“European construction technology investments seem to have fallen off”
Thomas goubau headshot
The World Economic Forum predicts that a 1% rise in productivity could save the construction industry $100bn (£70bn) a year. According to McKinsey, if the construction sector adopts new technology and digital ways of working, £1.1trillion could be added to the global industry. Now, venture capitalists (VCs) are clued in to this and, as a result, the top 20 construction tech funding rounds – investment fund raising operations – since 2012 have totalled almost £700M.
Unsurprisingly, these big-money rounds are taking place exclusively in the US. But not for long. With a GDP more than double that of the US, the European construction industry is poised to become the torchbearer.
In many European Union states – including the UK, Finland, Denmark, Germany, and the Netherlands – forward-looking technology such as building information modelling (BIM) is or will shortly be required by law for contracts on public works.
Compare this to the US, where only the state of Wisconsin took a similarly bold step of requiring BIM implementation for public projects (to be fair, Wisconsin‘s economy is almost the size of Finland’s).
For these reasons alone, you’d think Europe’s venture capitalists would be rushing to get in on the ground floor of companies looking to revolutionise the slow-to-adapt construction industry.
Unfortunately, European investments in construction technology seem to have fallen off in 2017: there were only 36 funding rounds raised compared to the 47 that were raised in 2016. All of which were well under the eye-watering £90M mega-round raised by tech firm Katerra in April 2017.
This story of Europe’s VCs trailing behind their American counterparts is well known. Also, the two global powerhouses perceive funding in two vastly different ways: where the US embraces risk and critical mass growth processes, Europe as a whole is more cautious and startups need to generate revenue earlier in order to prove worth and value.
These polar opposite VC approaches have caused a gap between the US and Europe. The hesitation and discretion that defines European investing will only cause an even larger imbalance.
Left behind by the Americans
And between innovative construction companies and well funded startups, it’s no wonder America is leaving Europe in the dust. It’s been well documented that large amounts of VC money can create a market of booming startups and motivated corporates. If you build it (and hire a sales team to fill the pipeline), they will come.
European companies need to wake up if they want to spark tangible interest in digitisation and to raise funds comparable in size to their American counterparts. If the European construction sector wants to get on an equal footing with the US, more VC money is crucial.
Major construction companies and technology startups will need to take a page from America’s playbook and show venture capitalists the potential of the market.
- Thomas Goubau is founder and chief executive of software firm Aproplan