Billion Dollar Opportunities in Construction and Real Estate Tech
Real estate is the most valuable asset in the world. According to Fortune, all of the world’s real estate is worth more than $217,000,000,000. The construction industry employs 6,000,000 people. It also creates close to $1,000,000,000,000 in buildings and structures each year.
Take a moment to think about those statistics. They’re mind-blowing.
Land and property are extremely valuable. Businesses that develop property and facilitate the exchange of land are also quite profitable.
Despite the value of construction and real estate firms, innovation and funding have lagged in these industries when compared to other tech sectors. For example, CB Insights reported that construction tech startups raised less than $800M between 2012 and 2016. When it comes to fundraising, real estate startups have fared better. While real estate startups only raised $221M in 2012, they raised approximately $2.6B in 2016. That said, about $1.28B of the $2.6B raised by real estate startups in 2016 went to just three companies: Homelink, OpenDoor, and SMS Assist.
In contrast to construction and real estate startup fundraising, AI startups raised more than $5B in 2016 alone. Even though these industries aren’t getting as much investor attention as “hot” sectors like AI and fintech, they sorely need innovation.
Inefficiencies and opportunities in the construction industry
There are many inefficiencies in the way companies build and develop properties. The results of these inefficiencies are increased costs and decreased productivity. For example, a report from McKinsey suggested that large real estate projects usually require 20% more time than scheduled to complete. Another part of McKinsey’s report found that many large real estate projects cost up to 80% more than their initial budgets.
Instead of investing in new technologies and processes, many construction firms and property developers spend revenue elsewhere. According to McKinsey, the construction industry usually invests less than 1% of annual revenues in R&D. On the other hand, the auto and aerospace industries typically spend between 3.5% and 4.5% of yearly revenue on R&D. In an industry with so many inefficiencies and such little R&D, there is an enormous opportunity for construction tech startups to create value.
If you want to create a construction tech company, some of the biggest opportunities for disruption are in:
Inspections and surveying.
Planning and collaboration.
Prototyping and scaling.
Data gathering.
3D printing and/or additive manufacturing
Augmented or autonomous tools
Building information modeling
Inefficiencies and opportunities in the real estate industry
Like the construction industry, real estate has many opportunities. For instance, the real estate industry is enormous. There are about 3,000,000 active real estate agents in the United States. Also, there are more than 120,000,000 commercial properties under active management in the US.
There are many problems in real estate. For instance, a bunch of startups are creating software to easily manage commercial properties. But, in 2015, industry adoption of these software platforms was still less than 10%. This means that there is plenty of room for other commercial real estate management solutions to gain traction.
Are you interested in working on a real estate startup? If so, areas in the real estate industry that are ripe for innovation include:
Collaboration software
Marketplaces that make the process of buying, selling, and/or renting real estate more efficient
Data and analytics
Building and project info
Drones, AR/VR
Design and architecture software
Financial and project management
Insurance solutions
Financing solutions
Successful construction and real estate tech startups
So far, you’ve learned about opportunities for startups in construction and real estate tech. That said, you’re probably wondering what successful companies have been started in these industries. Well, you get to learn that right now!
Though construction tech is still a relatively new industry, there have been many successful startups in it. Some examples of prosperous construction tech startups include:
IronPlanet (acquired for $758M in 2016)
Textura (acquired for $663M in 2016)
ConstructConnect (acquired for $632M in 2016)
Another example of a fruitful construction tech company is Procore Technologies, which makes construction project management software. Procore Technologies raised $50M at a $1B valuation in 2016, making it an early unicorn in the sector. These outstanding startups should indicate the high ceilings that construction tech companies have.
Founders have also started many large and lucrative real estate startups over the past several years. A few of these successful companies are:
Notwithstanding the fact that a large number of real estate tech startups have been founded, there are still many opportunities in the industry. For example, a majority of the big winners in real estate tech have focused on residential property and consumer-facing applications. This means that startups focused on commercial property and B2B business models have plenty of room to grow.
What to do if you currently run a construction tech or real estate tech startup
There are very few blogs and resources to help construction and real estate tech companies grow and scale. If you’re in the weeds building a startup in one of these industries, you know how tough it can be. One thing you can do to tip the odds of building a successful startup in your favor is join a high-quality accelerator.
At Dreamit, we recognized how construction, real estate, and other urban tech startups often need industry-specific help. So, we decided to create the Dreamit UrbanTech Accelerator by partnering with the $3B Tampa Bay Urban Redevelopment Initiative being led by Strategic Property Partners.