The macro thesis no one sees (still)
I get it. You are pounding your head against the wall because you keep reading that construction is unproductive. 20% decline in the last 30 years and what not. I think that's beside the point. It has nothing to do with my excitement for the real-world sectors. In fact, I believe the market has validated our macro thesis from 2019. Let me explain.
Construction productivity stats don't tell you anything about tech adoption potential. Instead, I'll share our fundamental macro thesis from the past five years. Why we think the market has proven us right. Strap in, this is going to be a ride.
What is the 'real-world'
First off, some definitions. I differentiate between proptech and AEC-tech. Proptech is about operating and transacting buildings more efficiently. It's about maximizing utilization and value. An operations problem. The real-world puts buildings into place or renovates them. It's a project and supply chain problem. Diametrically different tech and business models.
In this post, real-world means construction, renovation, design tech, and the blue-collar workforce. It's about executing projects, not operating facilities. Not proptech. Two different beasts. Keep this in mind.
AEC-Tech thrives counter-cyclically
Last two years have been tough for founders and VCs. Money receded post-COVID boom. IPOs dried up. Fundings trickled down. Venture has had a rough ride. But not for AEC-tech. Our funding tripled since 2021 to $30B. In 2024, we've added even more to the pie. AEC-tech is thriving counter-cyclically.
This observation alone doesn't make a thesis. But it shows our thesis is playing out. In a major way. Despite headwinds, our sector is catching up fast. There are deeper reasons for this. Hear me out.
Catch-up before our eyes
Construction is 10-12% of global GDP. A stat many like to cite. Fascinating indeed. But historically, VC into AEC-tech was only 0.4% of global VC. Minuscule. A $10T industry with meager VC allocation. This is catching up before our eyes. AEC-tech VC share more than tripled from 0.12% in 2020 to 0.45% today. In two down years.
I'm not saying it goes all the way to 10%, that's not the point. The point is catch-up is happening in down years. It's not just the money. Top talent from other successful ventures is pouring in. We have a perfect storm. Money meets talent. Accelerating.
Always: 6-8 years from $5 to $50 billion
Our January 2019 thesis came from analyzing a universal VC pattern. Once a sector hits $5B cumulative VC, it takes 6-8 years to get to $50B. B2B, B2C, doesn't matter. AEC-tech hit $5B around 2019. Five years later, we're at $30B. Probably 1.5-2 more years to $50B. The pattern is holding.
Why does this pattern occur? New tech adds new data pools. 1000-1,000,000X more data points. Isolated, they make sense. But with enough new pools, you need infrastructure. Especially for scaled AI deployment. Otherwise, applying AI to chaotic disconnected pools is a nightmare.
Foundamental's Waves Thesis: We are still early
I'm excited about data infra companies in AEC-tech. Even before high-profile AI companies. Not saying AI has no place. It does. But the real exciting stuff in the next years will come from data infra. Then the final wave: consolidation. Data pools and supply chains. After infra and integrations hit scale.
Once we hit $50B around 2026, boom. Other sectors went to $150-500B after. All patterns tell us that it's going to happen in AEC-tech. In other words: We are riding the waves. Infra next, then deeply embedded AI and end to end workflow automation, then consolidation. Thriving counter-cyclically.
This is our macro thesis. Why AEC-tech catches up in down years. A sector hitting stride with a universal pattern. The perfect storm of money and talent. Riding the waves of infra, AI, and consolidation. Still early.
Oh and by the way, we wrote about this exact waves thesis for AEC already in 2019. So backtest me.
Founders, if you are currently building infra or consolidation plays in AEC-tech, hit me up. I want to hear from you. Opportunity is knocking. Reach out.