tl;dr

• EverFence raises $7.7M Series A, highlighting growth in the fencing market
• EverFence follows Ergeon, another Cloud Installer model in the US fence-construction market
• Nexii's relaunch sparks discussion on asset-heavy modular construction challenges
• VC advice in construction tech often misses the mark, founders should prioritize customer needs

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"The truth lies with the customer. Don't make decisions for what will appeal to generic VCs later down the line, because they're actually probably not even able to tell you today."

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Listen to this episode

The Fencing Revolution: More Than Just Boundaries

We've always thought of fences as simple boundaries, haven't we? Those wooden or metal structures that mark property lines and keep pets in check. But what if we told you that fences are becoming a hot topic in the construction tech world? You might raise an eyebrow, but hear us out.

EverFence, a company that's reimagining how we approach fencing, just raised $7.7 million in a Series A round led by Hipster. Yeah, you heard that right. Fences are now hip. But why fences? It's not just about keeping your neighbor's dog out of your yard anymore.

The global fencing market is experiencing a boom that might surprise you. We're looking at a total transaction value of $30.4 billion in 2023. That's billion with a 'B'. And it's not stopping there. The market's expected to grow at a 5.6% compound annual growth rate from 2023 to 2032. That's the kind of growth that makes investors sit up and take notice.

EverFence isn't alone in this space. There's also Ergeon, which had already raised more than $50 million by 2022. These companies are onto something big, and it's worth understanding why.

So, what makes fencing such an attractive market? Let's break it down:

First, there's the standardization factor. Fencing is a highly standardizable process. This might sound boring, but in the construction world, it's golden. It means companies can introduce new labor pools to counter the flight of qualified workers in the construction industry. In a sector that's constantly struggling with labor shortages, this is huge.

Then there's the margin. We're talking north of 200% margins on products from manufacturer to landscaper. That's not just profitable; it's printing money. Traditional supply chains in fencing often involve multiple middlemen, each taking a cut. Companies like EverFence are streamlining this process, cutting out middlemen, and capturing more of that margin for themselves.

Software integration is another key factor. Companies like EverFence and Ergeon are using software to streamline the quoting process. Customers can now mark their property lines on Google Maps and get an instant quote. This level of convenience and speed is revolutionary in an industry that's often been slow to adopt new technologies.

There's also an interesting cross-border dynamic at play. In Europe, fencing often comes from countries like Poland. In the US, it's typically sourced from Mexico. This creates interesting supply chain dynamics and opportunities for companies that can navigate these international waters effectively.

Lastly, there's potential for expansion. While fencing itself might not require much maintenance, there's potential for expanding into related services. Think home security packages down the line. Once you've built trust with a customer through a successful fencing project, you've opened the door to sell them other home improvement services.

But here's where it gets interesting from a venture capital perspective: traditional VCs might struggle to value these businesses. They're not pure software plays or clear-cut marketplaces. They're real businesses with real cash flow, straddling the line between tech and traditional construction. And that's throwing some investors for a loop.

This brings us to a broader point about the construction tech landscape. It's not always about creating the next unicorn software company. Sometimes, it's about taking a traditional industry and making it more efficient through thoughtful application of technology. That's exactly what these fencing companies are doing.

The Rise and Fall (and Rise Again?) of Modular and Off-Site Construction

Now, let's shift gears and talk about a different part of the construction tech world: modular construction. Specifically, let's talk about Nexii. They were a big player in the offsite modular construction space, focusing on strip mall type buildings. Think Starbucks, Walmart, KFC - those kinds of standardized buildings that pop up by the thousands across North America.

Nexii had a unique angle. They were asset-heavy, wanting their own factories and vertical integration. On paper, it sounds great. Control the entire process, maximize efficiency, create a seamless product from factory to final build. But reality, as it often does, had other plans.

Nexii recently went bust. But now there's talk of a relaunch. This isn't just about one company though. It's a trend we're seeing across asset-heavy modular construction companies. Katerra, Veev - they've all faced similar challenges. So what's the deal? Is asset-heavy modular construction just not viable?

Here's our take: It's not that simple. The concept isn't necessarily flawed, but the execution is tricky. These companies often take on high fixed costs before they've built a solid track record. And in construction, track record is everything.

Think about it. If you're a developer or a big company like Starbucks, you're not just buying a building. You're buying confidence. Confidence that the building will be completed on time, on budget, and to the right specifications. That kind of confidence takes time to build. But these modular construction companies, flush with VC cash, often try to scale up before they've earned that confidence.

But it's not all doom and gloom. This shakeup could be good news for asset-light players in standardized offsite construction. Companies that use existing supply chain capabilities instead of trying to reinvent the wheel might have a better shot at success.

Take 011H in Barcelona, for example. They're doing multifamily residential construction, but with an asset-light approach. They're using existing factories and contractor competencies, just wrapping a system around it. And guess what? They've got a 100% repeat rate with customers. That's unheard of in this business.

The lesson? Maybe the future isn't about owning everything, but about orchestrating the existing pieces more efficiently. It's about being the conductor of the orchestra, not trying to play every instrument yourself.

This approach also allows for more flexibility. Construction is an inherently local business, with different regulations, climates, and preferences in different regions. An asset-light model allows companies to adapt more quickly to these local variations.

The Dilemma of Listening to (Generic) VC Investors: When Advice Goes Wrong

Now, let's get real about venture capital in the construction tech world. We've seen some things, folks. And it ain't always pretty.

Here's a scenario we recently encountered: A construction tech founder asked their investors for advice on strategic options and product decisions. The response? Don't ask VCs for strategic product decisions in construction tech. They likely won't have a clue.

Ouch. But is it true?

In our experience, there's some truth to this. Construction tech has its own unique dynamics. It doesn't always follow the same patterns as other tech sectors. And that can lead to some seriously misguided advice from well-meaning but uninformed investors.

We've seen VCs push for strategies that work in other industries but fall flat in construction. Like ramping up marketing spend and expecting ARR to skyrocket. In construction, it's often about building relationships, not blasting ads. It's about getting on site, ordering pizza for the crew, and becoming part of the community. It's a high-touch, relationship-driven business that doesn't always fit neatly into the typical VC playbook.

This disconnect can lead to some serious problems. We've heard stories of founders being pushed to make decisions that go against their industry knowledge, all in the name of appealing to future VC rounds. But here's the thing: in construction tech, success often looks different in the first five years compared to other sectors.

So what should founders do? Here's our advice:

First and foremost, prioritize customer truth. Your customers know what they need. They're the ones on the construction sites, dealing with the day-to-day challenges of the industry. Listen to them first. Their feedback is worth its weight in gold.

Be wary of harmful advice. Not all investor input is created equal. Some can actually hurt your business. It's okay to respectfully disagree with your investors, especially if their advice doesn't align with what you're hearing from customers.

Look for investors who know their limits. A good investor will be upfront about what they don't know. They'll say "I don't know" when they're not sure, and they'll defer to your industry expertise. These are the investors you want in your corner.

Value industry experience. Investors with a construction background can offer invaluable insights. They understand the nuances of the industry and can help you navigate its unique challenges.

Don't build for future VC appeal. Build a great business. The right investors will come. It's tempting to try to position your company for the next round of funding, but that can lead you astray. Focus on solving real problems for your customers, and the rest will follow.

Remember, in construction tech, success often looks different in the first five years compared to other sectors. Don't let pressure to conform to traditional VC expectations derail your vision.

The Construction Tech Paradox

As we step back and look at the bigger picture, we're seeing a fascinating paradox in construction tech. On one hand, there's incredible innovation happening in niche areas like fencing. On the other, we're witnessing the struggles of heavily funded, asset-heavy modular construction companies.

What gives?

It comes down to understanding the unique dynamics of the construction industry. Success here isn't just about having the coolest tech or the most VC funding. It's about solving real problems for customers in a way that fits with the industry's realities.

The fencing companies get this. They're taking a standardized process and making it more efficient, without trying to completely overhaul how things are done. They're working with existing supply chains and labor pools, just making them work better.

The struggling modular construction companies, in contrast, often try to reinvent too much at once. They take on massive fixed costs before they've proven their model works at scale. It's a high-risk strategy that can work in some industries, but construction is notoriously unforgiving of such approaches.

There's a lesson here for all of us in construction tech. Innovation doesn't always mean revolution. Sometimes, it's about evolution - taking what works and making it work better. It's about understanding the industry's pain points and addressing them in a way that respects existing processes and relationships.

Looking Ahead

So where does this leave us? We believe it's in finding the right balance. It's about leveraging technology and new business models, but in a way that respects the realities of the construction industry.

It's about being asset-light where possible, but not being afraid to invest where it really matters. It's about using software to streamline processes, but not forgetting the importance of relationships and on-site presence.

And perhaps most importantly, it's about listening to customers and solving real problems, not just chasing the latest tech trends or VC funding rounds.

The construction industry is ripe for innovation. But that innovation needs to come from a deep understanding of the industry's unique challenges and dynamics. It needs to come from founders and investors who are willing to get their hands dirty (sometimes literally) and really understand the problems they're trying to solve.

As we move forward, we expect to see more success stories like EverFence - companies that find niche areas where they can make a real difference. We also expect to see a shift towards more asset-light models in areas like modular construction.

And hopefully, we'll see a new breed of investors who really understand the construction tech space and can provide the kind of guidance that actually helps, rather than hinders, these innovative companies.

The future of construction tech is bright. But it belongs to those who understand that in this industry, the path to success isn't always a straight line. Sometimes, it's more like building a fence - one post at a time, with a clear plan, the right tools, and a whole lot of hard work.

In the end, the companies that will thrive in construction tech are those that can bridge the gap between the old and the new. They'll respect the industry's traditions and relationships while bringing in new efficiencies and technologies. They'll think big, but they'll also be willing to start small and prove their concept before scaling up.

And most importantly, they'll never lose sight of the customer. Because in construction, as in any industry, that's where the real truth lies.

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Companies Mentioned

EverFence, Ergeon, Nexii, Katerra, Veev, 011H, Starbucks, Walmart, KFC

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Keywords

construction tech, fencing industry, modular construction, venture capital, asset-light models, innovation in construction, EverFence, Nexii, investor advice