AI Governance: How Construction Giants Are Navigating The Future

March 20, 2025

Major construction firms are setting up AI governance boards to vet tech. Unlike PropTech, construction tech needs a unique balance of substance and storytelling—key to startup success in this complex, physical industry.

Patric Hellermann

AI Governance: How Construction Giants Are Navigating The Future

How the biggest names in construction are handling the AI revolution? I recently gathered insights from board members of blue-chip construction companies about their AI implementation strategies. The conversations revealed fascinating approaches that could shape how construction tech startups position themselves in the market.

This Week On AEC_VC - tl;dr

AI governance boards at major companies are becoming key gatekeepers for new tech implementation

Construction tech and Prop tech operate with fundamentally different business models and optimization needs

Finding the right balance between substance and storytelling can determine startup trajectories in construction tech

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How AI Governance Boards Are Reshaping Construction Tech Implementation?

The new gatekeepers: How construction companies filter through AI solutions

Last week, I had the opportunity to collaborate with several blue-chip construction companies on an article for Verdict exploring AI's impact on construction. The contributors included Dennis Lenz (Board at Heidelberg Materials), Dimitris Bountolos (Board of Ferrovial), and Fabian Lenz (Board at Goldback Technologies).

What struck me most was how these enterprise organizations are creating formal structures to manage AI adoption. Dennis Lenz shared that Heidelberg Materials has established an AI governance board where both the CFO and CIO must approve any new AI implementation – whether developed internally or pitched by startups.

It was really interesting to hear from Dennis that at Heidelberg Materials, they've set up this formal AI governance board. Any AI solution they build or buy needs to go through this board where the CFO and CIO both need to approve it.

This isn't just bureaucratic red tape – it's a practical response to market conditions. With AI creating both substantial value and what Dennis called "batshit crazy" noise in the market, enterprises need systematic ways to prioritize investments. These governance structures help filter signal from noise.

For startups developing AI solutions for construction, this insight is crucial. Your go-to-market strategy needs to account for these formal approval processes. You'll need to demonstrate value not just to day-to-day users but to governance boards making final decisions.

Fabian Lenz from Goldback added another layer to consider. He emphasized integration challenges in an already fragmented software landscape. "As AI tools proliferate," he explained, "our primary concern is ensuring they deliver integrated value across existing systems rather than creating more silos."

This integration concern represents another consideration for startups. Your AI solution needs to demonstrate not just standalone value but how it enhances the existing technology ecosystem within large organizations.

Dimitris Boutoulos from Ferrovial offered yet another perspective. As both a builder and operator of infrastructure (like highways in Texas), Ferrovial has partnered with NTT to leverage large vision models with existing data for highway management.

"They're taking a really practical approach," I observed. "Using existing cameras and infrastructure but applying new AI capabilities to extract more value from their data."

This case study suggests that startups might find traction through strategic partnerships that combine domain expertise with technological capabilities, rather than trying to deliver complete solutions independently.

In our contribution to the article, we highlighted pre-construction – particularly bidding and estimation workflow – as one promising entry point for AI. These processes involve significant data manipulation and pattern recognition where AI can deliver immediate value.

The emergence of these formal AI governance structures signals a maturing approach to technology adoption in construction. While the industry has historically moved cautiously with new technologies, these governance boards suggest companies are taking a more structured approach to AI adoption – creating both challenges and opportunities for startups in this space.

Why Construction Tech and Prop Tech Require Different Technology Solutions?

Understanding the unique optimization models that separate construction from real estate

A LinkedIn conversation recently caught my attention when someone suggested that Construction Tech and PropTech should be merged into a single category. This perspective misses some fundamental differences between these industries that I've observed throughout my time investing in both spaces.

Construction is fundamentally a project-based industry. Each building or infrastructure component represents a unique undertaking with specific requirements and risks. Success depends on managing these projects effectively, with particular attention to risk mitigation.

"In construction, a single failure point can have catastrophic consequences," I explained in the podcast. "It affects safety, timelines, budgets – the stakes are incredibly high."

This reality means construction companies tend to value track record over tooling. They need partners and technologies with proven success in similar projects. Trust is built through demonstrated reliability in comparable situations.

PropTech operates in an entirely different world. Real estate is primarily an operations-based industry focused on optimizing margins, yield, volume, standardization, and transactions. Property owners look to maximize returns over extended periods rather than delivering one-off projects.

"The optimization models are completely different," I noted. "Construction is about delivering complex, unique projects under budget and on time. Real estate is about maximizing operational efficiency and yield over decades."

These distinct business models demand different technology solutions. The tools that help manage construction risks have little overlap with those optimizing occupancy rates in an apartment building. Similarly, technologies that maximize construction productivity on a constantly changing job site differ fundamentally from those managing predictable building maintenance schedules.

Because of these differences, we see unique category creators emerging in construction tech with no parallels in PropTech. The core metrics and success factors differ so significantly that solutions rarely translate effectively between spaces.

This separation creates opportunities for founders in both areas. Construction tech startups benefit from focusing exclusively on the unique challenges of project-based work without trying to force-fit solutions designed for operational contexts.

For investors like myself, understanding these differences helps avoid category errors in evaluation. Comparing a construction tech startup against PropTech benchmarks would lead to misaligned expectations and potentially missed opportunities.

"I'm not saying one category is more valuable than the other," I clarified. "They're just fundamentally different businesses with different optimization models, requiring different technology solutions."

The construction industry faces unique challenges around digitalization, fragmentation, and risk management that demand specialized solutions. By maintaining construction tech as a distinct category, we create space for founders to develop these specialized tools without getting lost in broader real estate technology conversations.

Balancing Substance and Storytelling: The Founder's Dilemma

How to determine when to focus on building versus narrative in construction tech?

I recently had a WhatsApp conversation with an exited construction tech founder that illuminated a tension many entrepreneurs face. This founder had successfully built and sold a software company in the construction tech space, achieving significant financial success. Yet they wondered if they should have focused more on storytelling.

"This founder built what they believed was the most substantiated product with the highest ARR and best case studies in their segment," I shared. "But looking back, they saw competitors with perhaps weaker products but stronger narratives who raised more money or achieved higher valuations."

This raises a question I hear from founders frequently: Is it better to focus on substance or storytelling? From my perspective, the answer depends entirely on your objectives and timeline.

If you're building for the long term – aiming to create a category-defining company over a decade or more – substance must form your foundation. You simply cannot narrate your way through ten years of business operations without delivering real value. Eventually, the reality of your product and business fundamentals will prevail.

"You cannot storytell your way past year three or four," I observed. "At some point, your customers, investors, and employees will experience the reality of your product and business fundamentals."

However, if your objective is achieving a significant milestone in the next two to three years – whether that's an acquisition or a major funding round – storytelling can play a much more prominent role. Well-crafted narratives can create momentum and sometimes accelerate opportunities that might not come to companies with superior products but weaker stories.

I've seen examples of both approaches succeed in construction tech. Some founders have built quietly for years, focusing exclusively on product and customer success. Others have leveraged compelling visions to raise substantial capital and attract attention, then used those resources to build substance behind their stories.

Several factors should influence how you balance storytelling and substance. First, consider your funding needs. Capital-intensive businesses may require more storytelling early on to secure necessary resources. Companies that can achieve profitability quickly may let their results speak for themselves.

Second, examine your market positioning. If you're creating an entirely new category, storytelling becomes more important because you're selling a vision of a future that doesn't yet exist. If you're improving on an established solution, measurable performance improvements will likely carry more weight.

In construction specifically, industry experience significantly impacts this equation. Construction professionals place tremendous value on domain knowledge. "Founders with deep construction backgrounds can often rely more heavily on substance," I noted. "Their industry experience grants them credibility that others might need to build through storytelling."

Ultimately, effective storytelling in construction tech accelerates and amplifies actual substance rather than replacing it. The most successful founders don't view this as an either/or choice but find the right balance for their specific context.

Even when prioritizing substance, good storytelling remains valuable. It helps articulate your value proposition and create emotional connection with stakeholders. The key is ensuring your narrative remains connected to reality and your ability to deliver.

Conclusion:

The construction technology landscape continues evolving rapidly, with AI governance boards, industry-specific optimization models, and the balance between substance and storytelling all shaping how new solutions gain traction. By understanding these dynamics, founders can navigate the unique challenges of bringing technology to this massive but complex industry.