europe is doing a lot, but even places like India, Australia, Israel, Latin America are having a moment,” Hegde said.

“As a VC, you’re de-risking their early existence by enabling them to more productively engage with the existing construction space, which includes these large players, corporates and others in the space who actually want to innovate, but they don’t know how to do it,” he said.

Zacua’s focus on early-stage construction tech startups aims to bridge the gap between fragmented industry players and innovative solutions.

Three overarching themes drive Hegde and his team’s investment thesis: productivity, decarbonization and urbanization. From digitization and automation to sustainability-focused solutions and infrastructure resilience, these themes encapsulate the pressing challenges and opportunities within the construction industry.

“You need to understand construction workflows very well,” he said. “When construction tech first started, everything was about taking the existing workflows and converting them to digital workflows. Then it went to platforms, and now it is time to start optimizing. We have generated data, we have created platforms for data, and now we want to optimize and automate the workflow processes. So that’s where we are looking at the next frontier.”

Construction Is Transforming

Despite the immense potential of construction technology, the sector faces challenges, including regulatory fragmentation and the need for broader industry adoption. Educating stakeholders about the value proposition of innovative solutions and navigating regulatory landscapes are crucial aspects of driving adoption and scaling startups within the construction ecosystem.

“We use a term called gentle disruption for construction, as in, it’s not coming and breaking everything that exists because that doesn’t tend to go very well in the industry,” Hegde said. “Filling the trust of people and making it very, very easy to adopt is very important for product market fit.”

Looking ahead, the conversation highlighted the potential for further advancements, particularly in achieving Industry 4.0 standards. By leveraging technologies like AI and automation to create dynamic digital twins and optimizing processes, the construction industry can enhance productivity and efficiency significantly, Hegde said.

And as investment continues to flow into the sector and startups push the boundaries of what’s possible, the future of construction technology appears brighter than ever before.