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This week, we explore the diverse impacts of seasonality on the construction industry and related markets. We discuss how weather patterns, cultural observances, and fiscal calendars affect business operations and decision-making. We examine examples from various global regions and faith traditions, highlighting the challenges these seasonal cycles present. We also consider strategies for mitigating seasonality's effects and offer practical advice for founders and investors navigating these cyclical patterns in the AEC sector.

(01:19) Seasonal patterns in AEC: monsoons, holidays, and religious observances

(11:08) Construction software sales paradox during peak building months

(20:16) Fiscal year-end budget rushes driving AEC technology purchases

(35:55) Diversification strategies for AEC startups to counter seasonal fluctuations

(40:18) Temperature-driven demand trends in energy renovation services

tl;dr:

• Seasonality in AEC isn't just about weather - it's influenced by cultural, fiscal, and even psychological factors and differs widely
• The "Peak Season Paradox" can make selling harder during busiest construction periods << tune in to hear what the paradox is
• Smart founders anticipate cycles and adjust strategies, like diversifying into counter-cyclical offerings
• Having "co-pilots" to anticipate upcoming seasonalities, and the best custom strategies for it, is crucial for fast-moving founders

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Different seasonalities

When we think of seasonality in construction, the first thing that comes to mind is usually weather. But our deep dives with founders have revealed a far more complex tapestry of cycles that impact AEC businesses.

Take India, for instance. The monsoon season from June to September isn't just a weather phenomenon - it's a fundamental shaper of construction rhythms. Builders and contractors plan around it, slowing down work during the intense rains. For startups serving this market, it's not just a blip on the radar - it's a gravitational force that can significantly impact growth trajectories.

But nature isn't the only force at play. Cultural and religious factors create their own unique seasonalities. In countries following the Islamic faith, like Indonesia and parts of the Middle East, the month of Ramadan introduces a different kind of cycle. Work hours are reduced, and the festive period of Eid that follows can lead to a sharp decline in business activity.

We've even seen ultra-specific seasonal effects tied to local beliefs. One of our portfolio companies in India experiences a pronounced dip in home purchases during a particular month considered inauspicious in Hindu tradition. It's the kind of factor you'd never anticipate without boots on the ground.

USA and Europe have their own quirks. The French market, known for its generous summer holidays, sees a significant slowdown in July and August. This isn't just about people being away - it changes the entire rhythm of business, affecting everything from sales cycles to implementation timelines.

The key takeaway? Seasonality in AEC is far more nuanced than just "busy season" and "slow season." Smart founders need to map out these diverse cycles and understand how they interplay with their specific offerings.

Peak Season Paradox

Here's where it gets interesting - and counterintuitive. You'd think the busiest construction periods would be prime time for selling into the industry. But we've observed what we call the "Peak Season Paradox."

For companies selling software or tools that require implementation and training, the high-intensity construction months can actually be the worst time to close deals. When contractors and other industry players are in full swing, they're less likely to have bandwidth for adopting new systems or processes, no matter how beneficial they might be in the long run.

While another model - startups selling instant outcomes through services or transactions - usually boom during the exact same "on-season", contrary to many toolings.

We've seen this play out with several of our portfolio companies. The most successful sales periods for toolings often come during the "shoulder seasons" - those quieter months when decision-makers have more mental space to consider innovations and changes to their workflow - and for instant outcomes, services, transactions during the high season.

This paradox highlights a crucial point for founders: understanding your customers' operational rhythms is just as important as understanding the broader market cycles. Your peak selling season might be completely misaligned with what seems like the industry's busiest time.

Budget Rush

Another fascinating seasonal phenomenon we've observed is what we call the "Budget Rush." This typically happens towards the end of fiscal years, which can vary by country and even by company.

In many organizations, there's a "use it or lose it" mentality when it comes to annual budgets. This creates a unique window of opportunity for certain types of purchases - especially those that can be categorized as "run the business" rather than "change the business" investments.

We've seen startups capitalize on this by timing their sales pushes to coincide with these budget flush periods. It's particularly effective for products or services that can be easily procured and don't require extensive integration or organizational change.

But there's a flip side to this coin. The same end-of-year period that might accelerate certain purchases can be a dead zone for more complex, transformative solutions. Decision-makers are often in wind-down mode, less likely to greenlight major changes or long-term commitments.

The lesson here? Know which category your offering falls into and plan your sales strategy accordingly. If you're selling a quick-to-implement solution that fits neatly into existing budget categories, the fiscal year-end could be your golden hour. But if you're pushing for organizational change, you might want to target your efforts earlier in the budgeting cycle.

Anticipate and Adjust

So, how do successful founders navigate this complex seasonal landscape? The first step is simple but crucial: acknowledge that seasonality exists and will impact your business. We've seen too many early-stage companies fall into the trap of assuming they can "power through" these cycles through sheer force of will, or think that because "year 1" did not show seasonality - often due to baseline effect - it will not happen in year 2.

Once you've accepted the reality of seasonality, the next step is to plan for it. This might mean adjusting your cash flow projections, recalibrating your hiring plans, or rethinking your marketing spend during certain periods.

But the most innovative founders go a step further. They look for ways to create natural hedges against seasonality in their business models. This could mean:

1. Developing counter-cyclical product offerings that perform well during your traditional "low" seasons.
2. Targeting different customer segments with different buying cycles across seasons.
3. Expanding into geographies with complementary seasonalities.

We've seen this strategy work brilliantly for several of our portfolio companies. One construction tech startup, for instance, developed a service offering that was particularly attractive during the off-season for their main product. This not only smoothed out their revenue curve but also deepened their relationships with existing customers.

Another company expanded from residential construction into commercial projects, finding that the two sectors had slightly offset peak periods. This diversification not only helped with seasonality but also opened up new growth avenues.

The key is to view seasonality not just as a challenge to be overcome, but as a strategic opportunity to build a more resilient, diversified business.

Seek Input From Your Co-Pilots

One of the most valuable pieces of advice we give to founders in the AEC space is to cultivate a network of "co-pilots" - industry insiders who can help you anticipate the complex terrain of seasonality and market cycles in your segment and geography.

We like to use the analogy of rally driving. In a rally, the driver is focused on the immediate challenges of the road, while the co-driver is reading the map, anticipating what's coming around the next bend. As a founder, you're the driver, pushing your company forward at high speed. But you need those co-pilots to help you see what's coming.

These co-pilots might be experienced industry veterans who understand the nuances of different market cycles, or vertically focused Investors (like us !) who see the seasonality pattern because they cover divergent geographies in the same models and sectors repeatedly.

The goal is to create a system where you're not just reacting to seasonality as it happens, but anticipating it and planning for it well in advance. This forward-looking approach can be the difference between merely surviving seasonal fluctuations and actually thriving because of them.

In the fast-paced world of startups, especially in a sector as complex as AEC, having these multiple perspectives can be invaluable. It's not just about avoiding pitfalls - it's about spotting opportunities that others might miss.

Remember, seasonality isn't just a challenge - it's a fact of life in the AEC industry. The founders who excel are those who not only accept this reality but learn to use it to their advantage. By understanding the diverse factors that create seasonality, anticipating their effects, and building flexible, resilient business models, you can turn these cycles into a competitive advantage.

In the end, success in the AEC startup world isn't about defying seasonality - it's about mastering it.

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Keywords: Construction seasonality, AEC industry trends, Monsoon effect on construction, Religious observances in construction, Construction software sales cycles, Fiscal year-end budgeting, AEC startup diversification, Investor insights for construction tech, Energy renovation demand patterns, Weather impact on construction, Construction technology adoption, Seasonal revenue fluctuations, Construction industry cycles, AEC market analysis, Building sector seasonality, Construction software marketing, Energy efficiency upgrades, Construction tech investment, Seasonal construction challenges, AEC business strategies

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