by Jesse Devitte
For example, today the largest contributor to landfills is construction waste. The operation of buildings is the largest consumer of energy in most markets, yet 40 percent of office space is underutilized. This is happening while global population growth is increasingly urban and placing more pressure on the cities of the world—and it is not sustainable.
So, we must improve how we design and build our world. Companies with missions to make this a reality are becoming increasingly commonplace. There are founders with dreams and crazy, evolutionary ideas coming from all over the world—we’ve never seen anything like it. The growing priority of creating a sustainable environment has resulted in a market ripe with investment opportunities to protect our planet … and as investors that’s a “good thing.”
Our mission is to build companies, because we realize that if we just invest in technologies, it could lead to a dead end. In a perfect world, we could predict the future and we’d know exactly who to give to and how much. The reality is, the best we can do is to see how far down that path we can get. While it’s great to apply our industry knowledge, we also like to have investment partners who are not from the industry because they are not cowed by its history. By having a combination of different approaches, it creates a different dimension that can usher in true change.
Business models can be tricky in this industry. While technology remains a very important element of any business model, our focus is not just design, build and operate; we’ve also added an emphasis on the data that technology allows us to collect. Recently we began to see new types of companies with data in their business model vs. point-solutions for initiatives like authoring apps. We also began to partner with a whole new group of investors who are beginning to size up their synergy for potential, too. Without the ability to share data, it will be almost impossible to design and build in the way the world will require us to, but one of the challenges of implementing technology is accepting that only so much can be done. Bill Gates once expressed that it is best to think of it, along with building a business, like an early stage in a video game; every time you reach success you go to the next level. You will face more battles, but you continue to advance. To succeed you must be committed to growing through those challenges.
As an example, a young entrepreneur mentored by an industry veteran and working in a sustainability consulting practice recently had an idea to collect and share sustainability data through technology for real estate assets. In three or four years, this company—called Measurabl—has grown from an idea and two people to 50 people working in a great business with some of the largest asset owners in the world as customers. Imagine if someday they could deliver a sustainability score for every building in the world.
As another example, we’ve been talking about the industrialization of construction, which we coined our own term for: constructuring. Imagine if the construction process shared the predictability and efficiency of manufacturing; in fact, it may be the only way we can meet the world’s demand for new buildings to meet the needs of 9 billion humans by 2050.
There are many effective, easily accessible resources available now that advance the cause of sustainable design and construction. Mike Bloomberg wrote his book Climate of Hope to encourage readers that all was not lost after the U.S. withdrew from the Paris Climate Accord. In it he says, “Cities are the key to saving the planet,” and he believes the single best thing we can do for the earth is to improve how we design and operate our buildings. Unfortunately, this idea doesn’t get as much attention as something like saving the rainforests, but I share his belief.
This market is ripe for change we haven’t seen before. Three or four years ago, no one was tracking startups around real estate, construction tech, smart cities, or design tech. They weren’t even categories. Now this has become its own investment space with thousands of new startups. In the mergers and acquisitions world, new billion-dollar players like Katerra and ProCore have emerged while traditional industry leaders like Autodesk, Oracle and Trimble have spent billions in the last two years in acquisitions to improve their market positions. This represents an unprecedented level of capital investment and a unique moment in time for what has always been considered a sleepy industry on these fronts.
In the last year, we have looked at more than 1,000 company proposals—which is unprecedented in this industry—and the rate just continues to go up. We get a wide range of proposals, and even though we don’t know how viable they might be, we look at every one as a potential investment. For example, we made an investment in a company in Seattle called Blokable, which is targeting the affordable housing space. They had an idea to create a manufactured good for beautifully designed affordable housing at scale, so they pulled together $5 million, built a small factory, hired some architects and churned out the first units. Now these units are in demand in places like San Francisco, where previously they couldn’t get through the system to process the permitting. We found another investment opportunity through a project at Google around geothermal energy; some young entrepreneurs there had an idea to bring the benefits of geothermal energy to residential scale at a much lower cost while refining the approach to drilling and the new business model—and Dandelion Energy was born. Another company, SmartVid.io is using machine language and AI along with the wealth of available construction site imagery to create the industry’s first predictive safety models for construction.
There are many more viable investment opportunities now than ever before. In the last six months, we’ve even seen a handful of business plans where we’ve had to ask if they were a technology, architecture, or construction company—which indicates there is innovation on the business model front as well, and that’s very exciting. Many industry companies are even launching their own internal innovation programs. The number one piece of advice I have is that if you’ve advanced something internally and you believe it needs to be a business on its own, then it needs to be a business on its own or it won’t succeed. Many people try to hold things like that close to the vest in order to get an edge—which can make sense, but you have to let it loose into the marketplace if you want it to succeed as a standalone business.
For any investment that we make in this industry, the company must do everything humanly possible to support the existing systems already in place. This better enables the different parts to work together well, to collaborate and share data— which is logical and appropriate in a fragmented, siloed and project-based industry. It’s also important to have risk partners, including the owner or the ultimate operator, involved in the project from the beginning. This industry has lacked an effective way to capture intellectual property and monetize it broadly to help the industry help itself to move forward. My hope is that one day, the industry is served by a platform or a company or some combination that enables that to happen. Bigger, better decisions involving more stakeholders made earlier in the design and construction process is the goal.
Some of our investments will result in startups that are often acquired by larger companies. After a business is acquired, one common challenge is the integration of its products and people into the existing company. Antibodies tend to come out when something new enters an organization, and sometimes large companies pay a lot of money for talent and technology that is never utilized and ends up being buried. Most of the time, it’s just organizational dynamics that get off track and frequently, strategies change as well. Ultimately, in these cases the market has to speak to these companies to make sure it’s done right; if subscriptions aren’t renewed, the market is speaking up, and that’s how to get people’s attention.
A sustainable future is a worthy investment, and as time goes on, the opportunity is only increasing along with awareness, technological advances, and the availability of data. I am excited and optimistic about all the possibilities surrounding the industries—those that exist today and those that are to come—supporting this movement.
Jesse Devitte is co-founder of Building Ventures, a company that provides capital, mentorship and industry connections to entrepreneurs working on innovative solutions to design and construct a better built world.