The construction market for startups (one that I’m fairly involved in, but only as a segment of our market) has been a historically tough nut to crack for technology companies.

This is a great breakdown from Brian Potter on the past couple decades of construction startups and funding amounts, with a useful segmentation by category into slices like builders, materials, energy use, construction software, digital twins, and more.

It wasn’t surprising to see builders taking such a huge proportion of the funding — after all, trying to scale a soup-to-nuts homebuilding company is enormously capital-intensive. Management software scoops in an ~8% share, with Procore at the top. This bit hits on one of the challenges I’ve observed anecdotally working with construction companies: a slog to scale within big orgs due to various reasons:

Most VC returns come from a small number of huge successes that end up being worth 10s or 100s of billions (for instance, 65% of the value of YCombinator startups comes from just 5 companies), but construction has yet to see any $10 billion+ startups. Part of this is possibly due to a sort of natural throttling (caused by, among other things, rational risk aversion) that limits how fast even a software company with strong network effects can grow in construction. For instance, at its IPO, Procore estimated that it had captured just 2% of its potential market despite being around for over 15 years and having a category-defining product.

Some of the frictions are common in other markets, but particularly acutein construction — risk aversion, resistance to tech, and fragmented cost centers until you get to enterprise-scale (departments compete for their own revenue/budget, and the company wants to book software expenses as op-ex to a project). Plus the multiparticipant nature of every construction project (a sea of subs and contractors) makes it difficult to go upstream with a single stakeholder buyer.