Dive Brief:

• Brick & Mortar Ventures, a San Francisco-based firm founded in 2015, has launched a $97.2 million fund to invest in construction technology, another sign that stakeholders are eager to invest money into construction technology after a more than $6 billion infusion in the sector last year. 
• The firm, led by Darren Bechtel, a scion of Bechtel Corp., raised the money from construction-related companies such as Autodesk, CEMEX, Ferguson Ventures and others. Darren Bechtel, who has found success raising money in the real estate industry, has a 10% stack in the fund. 
• As the industry shifts towards incorporating technology into more projects, the fund is one of the first to specifically focus on helping digitize construction through investments in emerging technology.

Dive Insight:

Brick & Mortar Ventures’ new fund could help address slow technology adoption by targeting and investing in construction tech startups, focusing on seed and Series A funding rounds, officials said. The fund raised the initial $50 million in late 2017 and the remainder in January, according to an announcement this week.

With support from a company like Bechtel, which had $16.8 billion in revenue last year, the fund may have an edge in identifying and investing in tech startups. Bechtel has been ranked No. 1 on Engineering News-Record’s 2019 Top 400 Contractors list for the past two decades. The fund previously invested in PlanGrid, BuildZoom, BuildingConnected and Rhumbix.

These construction startups are defined by Brick & Mortar as “emerging companies developing software and hardware for the industries of architecture, engineering, construction and facilities management.” As momentum for construction tech grows alongside initiatives like Brick & Mortar, investors will be looking at ways to best capitalize on construction technology startups.

With deals like Oracle’s 2017 acquisition of Aconex Ltd. for $1.2 billion marking an increased industry investment into technology, Darren Bechtel reportedly said there is “a sense of urgency” for investor markets.  

The continued labor shortage and rising costs of construction may also open companies up to investing in new technology that can fill those persistent gaps. Automation and modular construction have both gained popularity in the industry, with a report finding that modular construction can deliver projects up to 50% faster.

“Eventually, as more capital comes to the scene and more people see the potential in the space, we’ll see an increase in competition and valuations,” Darren Bechtel told Crunchbase News. “For now, I believe we’re still in the early innings and we’re excited about the opportunities and value we can get as early-stage investors.”

Though the sector is prone to consolidation and burnout among a competitive market, some investors realize large returns. Investment firm Bee Partners, for instance, made seven times its original investment on its $275 million sale of BuildingConnected to Autodesk last year.