Despite the Hype, Construction Tech Will Be Hard To Disrupt

Procore, in comparison, concentrated on the attractiveness of the SaaS business model for delivering data-intensive business processes with minimal IT involvement. But even so, it’s been a long haul of 15 years of accumulated losses that have not ended yet. Growth will require taking an even greater cut of GC revenues, pressuring already tight margins.

When you consider that only 15% of construction firms have a staff of over 1,000, that leaves the vast majority of GCs in the small to medium-sized range. This means a construction tech product has to prove its ROI very quickly — often on the first two or three projects where the new technology is used. That’s not easy for a product so complicated that a job site supervisor needs a month of training to fully realize Procore’s effectiveness.

There’s still a lot of opportunity for construction tech companies and their investors, but only if their products are easy to use and deploy, adaptable to local variation, improve productivity almost immediately, and have a “pay as you go” business model.

Despite the billions lost in Katerra, investors are still bullish on construction tech because it’s a large and underserved industry. VC funding and innovation show no signs of slowing and both private and public investors are still willing to pay for “growth at any cost,” which explains why Procore, with huge annual losses, can still go public.

But I believe most successful investments will be specialized by building type, process and function. Even though there are many back-office incumbents, there are still opportunities for workflow efficiencies in construction finance, for example. Mobile consumerization is also having an effect. At the job site, low-cost and easy-to-use and -deploy technologies like drone surveillance are making an impact.

Like any industry, we’ll see some “sure bets” close down while others continue to succeed. And for an industry with such risk management needs, it’s probably best to stop talking about “disruption.” Success in construction tech will come down to proving the need for the technology, delivering immediate ROI, and ensuring workers know how to use it on the first try.

David Ward is a 30-year tech industry veteran, entrepreneur and the CEO of  Safe Site Check In. This article originally appeared in TechCrunch.



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