Jun 01, 2023

Why ConstructionTech founders might want to stay away from “best-of” lists and “market maps”

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Context and objective

Ever seen these lists or maps of “these are the top 100 startups to watch” ? I know, I know – who hasn’t. Well – I wanted to backtest how correct and good those VCs or journalists who publish these “best-of” lists or “market maps” are at curating ConTech ventures.
Being a full-time early-stage investor in ConTech as part of the global VC in the sector (Foundamental) – where we speak with several thousands of founders in our sector every year – I’ve had more and more the hunch that “best-of” lists and “market maps” often showed a picture distorted from the sector’s venture reality, and were not very good at highlighting the eventual long-term winners and category creators.
Outside-in PR propaganda ≠ Actual inside-in performance?
This analysis was to backtest the “curation quality” and “prediction performance” of all the “best-of” lists and “market maps” created by other people by using objective data.
See for yourself…


Researched 20+ “best-of” lists and “market maps” for ConTech by VCs and journalists * Google in incognito mode first; then duplicated the approach with DuckDuckGo * only lists/maps no later than December 2021 (to allow for backtesting) and no earlier than 2016 (before 2016, ConTech practically didn’t exist) * boolean search used: (”top 50” OR “top 100” OR “top 25” OR “top 30” OR “market map” OR "landscape") AND (”contech” OR “constructiontech” OR “construction-tech” OR “construction tech” OR “construtech” OR “in construction” OR “disrupting construction”) AND (”ventures” OR “startups”) * searched through ALL search results; text and image results * excluded PropTech-only firms (of which there were few, eg. Knotel and Juniper Square) * did not use single-country lists except for USA
Extracted all 530+ mentioned ConTech firms, added objective data-points, and amended the list by the most-funded firms not on anyone’s “best-of” list or “market map” * cross-referenced each firm with the lists/maps they were mentioned on * added ConTech firms that have raised $30M+ but were missing on the sampled lists/maps * added data-points for each firm: # of mentions, $ raised total, $ raised before mention, $ raised after mention, $ raised in last 18 months, status * sources used for funding data: Tracxn first; if Tracxn shows no funding then double-checked with Crunchbase
Ran multiple analyses * are pundits early or late? * do they make or miss winners? * do they promote substance or hype firms? * if they were a fund: would they earn or burn money?

The sampled ConstructionTech “best-of” lists and “market maps” from 2016-2021 [open-source]

Sampled ConstructionTech “best-of” lists and “market maps” from 2016-2021


The 530+ ConTech ventures mentioned in the sampled "best of” lists and “market maps” from 2016-2021 [open-source]

Remember: What this is NOT * first of all: it’s NOT a Foundamental list, also NOT my list! * It’s NOT an endorsement or curation, and not a measure of quality or long-term success of any firm; remember that this is just a meta-collection of all the sampled “best-of” lists and “market maps” that other VCs and journalists created in the first place (and to demonstrate the advantages and disadvantages of such lists/maps is exactly the point of this exercise – so if you feel this list sucks, that’s my point !) * It does NOT give an accurate global representation due to a huge bias in the sampled lists/maps; due to the strong bias represented by the pundits’ “best-of” lists and “market maps” towards US (and some European) firms, it contains very few Asian, African and Latin American ConTech start-ups * It’s NOT complete; in fact we at Foundamental have spoken with over 10’000 ConTech-related founders over the last five years, which gives you an idea just how short “best-of” lists and “market maps” are * It can NOT show always the correct funding data; we decided to use only funding data available on Tracxn and Crunchbase, even if we know internally that the public data is incorrect; we choose not to disclose non-public info Sources for funding data: Tracxn, Crunchbase per June 1, 2023; no Foundamental data used

Crunching the numbers …

1/ Early or late to the party?: % of total capital raised before and after mention

Reading: Looks like they are very late to the parties.

2/ Making or missing winners?: Total capital raised; firms mentioned 3 times or more vs. firms least-mentioned but raised $20M+

Reading: They miss a lot more successful firms – too many.

3/ Substance or hype?: % of total capital raised in last 18 months; firms mentioned 3 times or more vs. firms least-mentioned but raised $20M+

Reading: This one’s a killer. They seem to promote firms that were much lesser able to withstand the tough funding environment of the last 18 months – by far. PR > substance for these pundits.

4/ Earning or burning?: “If these lists were a fund that invested at time of list”: Estimate of hypothetical fund return

Assumptions used: $1M investment at time of mention per firm. 40% Dilution happened before, 20% dilution after. 48 months holding period. For firms that had 0 mentions, valuation at time of investment assumed as $30M (which is a point in time when people who know the sector should have seen every firm).
Reading: Not much interpretation needed. The data says it all: “best-of” lists and “market maps” are sub-par at picking ventures. The reason is simple: The “best-of” lists and “market maps” have missed a large number of large category creators in ConTech consistently. The lists/maps contain a substantial bias towards (i) rather picking any kind of US firm over terrific non-US ConTech firms and (ii) picking many more charismatic, PR-ready founders with high-PR-value investors than they pick less charismatic founders who are excellent operators (because they don’t KNOW that they are excellent operators…) These lists/maps also clearly seem to be sub-par at picking eventual winners before Series-A’s, which is why you won’t find many firms created since 2020 whom you might think highly of and feel like they are missing here. That’s part of the whole point…

Findings and call-to-action to ConTech founders

ConTech “best-of” lists and “market maps” can waste your time: The data is clear – many pundits are late, bad pickers, and promote hype instead of substance. Reasons are also clear – lack of insight, no proprietary view about operator performance, and hidden incentives.

Adverse selection, anyone?: Alright, get this – out of our top 15 financially-performing companies, only one (1) was ever on a list or market map in its first four years after founding. Let that sink in. Of course correlation is not causation – I am not saying being on a list or map will make your ConTech firm average. But what I clearly see is the correlation between being heads down and under the radar while you build a product and a business with your customers, and your long-term substantial performance in Construction-Tech. Hype does not sell, PR does not sell – only product and substance does, to the no-BS world of construction and architecture clients.

The company you keep: You likely don’t know the past and performance of your peers you get lumped together with on a list or market map. Do they do well? Do they have a good reputation behind the scene? Do they maybe have bodies in their closet? You likely don’t know, and that’s a risk for you. Because your customers and investors might know – they tend to have talked to and looked at many more folks in the space. By accepting to be on a list or market map, you might unknowingly associate yourself with company you don’t want to be mentioned in, and your customers or investors might take notice of such associations. This happens all the time.

I could keep going, but this post already got out of hand.

Let me just close with this call-to-action to you all ConTech founders:

  1. The only stakeholders that matter in your early days are your customers and your talent. If you accept PR for your firm – do it only if it benefits you with your customers or with talent.
  2. Do not accept PR about anything else, especially not investors. It’s an investor’s job to find you. We literally do nothing else the entire day. If this is the reason you accept PR, you are literally wasting your scarce time.
  3. I am a huge fan of staying under the radar. I have seen first hand that ConTech firms can get dinged by old-school construction clients for being perceived as non-serious tech firms, while others who presented themselves as serious firms with no tech PR footprint at all grew quite fast. These are anecdotes, of course – but this general direction is solid advice.

@ me