While construction and real estate may not be as flashy as delivery services, driverless cars or drones for investors, they’re both industries that are drawing real money from venture capitalists looking for new markets under-served by technology.
In the last year, venture capitalists spent $250 million dollars on investments in the construction industry and another $1 billion according to data from CB Insights.
Admittedly, the amount invested in construction deals is roughly a quarter of a single round for on-demand transportation and delivery services like Lyft or Uber, but it’s a significant jump from the $50 million startups serving the industry raised in 2014.
Companies like IronPlanet, ProCore and PlanGrid, which have all raised significant amounts of capital from investors, all have real revenue and real customers in an industry that’s not typically known to embrace the latest technologies.
Construction’s new embrace of technology is in part because of the ubiquity of mobile devices and the development of software as a service models that don’t require the significant infrastructure investment that companies used to need to deploy complicated resource planning software.
Now, those investments are moving upstream to catch an even higher part of the construction value chain.
Heavy equipment rentals (IronPlanet’s purview) and construction management tools (ProCore and PlanGrid) are one thing, but with their $7 million investment in Architizer, new investor August Capital — and a slew of existing angel investors and industry experts including Joanne Wilson, Alessandro Piol, SHoP Architects and Handel — are tackling procurement among the first line of decision-makers — the architects.
Architizer started seven years ago as a side project for company founder Marc Kushner, whose firm was having a tough time in the wake of the financial crisis.
The company began as a community and portfolio site for budding and established architects to share their work with the world. Since its launch, 40,000 architecture firms have uploaded over 120,000 projects that each have an average price tag of $33 million.
But it’s not the community that’s most attractive to new and existing investors, it’s the collective spending that they manage.
Architects will order $100 billion worth of products for buildings in North America annually, according to Kushner’s estimates, and right now there’s no transparent marketplace for these buyers to conduct their business.
“The amount of shitty decision-making that happens is unbelievable,” says Kushner. “As consumers we’re used to Amazon reviews and Yelp reviews and have the ability to choose from a plethora of products. Meanwhile [architects] are making million dollar decisions with relatively no information.”
The Architizer Source tool, which is where the bulk of the company’s new cash will be funneled, aims to change that. In a private beta since last July with only 10 architecture firms, the platform was able to source $50 million worth of deals.
The marketplace software links architects with a number of vendors who pay Architizer in two ways. One, the vendors are charged a transaction fee when a deal is struck, but the company has also built software procurement tools to make it easier for vendors to make it easier to respond to orders and quicker to bill and receive payments.
A product geared towards construction seems like a great idea when the economy is humming, but if it slows (and it looks like we’re heading into a slowdown now), is an architecture startup really a great place to be?
According to Kushner… the answer (unsurprisingly) is yes.
“Architecture billing is a key economic indicator for a good reason,” Architizer’s chief executive wrote in an email. “We are the first to get hit in a recession and the first to recover. The industry is highly susceptible to macro-economic trends, however construction… never stops – even in a downturn.”