The Rise And Fall Of Construction Tech Models: A 2019 Flashback

February 24, 2025

Construction tech has transformed since 2019. From Katerra's $2B fall to the rise of design software, this analysis reveals why some models struggled while others thrived.

Patric Hellermann

Shub Bhattacharya

The Rise And Fall Of Construction Tech Models: A 2019 Flashback

Remember Katerra? With its massive $2+ billion in funding, it wasn't just a construction tech unicorn - it was a lighthouse beam that went through the entire industry. Between 2019 and 2021, founders and investors rushed to replicate various construction tech models, from integrated builders to renovation platforms. Today, we're taking a deep dive into what happened to these ambitious ventures, and more importantly, what we've learned from their successes and failures.

This Week On Practical Nerds - tl;dr

Next Katerra companies raised billions but struggled with unit economics

Digital GCs for renovations worked in Asia but faced challenges in the West

The iBuyer model collapsed when interest rates rose

Quick commerce for construction proved premature

Field software succeeded but didn't meet all promises

Design software emerges as the most sustainable category

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Vertically Integrated Construction Models: The Katerra Effect

How Did The "Next Katerra" Stories Play Out?

In 2019, Katerra stood as the most funded construction tech company ever, with estimates ranging from $2.1 billion to $3 billion in total funding. This astronomical number sparked a gold rush of founders pitching themselves as "the next Katerra." The model evolved through several variations:

Traditional Integrated Builders: Following Katerra's core model of controlling the entire construction process from design to delivery.

ADU Specialists: Companies focusing on California's emerging Accessory Dwelling Unit market, riding the wave of regulatory changes.

Asset-Light Approaches: Ventures like 011H proposed a "cloud manufacturing" model that avoided heavy capital expenditure and factory utilization risks.

Building Ownership Models: Some companies went even further, attempting to own not just the construction process but the buildings themselves.

The aftermath of Katerra's collapse proved devastating for this category. Many companies found fundraising impossible once the unsustainable nature of their business models became apparent. The fundamental challenge? These models required massive capital investment without a clear path to profitability at scale.

The Katerra effect taught us that vertical integration in construction requires more than just capital - it needs a sustainable operational model.

Digital Renovation Platforms: The Promise Of Modernizing Home Improvements

Why Did The Digital GC Model Struggle In Practice?

The digital general contractor model for renovations emerged as another hot category, exemplified by companies like Block Renovation, Made Renovation, and LivSpace. These platforms aimed to streamline the renovation process through technology, but took different approaches:

Full-Stack Design and Renovation: Companies like LivSpace and Dekoruma focused on complete home design and renovation, particularly for new builds in Asian markets.

Specialized Renovation: Block and Made concentrated on specific renovation types, particularly bathrooms and kitchens in existing homes.

Market Differences: The model showed varying degrees of success in different regions. LivSpace in India is preparing for an IPO, while Made Renovation entered administration.

The key challenge for many of these platforms was unit economics. Despite raising significant capital, many struggled with negative contribution margins. The promise of "achieving scale" proved problematic in a project-based business where each renovation required individual attention and customization.

Success in digital renovation platforms depended heavily on market characteristics and operational efficiency rather than pure technological innovation.

The iBuyer Wave: When Real Estate Met Tech

How Did The Property Flip Model Fare Against Market Reality?

The iBuyer model attracted massive funding with a seemingly simple premise: use technology and capital to buy, renovate, and quickly resell properties. Different approaches emerged:

Traditional iBuyers: Companies focusing on quick property turnaround with minimal renovations.

Specialized Asset Focus: Some targeted specific property types, like Pacaso focusing on second homes and holiday assets.

Short-Term Rental Plays: Others concentrated on properties for expatriates or traveling enterprise workers.

The model faced several fundamental challenges:

Capital Requirements: Companies needed substantial funding to hold properties on their balance sheet.

Market Dependency: Success relied heavily on favorable market conditions and credit spreads.

Limited Moat: Beyond access to capital, companies struggled to build sustainable competitive advantages.

The model also spawned related ventures:

Rent-to-Own "Fintechs": Though marketed as financial technology companies, many lacked genuine technological innovation.

Partial Equity Solutions: Attempts to create new financial products for specific demographics, often reinventing existing concepts like mortgages.

The iBuyer model proved vulnerable to market conditions, highlighting the risks of capital-intensive business models in construction tech.

Quick Commerce For Construction: Ahead Of Its Time

Why Did Construction Quick Commerce Precede Food Delivery?

Interestingly, quick commerce emerged in construction before it became popular in food delivery. Companies like Renorun in the US led the charge with various approaches:

Asset-Heavy Models: Some companies operated their own warehouses (later dubbed "dark stores").

Asset-Light Interpretations: Others attempted more flexible logistics models.

The model targeted specific pain points:

Small Basket Sizes: Orders typically ranged from $100 to $400.

Quick Fulfillment: Promised delivery times of two to four hours.

Geographic Variations: The US emerged as the most funded and liquid market for this model, with fewer players in Europe and Australia.

Despite some companies surviving by pivoting to broader logistics solutions, the original quick commerce model faced fundamental challenges:

Market Size: The addressable market for urgent construction materials proved smaller than anticipated.

Operational Complexity: Managing inventory and delivery for construction materials presented unique challenges compared to food delivery.

The quick commerce model in construction demonstrated how timing and market readiness are crucial for business model success.

Field Software: The Procore Effect

How Did The "Next Procore" Stories Evolve?

Field software represented another heavily pitched category, inspired by Procore's success. Various approaches emerged:

Geographic Expansion: Companies positioning themselves as "Procore for X region"

Feature Specialization: Ventures focusing on specific gaps in Procore's product suite

Workflow Solutions: Companies like Fieldwire, Rhumbix, and Novade developing specialized workflow tools

The category produced several notable exits:

PlanGrid: Acquired by Autodesk for $875 million

Aconex: Major acquisition in 2017/2018

RIB: Acquired by Schneider Electric for $1.2 billion

While the category generated significant liquidity events, not all companies achieved their ambitious goals. The success stories often involved:

Clear Market Focus: Understanding specific regional or workflow needs

Strong Product Differentiation: Building genuine technological advantages rather than just geographic arbitrage

Field software success required more than just replicating Procore's model - it demanded genuine innovation and market understanding.

Reality Capture And Drones: The Visual Tech Rush

How Did The Reality Capture Market Evolve?

The visual technology category saw persistent interest, with various approaches:

Drone Solutions: Multiple companies offering aerial surveying and monitoring

Indoor Visual Analytics: Solutions for interior space mapping and analysis

Hardware vs. Software: Some companies developed proprietary hardware while others focused on software-only solutions

The category evolved toward more specialized applications:

Targeted Use Cases: Focus on specific industry segments or workflows

Integration With Existing Tools: Moving from standalone solutions to integrated offerings

Reality capture technology required finding specific, high-value use cases rather than broad market application.

Design Software: The Sustainable Success Story

Why Has Design Software Maintained Its Promise?

Design software emerged as perhaps the most sustainable category from the 2019 era. The evolution has been marked by:

Single to Multi-Player: Early solutions like Snaptrude focused on individual users, while newer platforms embrace collaboration

Built on Proven Foundations: The category builds on 60 years of CAD software history

High Minimum Feature Set: Substantial investment requirements actually benefit well-funded companies

Current leaders include:

Snaptrude: Evolving from single-player to collaborative solutions

Speckle: Focusing on data interoperability

Rayon: Developing specialized design tools

The category continues to show promise due to:

Clear Value Proposition: Addressing fundamental industry needs

Scalable Technology: Ability to leverage modern cloud and collaboration capabilities

Proven Business Models: Building on established software licensing and subscription models

Design software success comes from combining proven business models with modern technological capabilities.

Conclusion: The Three Tests For Construction Tech Innovation

Understand your unit economics before scalingBuild for specific market characteristics rather than copying successful models
Becognize that capital alone doesn't create sustainable advantages
Focus on fundamental industry problems rather than funding trends
Maintain operational discipline even during high-growth periods