ConTech investment weathered last year’s shaky economy

Earlier today, Bloomberg News reported that Gropyus AG, a Vienna, Austria-based startup that helps streamline housing construction, had raised 100 million Euros (US$109 million) in fresh cash from an investment group led by Vonovia SE, Germany’s largest landlord. Gropyus will use this capital to expand its factory to meet its goal of producing 250,000 sm of timber-based homes by 2024.

Gropyus is one of the top 50 ConTech startups of 2023, as chosen by CEMEX Ventures, the corporate venture capital and open innovation unit of the giant cement, concrete, and aggregates manufacturer CEMEX. That list is part of a recently released report where CEMEX Ventures offers its review of ConTech investments last year and its forecast for this year.

In 2022, global venture capital funding declined by 35 percent, to $445 billion, according to a market analysis by Crunchbase. However, the size of the investment in 2021 may have been an anomaly, as last year’s number exceeded investment totals in the years 2013-2020.

Investment in construction technology (ConTech) specifically hit $5.38 billion last year (less than a 1% falloff compared to 2021) from 228 deals, according to CEMEX Ventures’ estimates. Indeed, since 2018 the flow of capital is why ConTech continues to be a vibrant source for innovation.

“The construction sector has entered into an era of change, where new emergent business models are driving its revolution,” writes CEMEX Ventures in its report. Startups “are just some of the new players helped the industry become more sustainable, productive, efficient, and innovative, and are transforming the way we have traditionally seen construction.”

As of January 2023, CEMEX Ventures had 23 startups in its investment portfolio. It also recently launched its exclusive accelerator program, CEMEX Ventures Leaplab, which is currently working with five startups in six different geographies under an intensive 14-week period.

ConTech investors seek productive solutions

The top 50 ConTech investments list classifies each startup according to four categories: Green Construction (13 startups), Enhanced Productivity (13), Construction Supply Chain (12), and Future of Construction (12).

The startups related to enhanced productivity accounted for 53.1 percent of the total deals’ dollar amount, followed by new construction methods and solutions such as prefabrication and robotics, which accounted for 20.6% of the total deals. Green construction (the leading category in 2021) made up 14.9% of the deals last year, and startups in the construction supply chain category 11.4%.

Sorted by geographic region, 113 of the startups in 2022 were in North America (97 in the U.S.), 72 in Europe (of which 20 were in the United Kingdom), 29 in Asia Pacific (10 in Australia), nine in the Middle East, four in Latin America and one in Africa.

Planning and scheduling led the top seven most common topics related to ConTech investment last year, representing 17.1% of total investment. Project monitoring and control placed second among topics, accounting for 12.7% of last year’s investment dollars.

'Promising year' ahead for building materials, offsite construction firms

CEMEX Ventures observes that, despite a slowdown in the global economy in the later stages of 2022, there were still a high number of Seed and Series A deals, and acquisitions. There were, in fact, 91 Seed investments, nearly two-fifths of the total number of deals, followed by 53 Series A deals.

CEMEX Ventures’ report notes that ConTech investment flatlined last year due to unfavorable economic forces that are likely to continue through 2023. Yet, CEMEX Ventures foresees resilience to economic forces because, it writes, “ConTech is an emerging sector with a less-crowded marketplace [than FinTech or PropTech] brimming with opportunities for ambitious entrepreneurs.”

Enhanced Productivity will continue to receive healthy investor interest, CEMEX Ventures predicts, partly because it requires less upfront capital, and has higher short-term ROI.  On the Green Construction front, CEMEX Ventures expects “heightened demand for new processes, products, and services” that negate environmental impacts and to comply with tougher climate targets.

The report sees a “promising year” ahead for startups focused on advanced building materials, industrialized construction methods (especially off-site construction), and robotics and machine-assisted applications.

North America and Europe will remain hotbeds for ConTech investment, and early-stage investment will predominate again this year. “This is especially true for corporate venture capitals that seek to link startup solutions with their core products.”

As a corporate venture capitalist itself, CEMEX Ventures advises prudence and collaboration to entrepreneurs. “We are not out of the current macroeconomic environment yet, so stay ambitious while preparing for the worst.”

The report includes interviews with CEOs from four companies that have been on previous years’ lists: PartRunner (an on-demand delivery service for contractors and supply houses), hyperTunnel (infrastructure solutions), StructShare (cloud-based procurement), and Plinx (construction safety).