The trillion-dollar construction industry is often tarred with the inefficiency brush, accused of failing to move with the times and ignoring digitization in favor of legacy tools. But there is plenty of evidence that things are changing, with countless startups raising large sums of cash to help the construction industry modernize.
Venture capital (VC) funding in U.S. construction tech startups alone reportedly hit $1.3 billion in the first half of 2022, representing a 44% increase on the previous six months. In tandem, a slew of new funds and initiatives have emerged to support a fresh swathe of entrepreneurs, with Building Ventures recently closing a new $95 million fund for construction tech and real estate startups, while Agya Ventures announced a $32 million fund. Brick & Mortar Ventures, meanwhile, launched an early-stage accelerator billed as the “Y Combinator of construction tech.”
It’s against that backdrop that German VC firm Foundamental today unveiled its new fund, targeting $85 million at early-stage construction tech startups globally and building on the early success it has seen from its inaugural $65 million fund which closed back in 2019.
Exits and unicorns
Foundamental partners: Patric Hellermann, Adam Zobler and Shub Bhattacharya. Image Credits: Foundamental
Foundamental said it has seen four exits and one unicorn over the past three years, with the likes of Procore acquiring Indus.ai and Faro buying Holobuilder, while India’s Infra.Market hit a hefty $2.5 billion valuation last August.
On top of that, Foundamental says that seven of its 64 investments have hit a $100 million-plus run-rate, while 81% have gone on to raise subsequent funding.
Founded out of Berlin in 2018, Foundamental counts three general partners, each focused on distinct regions. Patric Hellermann covers Europe, while Shub Bhattacharya is all about Asia-Pacific (APAC) and Adam Zobler targets North America.
“Construction is the biggest, undisrupted market in the world,” Zobler said in a statement. “It’s a 12 trillion-dollar market — 10% of the world’s GDP — which employs one in fourteen workers globally. Yet the construction and built-world industry is massively inefficient, and it’s getting worse.”
With its latest fund, Foundamental says that it’s looking to double-down on emerging regions such as Latin America, while focusing on “historically neglected verticals” that impact everyone, including housing, skilled labor and public/private infrastructure. It noted that it’s aiming for a “larger portfolio” of around 40-50 companies, and plans to invest across pre-seed, seed, Series A and Series B rounds, with check sizes maxing out at around $3.5 million.
“The time to invest is now,” Zobler continued. “Technology that fundamentally reshapes the world of construction and the built environment is needed now more than ever — and it can drive great returns — but is currently underserved and underfunded.”
While Foundamental touted the fund’s limited partners (LPs) as “global names from the building and construction ecosystem,” it said that it wasn’t at liberty to reveal who they actually are.