CONSTRUCTION DECONSTRUCTED

Breaking down the next big construction startup opportunity

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These maps visualize the flow of information in five major industries.

Spot the odd one out?

Clearly, something significant is going on here.

(We think we may know what it is.)

1 / 5

Financial service

2 / 5

Media

3 / 5

Construction

4 / 5

Manufacturing

5 / 5

Software

Chapter 1:

THE GLASS DOME

Construction is the biggest industry in the world that is still almost totally undisrupted.

A $10 TRILLION INDUSTRY.

10% OF THE WORLD's GDP IS DUE TO CONSTRUCTION.

1 IN 14 PEOPLE WORK IN CONSTRUCTION.

(In short: it’s huge.)

But even the latest of late adopter industries have left construction behind.

Manufacturing, shipping, insurance, oil & gas, even agriculture have all been transformed over the last 20 years...

Construction?

It still looks a hell of a lot like it did 20 years ago.

(A prime indicator is that most of the market leaders from two decades ago... are still at the top.)

Not surprisingly, it’s a market plagued by inefficiency.

Costs are spiralling.

Doubling since 2000.

FM_Icons_Mobilephone-green

Tech adoption is low.

29% of foremen use a construction-specific app on site.

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Investment in innovation is even lower.

Investing only 1.5% of revenue in technology: 55% less than other sectors.

FM_Icons_Process-green

Outdated processes are the norm.

Foremen and contractors spend 3-5 hours every day on manual, repetitive communications.

The question is:

WHY?

Why has all this inefficiency been allowed to continue?

What makes construction different from all the other industries already disrupted by tech startups?

Construction has unique first principles that aren’t changing any time soon...

Sites are geographically dispersed.

Ten billion construction sites will always be in ten billion different locations.

(Imagine trying to run a car factory that way.)

The value chain is atomized.

80% of construction value is delivered by the 99% of companies with fewer than 50 employees.

Assembly is hyper-local.

Fully assembled structures are too heavy to be transported.

Concrete perishes within 60 minutes. So final assembly will always be on site.

(A barrier to many of the efficiency leaps other markets have seen.)

Terrain dictates customization.

Size, shape, slope, geology and adjacencies make each site unique.

(This constrains the standardization of structures.)

Key stakeholders are spread far and wide.

Widespread integration and centralization of production is impossible.

The key stakeholders driving construction projects are rarely in the same room. And we know that as distance increases, communication plummets.

It all adds up.

The result of extreme fragmentation is extreme stagnation.

It’s as if construction innovation was frozen in 1999.

Today, it’s still preserved under a glass dome that keeps inefficiency locked in – and innovation locked out.

The glass dome is preventing the transformation that the construction industry desperately needs.

It makes construction unapproachable.

And stops the normal flow of innovation across markets.

(Outside founders can’t even understand the market, let alone enter it.)

It’s time to smash the glass dome.

Chapter 2:

THE OPPORTUNITY

We’re Foundamental and this is our thesis:

Construction is poised to become an orchestrated economy.

Ultimately, it will be self-coordinated by autonomous supply chains.

These supply chains will draw on integrated data pools.

And this orchestration will develop in three waves.

Let’s unpack that.

Orchestration is the inevitable endgame in the construction industry’s transformation.

And that transformation will occur in three waves.

Wave 1

Isolated data pools

Known problems will be solved by simple, immediate solutions that don’t demand behavior change.

The result: New data and improved transparency, but in isolated pools.

Wave 2

Connected data pools

Construction workflows will be connected, transparency will spread to embrace whole processes and people will use data to improve supply chain efficiency.

The result: The root causes of inefficiency become visible as workflow fragments connect.

Wave 3

Consolidated data pools

A few first movers will take control of the emerging data pools, integrating workflows and orchestrating the market end to end.

The result: A handful of companies become the orchestrators of construction, drawing on an integrated ecosystem of data-driven specialists.

Ultimately, the construction industry will act like one massive, globally distributed factory.

  • Equipment will be ordered and delivered automatically.
  • Concrete will be purchased and poured by a robot on a smart contract.
  • Everything will be fed by computer vision and multi-parameter optimization.

In this orchestrated economy, power will shift to those who control any or all of three digital assets.

INTELLIGENCE

Control over information and decision-making.

  • Multi-object optimization
  • Machine learning
  • Advanced robotic controls
  • Statial interpretation
  • Object recognition

PROTOCOLS

Control over transactions and the transmission of information.

  • Payments
  • Data transfer protocols
  • Communications protocols
  • Financing

FULFILLMENT

Control over supply and operational fulfillment.

  • Pre-sale and engineering
  • Structural materials
  • Off-site and on-site production
  • Framing and assembly
  • Recycling

That’s the endgame we’re headed for.

But there’s a catch.

The problem is that most people don’t get under the glass dome.

Most VCs work across multiple sectors and focus on a single region.

So while they have horizontal industry expertise, you won’t find them on-site working on a construction project.

They fly at 30,000 feet.

It means they lack the deep insights you only find when you’re on-site, 3 feet from the ground.

They’re on the wrong side of the glass dome.

Real transformation can only begin once the glass dome has been lifted...

...or smashed

Chapter 3:

THE WRECKING BALL

The kind of deep insights needed in construction can’t be seen from 30,000 feet, where most VCs fly.

You need to be on the ground, on site, rocking that hard hat.

In other industries — especially consumer markets — founders can easily harness disruptive insights because it’s easy to see the most pressing problems and ripest opportunities.

In construction, it doesn’t work like that.

To succeed in construction, tech founders must attack problems that only deep, scarce insight can solve.

A few hours of Googling won’t cut it.

Founders hoping to disrupt construction need support in picking and de-risking the right opportunities.

(The kind of support only a domain-specific VC can offer.)

And since construction is a global (but locally fragmented) market, founders need help with market selection and cross-border commercialization.

That’s where a domain-specific VC comes in.*

*Good news: we found(ed) one.

Without these kinds of assets – deep insights, a global view and access to global markets – it’s impossible for entrepreneurs to disrupt construction.

But when they have those assets, founders have the kind of unfair advantage that makes unicorns.

An unfair advantage in gaining control of the Fulfillment, Protocols and Intelligence layers.

This gives founders a strong shot at becoming the orchestrators of the entire construction industry.

Or owning one of the few critical specialist layers in the new construction tech stack.

Allow us to re-introduce ourselves.

We’re Foundamental.

We’re smashing the glass dome so entrepreneurs can enter, disrupt and ultimately orchestrate the construction industry.

WE THINK IT'S THE SINGLE MOST EXCITING OPPORTUNITY IN THE WORLD FOR AMBITIOUS FOUNDERS AND ENLIGHTENED FUNDERS.

Help us swing the wrecking ball.

This is going to be fun.

We’re Foundamental.

We’re smashing the glass dome so entrepreneurs can enter, disrupt and ultimately orchestrate the construction industry.

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