Why are there no startups in the real estate construction sector?

There’s a long list of construction startups who thought the industry was low-tech simply because everyone in it was dumb, and that they would be the smartest guys in the room who’d revolutionize everything. Those startups are pretty much all roadkill.

The construction industry’s fundamental constraint is that it manufactures products that are too big to fit in highway lanes. That means they can’t be shipped from a centrally-located factory to their final destinations. So they need to be built at the site, which means they need to be built with more labor-intensive methods (since it’s too expensive to build a capital-intensive factory for just one unit of output).

Building components that are small enough to fit in highway lanes, on the other hand, are manufactured in centrally-located, capital-intensive factories and shipped to their final destinations, just like cars or electronics. Think: boilers, doors, windows, air handlers, etc.

And, like cars and electronics, these building component products are manufactured by a small number of big companies, rather than a large number of small companies. The equilibrium capital investment and company size is much different when the product is small enough to be manufactured in a central location and shipped.

People seem to have forgotten the boom of prefab/modular houses in the 1960s/1970s. It turns out after the cost of delivery and final assembly on location you lose out a good chunk of the efficiency of the factory line production.

The biggest innovations to construction are probably to be had in better/faster/easier plumbing and electrical connections, making it faster and more reliable to install all the fixtures. Being able to plumb and install a whole bathroom in a couple of hours instead of most of a day while reducing the odds of needing rework would be a decent boost. We’ve seen some improvement in this already though with things like PEX and Wago, I imagine even more modular designs can improve this even more. The challenge with this is actually getting adoption and approval for some of this stuff.

Having just finished a build, this is very true. New construction methods are amazing. My home had rough in plumbing in a day. Scheduling, inspections, and credentials eat up the most time. Why a plumber can’t hook up power to a water heater is beyond me. That alone ate a week.

I just redid my 15 year old original builder-grade kitchen sink and cursed the quick-construction plumbing the whole way. It was all glued together ABS plastic pipes instead of threaded pieces and single-use plastic shutoff valves with non-threaded supply hoses. I had to saw off all of it down to the wall and replace it all, this time with quality components.

So yeah, you’re right, the new methods and parts make for very fast construction but the maintenance and repairability/reusability is trending toward zero.

Just like everything else these days, I guess.

> Why a plumber can’t hook up power to a water heater is beyond me.

Depending on jurisdiction, they can. In Germany, you can train to be an “Elektrofachkraft für festgelegte Tätigkeiten” – i.e. an electrician trains your staff to do a specific task, like hooking up the water heater.

The problem is, plumbers already have more than enough work. They could do that technically but they don’t because they want to move to the next job site as fast as they can.

What?

This is odd given that in a lot of places, a home owner can run their whole electrical, and the inspection is just a dude plugging shit in to the receptacles.

Also, are most modern water heaters not just a standard plug in? Even my dishwasher, which was a curiously long hold out, doesn’t have direct power any more.

Around here, home owners are not allowed to plumb, not even with inspection. Plumbing permits are only given to plumbers.

My brand new (last year, anyway) high efficiency water heater is direct wired. The plumbers connected it. I can’t say I’ve ever seen a plug-in water heater (bigger than a few gallons).

Even with modern plumbing, wiring, tiling substrates, etc., bathrooms are an utter pain in the arse. You’ve got utilities going all over the place, multiple drainage points, tiling, underfloor heating, studs to position so things like shelves, heated towel rails and all the rest end up where you want them, ventilation, and on it goes – and all of it has to happen sequentially, often a bit of this, then a bit of that, and then back to the first thing again. Having done several bathrooms, top to tail, I would gladly just buy one off the shelf if it were good.

I think there’s a massive opportunity in modular bathrooms. I’ve seen them done amazingly badly (think: the plastic cube badly perched in a corner of your Victorian seaside hotel, in which you have to crouch under the shower, while it hoses down the toilet paper), I’ve seen them done so well you wouldn’t have a clue you were in a room delivered in a box. The latter, I’ve only seen in Latvia, by a Latvian company – but I think the concept has legs.

You’re right. The way that some of the new cruise ships are built is that the rooms (including the bathroom) are each one long “module” that they slide into place for final assembly. This means they can be built offsite on an assembly line, and also when it comes time to renovate, they can swap them out with much less downtime for the ship.

I think the main challenge with modular bathrooms integrated into an otherwise traditional build is that you’re plonking a finished unit into a rough-and ready site that has no pipes or wiring to connect to yet and people running round laying bricks and lifting in beams… which feels a little premature. You’re not going to fit one through the doors of your average existing building either, and the economics of hiring a large crane just for the upstairs bathroom rather than the entire build probably make less sense

It’s a bit different when the modules are part of a hotel/apartment block that’s entirely built using a modular system. That’s common enough in city centre hotels and motels where they’re a single full-sized room and nobody can tell the difference.

Japan has modular bathrooms, it’s pretty nice (though it does mean that almost every bathroom looks like one of 3 kinds of bathrooms). Even the basic ones are more functional than what I see in 90% of US bathrooms, but it is just huge chunks of plastic and cleaning is a whole thing.

Wago is better than sliced bread, the only people upset with them are just butthurt that their knowledge of how to use a wire nut is no longer a competitive moat.

What a silly response. No, Wago has in some cases higher contact resistance than other means of splicing hard copper wire. And in those cases it can lead to an increase in temperature, arcing and possibly fire.

It is much more convenient and I highly doubt anybody that can splice a couple of wires sees that ability as a means to keep the competition out. But there are drawbacks and you should be aware of them. When doing high current and tri-phase connections I will use a wire nut, otherwise I use a Wago.

Could you elaborate? All connectors regardless of type have current rating and specify what wire gauges they are compatible with. It seems like it would be a big deal if a properly installed Wago could catch fire.

I know that wire nuts can sometimes have a better failure rate when tested at much higher currents than either connector is rated for but this is equivalent of ingredients causing disease when you consume 1000 times more than is typical.

> And in those cases it can lead to an increase in temperature, arcing and possibly fire.

Prove that. There is no evidence for that if they are used within spec – and if there was, UL and CSA would immediately pull their listings. There is however, plenty of FUD on the internet about Wagos being dangerous, even though plenty of tests have shown this is not true. For example, this test which showed a five-connector Wago running at maximum of rated limit releases about 1W of heat. A little warm, nothing dangerous.

https://www.youtube.com/watch?v=zgjo36-jaFY

https://www.youtube.com/watch?v=OhFwcEcNF2I

Also, you should look into how common electrical fires are in Germany if you really want to prove your case. Wago popularity over there is insane. Wire nuts are viewed as archaic and most homeowners don’t even know they exist.

In what way? I recently switched to using Wago and they are so much better than wire nuts that I can’t see any downsides (other than cost).

I want at a minimum the wires in my walls/floors to be easy to edit, inside trunking in the wall/trapdoors in the floorboards. Why would you have to cut holes in your wall, edit the cables inside, and then plaster over them again to cause the same problem next time? Madness

I sometimes really wish my house was pier and beam construction instead of slab; having a crawl space seems really handy when wanting to rework things. Everything is just right there!

A single story home does make some things simple, but it is still a pain with the insulation. On top of that, all the old plumbing goes through the slab making access difficult.

Why would you want to look at access panels every day for a once-in-a-decade issue? Patching a hole in a wall is really easy, all things considered.

I’d be curious to see examples of very tastefully concealed / unobtrusive / or well integrated access panels.

(Asking for myself, because I agree with both of you – I hate having to open my lathe and plaster walls, but I also don’t relish the idea of blatant access panels).

Maybe 8″x8″ panels with electrical receptacles and data ports integrated so they’re also functional…

You could leave lathe off of the tops and bottoms of your walls and cover those sections with baseboards and crown molding. Then you pop off the baseboards / crown molding to get access behind the wall.

I’ve done a smaller version of this with painted electrical junction box covers.

Basically have a cable run behind there and one of these every so often (especially at junctions).

Usually for networking or audio/video but I’ve run power cables like that too.

For a long time I’ve wanted a variant of this idea in which the exterior walls of the house are separated by a man-sized air gap from the interior walls of the house.

This make plumbing and wiring easier to repair; vermin easier to ensnare; improve safety from wildfires; and force every window to be a nice bay window with seating.

> For a long time I’ve wanted a variant of this idea in which the exterior walls of the house are separated by a man-sized air gap from the interior walls of the house.

Cue an increase in the number of DIYers and toddlers needing to be rescued after they have somehow managed to fall into the gap e.g. while working / playing in the attic.

Not sure how it would work from an insulation perspective, either.

Houses used to be constructed similarly. It’s actually very good, insulation wise. You have two walls you can insulate & a large air gap: pretty amazing.

But it wastes a lot of space & is expensive

This isn’t entirely correct. Modular construction is definitely an option and is particularly well suited to projects like hotels and apartments with lots of repeating layouts. Here’s a 4 storey hospital extension that I worked on in Melbourne that was put together over a weekend: https://www.modscape.com.au/commercial/the-avenue-hospital-e….

Having said that, it definitely has limitations. There’s a lot more structure in the modules which means more material overall and makes it harder to fit in services. You’re also limited architecturally.

See my other comment. Modular is somewhat better in some cases, but not dramatically better, which is why it has gained a certain share of the market but not the majority of it.

Modular is mature technology and would have taken over the whole industry decades ago if it was actually a lot better.

There are also social stigmas holding back the development of modular housing.

There are a lot of people who don’t want their friends to know their McMansion was delivered on a bunch of trailers.

All McMansions are ultimately delivered on a bunch of trailers. It’s just a matter of how much of it is pre-assembled. But I understand what you are saying, it looks more impressive to have it built onsite instead of having a handful of large pieces trucked in and dropped in place.

There are also HOA regulations that empower the HOA board to reject builds. These boards tend to be conservative with building types. Many of these regulations are in place to keep the value of surrounding homes.

> would have taken over the whole industry decades ago if it was actually a lot better.

I think it would have taken over if it was cheaper. But for larger size buildings it isn’t and that’s what I think stops larger scale adoption. But they are faster to deploy.

> Melbourne that was put together over a weekend

Do you mean a skeleton laid on already poured foundations with water/sewage/electricity drawn, and ready for finishing after this weekend? finishing, carpentry, windows, internal plumbing and electricity takes a lot more to complete than the skeleton itself.

Correct this was just the structure. Still impressive for what it was. I did the mechanical services which were put in after in a traditional way but in theory a lot of the services could have been installed within the modules at the factory and connected onsite.

The modular hotels I’ve seen built like this come with each room pre-plumbed, pre-wired, etc.

You just “plug in” each room to the central connections.

Stuff like SIPs (structural insulated panels) and CLT (cross laminated timber) are kind of changing the game on prefabrication offsite for homes. The components are small enough for trucking but assembling each lego blocks onsite gets you far closer to a completed house per unit time compared to stick framing. I’ve even seen some smaller SIP houses that don’t need a crane onsite. You also don’t end up with the modular house stigma.

It’s still a small % of houses built, but it’s very cost effective and getting better (and more common)

I think there are a few niches for construction that haven’t been solved, CLT and CMU can go up 16 stores and should be able to deliver “infinite” apartment buildings

european companies will build prefab exterior enclosure to retrofit old construction without displacing residents https://www.sciencedirect.com/science/article/abs/pii/S03787…

New construction:

Integrated Project Delivery – AI could solve the problem of aligning stakeholders possibly

Applying scrum/lean to construction –

BIM – there is a lot of data in a building and BIM standards are putting everything into one file,

digital twins: lidar and cameras and ai are all getting better where high accuracy scans can create as built digital twins while referencing BIM file to build it.

lifecycle analysis and building automation: precooling and preheating spaces, I believe we should have better rubric for valuing existing properties eg a window is an asset and a liability (many owners do not account for replacement costs leading to buildings in disrepair)

skilled labor – mixed reality education: if there is a digital twin then worker could use augmented reality to see preferred methods to make that happen while being credentialed and upskilling (crazy brick facades become possible)

Hadrian robot competitors: crane placing concrete blocks autonomously

This is the same problem that plagues electric car startups. Most of these folks don’t know what they don’t know. Tesla has had great engineering from day one, but almost went under because it couldn’t figure out large scale manufacturing and logistics. Problems that old school companies have been solving for a century.

It’s just the same “I figured out something complicated so I’m smart and something I consider a problem in a completely unrelated area of knowledge must be because the people involved are too dumb to fix it so I will” mentality that seems to infect so many people that learn a programming language.

Uh, I’m not in the industry at all, but obviously (?) the concept of prefabricated (modular) houses exists, and has done so for many years.

Perhaps this is a regional/national thing (I sometimes get the feeling that “prefab” is a condescending term in the US sometimes). For reference, here’s a page showing the selection from one of Sweden’s main house manufacturers [1]. It’s in Swedish, but I just wanted to share the pictures. Also it’s hard to say exactly what proportion of a house is pre-built, but I expect the majority of the structural things (walls, floors, roof) to be.

[1]: https://www.eksjohus.se/husmodeller/

> The construction industry … manufactures products that are too big to fit in highway lanes.

This is why I believe the future of construction is portable 3d printing. Imagine a 3D printer which fits on a truck, yet can be assembled in an hour and can print something the size of a large house from fiber-embedded cement. The printer would have nozzles for paint, foam, tar, electrical wire and PET plastic. It would also have a scoop to remove soil.

A team would drive the truck to the worksite, assemble the printer, start it going, and come back in 2-3 days when it was done. The printer would dig foundations, lay a fiber-cement foundation, damp proofing tar layer, build double skinned walls with foam between, paint the inside and out, install wiring and pipes, and build a foam, cement and tar roof. The house would have premade cupboards, bathtub, washbasin, etc.

Humans would come back to fit carpets, electrical outlets+fusebox, appliances, windows, vacuum formed liners in the bath/washbasins, etc.

Yes, but I think their printer design could be improved.

I would go for the printer being far less weight by making the whole thing a cable truss and winch structure. That should cut the hardware cost in half or better, like the way a travelling circus tent can be assembled entirely without a crane, yet packs into a tiny box. The downside is you can no longer assume a rigid structure, so you need cameras and alignment marks for precise positioning – but you probably needed them anyway. You also can’t make any accelerations above 1G, but that should be fine for housebuilding.

And obviously, their design only makes the walls, but I would want to do foundations, roof, insulation, plumbing and electricals all with the same machine.

Various levels of offsite construction (below the highway lane size limit components of course) exists for decades, in many contries, since at least the 60s, some died, some flourished. Of course this is still requiring considerable amount of onsite assembly and finishing off but still, manufacture component and delivery on trailers is a traditional concept already, the resons for less (as there are some) startups in construction need to be looked for elsewhere than onsite/offsite reasons.

Should you look at the fragmented composition of participating professions, fragmented nature of players and organizations involved, the fragmented and fluid supply chain, all combined with the long realization phase and complicated responsibility (legal) relationships of the actors perhaps? Generic contracting is more like a conductor role for the numerous groups involved, be it joined or independent ventures, than a subject of startup ‘disruption’. Management, including financial.

Sub tasks will see some unicorns, but not much though, mostly in software area. The opensystemslab.io comes to mind as one construction adjacent one concerning the structral components mostly, but with systematic vision and novel mentality.

The houses they are building around here are usually put together from pre-fabricated walls. The siding is even on them. They arrive on a truck and most of the house (as far as the outside goes) is put up in a day. Just like the trusses.

Typically these are called “modular homes” in the US. They’ve been around for quite a while and do make up a certain portion of the new home construction, though not the majority.

This approach is not quite as efficient as it initially appears:

First, it does nothing for the site construction (grading, excavation, utilities, paving, septic, well, etc.) Those tasks, which make up a decent portion of the project, are done in exactly the same way as in conventional construction.

Second, the modular boxes are either A) the width of shipping containers, which severely constrains the house layout, or B) somewhat wider than shipping containers, which makes them oversized loads that require escort vehicles, highway permits…increasing cost.

Third, you have to hire a crane to set the boxes, and then make all of the connections between the boxes, and install various mechanical and electrical components, complete the finishes, install staircases, etc. This costs quite a bit and still involves the hiring of various local subcontractors, just like in conventional construction.

When you add everything up, modular sometimes saves a little money and often reduces the project timeline (unless there are delays at the factory). But it’s not a massive improvement, which is why modular hasn’t taken over everything.

All house structures depreciate in value over time. The land they sit on is what appreciates, usually dramatically more than the depreciation of the structure. The prefabs associated with poverty are prefab structures on rented land, so the only thing you own is the depreciating structure, not the appreciating land.

That is true of “manufactured homes”, a.k.a. “trailers”, but not of “prefab” or “modular” homes, which are built using the same components as conventional homes.

The loan to buy them also isn’t dramatically subsidized by the government and turning them into real property is a legal pain.

You’d think there’d be a novel application along the lines of programming Boston Dynamics robots to construct cookie-cutter template houses, no?

Have humans in the loop to clear the land and drive construction materials to the site, but build the rest with robots that can work through the night and faster than any human, constructing the same template again and again in different lots?

Sure, bureaucracy is a major bottleneck, but it’s not like human construction finished within a month…

Boston Dynamics robots are still nowhere close to as dexterous, flexible, or capable as human laborers. Getting them to build houses is a massive and expensive R&D project, not a startup, for now.

If you built the houses the same way as with human labor, sure. But perhaps they would be built differently with robots, in a way which didn’t require that level of dexterity. After all, most industrial robots don’t have opposable thumbs.

I’m not saying it’s a simple problem to solve, nor one whose solution I have fully mapped out in my head. Just that it’s a problem whose solution strikes me as being within the realm of feasibility.

Boston Dynamic robots aren’t free. They’re far from cheap. Do you think making and sending them out sites would be cheaper than just hiring someone local?

At their current cost? No. But if you could come up with a dependable and repeatable solution that reduced the labor cost of human construction down to about a week of robot construction, then yeah, I think the cost of manufacturing the robots would quickly pay for itself.

I have Also heard of https://www.14trees.com/ and terran robotics doing this…

Edit: I imagine though, that in locations where building is regulated under the international residential code. There has been less investment, it only in the last few years added an appendix for mud/cob construction… So you can add regulatory cost on top of the actual robotics involved.

The tiny house they have a gallery of is aggressively ugly, with lots of bizarre curved walls seemingly just to demo their method. And the shelves and fixtures look precarious and unsafe, straight out of Arrested Development. Given the build quality, I’d be afraid the roof would come down on me if I sneezed.

The economics on those robots is that they’ll be used for monitoring and controlling citizens and aliens by the state or employers, rather than be used to serve common folk for their problems including housing

For what it’s worth, my house was shipped on the back of two lorries and the individual walls were built in a factory offsite. Though what I learned in the process is that getting the frame assembled is only one part of having a house built and the other stuff (foundations, etc adds up quick)

> There’s a long list of construction startups who thought the industry was low-tech simply because everyone in it was dumb, and that they would be the smartest guys in the room who’d revolutionize everything.

And therein lies the problem.

The guys that work in construction aren’t “dumb”. They’re most likely way way *waaaay* smarter than you, particularly about construction, but maybe not so much about the computer industry.

Guess what? Construction is absolutely nothing like the computer industry, and nothing the techbros know about it remotely maps onto construction.

I jointly ran a window and door software company (I was responsible for product/dev). You wouldn’t believe the amount of staff that joined “how hard can windows be?” Consistently and without fail 3 months later “what the _____! I never knew!”

And that’s just one component of a building.

Buildings are not simple things…

Well, the software startup mentality didn’t succeed in revolutionizing any industry except for software.

And it is looking quite shortsighted and unsustainable for software too.

Yeah exactly, like the car industry. Christ, can you imagine if one of those cloud-cuckoolander morons decided they wanted to start a car company? You’d have kinda cool-looking cars that were surprisingly affordable but all the switches would be replaced by a big touchscreen that’s too bright to look at when you’re driving at night, and all the important safety systems would be written in node.js or some damn thing.

To add to that, construction is heavily regulated (which is by the way, probably a window of opportunity for some startups that will aim at finding innovative ways of working around regulations to build cheaper without breaking the law), and heavily unionised too. Most attempts to seriously innovate in it will be shot down quickly as it will threaten jobs and union power.

It honestly feels weird to hear people talk in generalities about “regulation” and “innovation” in the wake of the whole Titan submersible thing. Like, didn’t we just have an object lesson in why certain industries need to be more tightly regulated than others?

I would not want to live in a house whose builders took an “innovative” approach to dealing with “regulation”. Building codes are often written in blood.

>the wake of the whole Titan submersible thing.

The Titan submersible didn’t violate “regulations”, though, it violated industry standards. Standards that are updated more often than regulations. In so doing, it it was denied a certification. Since it operated in international waters only, there were no applicable regulations to evade.

Regulatory bodies which are poorly funded may write overly restrictive rules because they don’t have the resources to do a more comprehensive assessment. In particular, many HUD rules are split into “single-family houses” and “everything else”, with little consideration for small apartment buildings, townhouses and other “missing middle”. The requirements for houses are much less strict than for apartments, and construction costs per square foot are correspondingly lower for detached single-family homes.

If you live in a detached SFH built after 1970, it’s arguable that you already live in a structure where the builders took an “innovative” approach to dealing with regulations, because it was built to the lower house standards and not the stricter apartment standards. And if it was built before the 1970s, the regulations were probably very lax.

Nonetheless, I think the solution must be to reexamine the regulations, rather than evade them. But this “written in blood” is a thought-terminating cliche that prevents progress.

People start companies, but they’re more “sole proprietor plumbing services” and less “spending someone else’s money on customer acquisition in hopes of 1000x exit” so it’s not what people categorize as “startups.”

There’s no magic construction sauce that will let you scale up to taking over the entire market, so it doesn’t attract that sort of investment.

You get related startups for software to manage projects, building codes, etc, but not for doing the actual construction part.

Yeah agreed but the secret sauce can be operating at no margins for initial years since there are almost no startups in construction thus nobody else would be able to do the same thing and a bit of market can be captured.
what do you say ?

Construction is actually pretty low margin, builders survive with credit and volume.

The secret sauce for construction is just finding the cheapest labor you can. There’s not a lot of efficiencies to be had.

>secret sauce for construction is just finding the cheapest labor you can

And then “sorting out” all the mistakes you can expect from such kwality.

Someone just told me about a construction business practice:

– Hire 5 guys, on the books.

– Those guys each bring 5 guys, off the books. (illegal immigrants)

– Those 5 guys on the books get paid for all 25 guys and distribute it within their team.

It’s a bit sad to hear about this sort of thing happening, but it seems all too common in business.

That same person told me about another story– regarding quality:

– At another job site, the company had a new project manager. The new PM approved moving forward into a new phase of the project without plans (plans didn’t arrive by the time contractor arrived). The contractor of that project build something incorrectly (as you’d expect) due to lack of coordination with other contracting teams (i.e. lack of plans). The result: $1-2 mil worth of work needing to get fixed.

I know someone who landed six months in federal prison for doing just that, and a multi-million dollar civil suit for underpaying those workers. The penalties for failure here are pretty steep.

I could be wrong, but I think intentionally operating at a loss in order to make it impossible for others to compete would run afoul antitrust / predatory pricing laws in most countries.

I’d say one construction site injury or fatality and you are out of business and on the hook for loads of money.

So put at buildings with no profit with the hopes that will… let you put up buildings in the future?

A small construction contractor might be able to drive out of business through dumping some similarly small moribund competitor, at which point every other competitor will fill the small gap in the local market that they have paid for.

A strategy of mergers and acquisitions seems more productive, but good management to actually build something without going bankrupt is still needed.

As someone who actually worked in construction (excavation in my case):

– it is immensely capital intensive at scale. Your average excavator runs in the mid 5 digits, cranes and other specialized equipment way more. If you want to start a nationwide company, no one is stopping you, but be ready to shell out hundreds of millions of dollars.

– Staffing is just as bad… you can’t outsource the grunt work to the cheapest contractor overseas, you need actually certified people on site and most young people don’t want to work in that area anymore as it is really hard, literally back breaking work.

– it is, and that for good reason, extremely regulated by government. No one dies if Facebook is down for an hour because someone fucked up a deployment. Mistakes in construction can cost lives or cause serious bodily harm or damages to nature (e.g. a sewer leaking into a groundwater table).

– almost none of it is automatable or in any way “disruptible” by a startup. Sure you can improve a bit by investing in automation or better digital tooling, but the ROI is in the single digits.

– most of the industry is decentralized small contractors. You can’t go viral with construction, you can’t build monopolies to extract rents later on.

– regulations are completely different everywhere on all levels, meaning you can’t do a “build a standard whitelabel solution and sell it for cheap” job.

– most of the industry is extremely local and “knowing” people is how you get business. At the same time, purchasing is extremely local as well. If you want to construct a new home, you ask other home builders on recommendations for contractors.

If by startups you mean new businesses, then there are plenty of them created all the time in the construction industry. Some succeed and some fail, just like everywhere else.

Going by the tech definition of startup though, sectors like construction simply don’t have the kind of economics that VCs want to put their money behind. Stuff like:

– lots of regulation

– lots or manpower requirements

– low margin

– established hierarchies, relationships, and general ways of doing business that are hard to disrupt

– need to have hyperlocal presence

– scaling has a high variable cost

all make it unattractive for the “three dudes with a laptop looking to disrupt” types, and it is very unlikely that they are going to be able to have hyper growth and a large exit a few years down the line.

New businesses on the other hand rely on financing options like SBA loans and regular bank loans.

I am squarely in the business and there are successful and failed startups everywhere. It is dynamic, challenging but there is defintely no shortage of people succeeding. Perhaps the startups just dont have the buzz or respect?

Many successful ones are already mentioned, like Procore for example. There are many more focusing in the data collection and modeling space including BIM. For example, there are still tremendous opportunities solving little problems with data collection and selling to Trimble. Or automating tasks in software and selling to Autodesk. Or add CAD like tools to a PDF reader and sell that for a hundred million (BlueBeam). The list is pretty endless, no shortage there. I believe the shortage is perhaps the humble humans that understand construction thoroughly AND understand technology to a level that would allows a bridge between the two to be constructed.

My favorite failed unicorn startup in this space that I believe demonstrates the difficulty of construction is Katerra. I personally dealt with them as a vendor and immediately knew they would fail even before Softbank gave them a billion dollars. The hubris was off the charts. A bunch of tech people that tried to hire people in the business but just couldn’t understand the scale of difficulties or challenges. I must admit they generated a fair amount of schadenfreude in me.

Interesting note on Katerra, if you visit DPR’s headquarters in Sacramento, there is a vision statement on the wall from around 99 stating their intent to become to construction what HP had been to computers – winning by driving the cutting edge with smart innovation. Not so different from the Katerra pitch, except that DPR is run by seasoned construction professionals who want to leverage lessons from tech – not technocrats who think the building industry needs to be told what to do.

> It is a highly profitable business and yet there are no startups involved in constructing building

It is very capital and labor intensive, and the margins aren’t all that great [0]. It involves an asset class that has a slow-moving market. It also is very labor intensive with lots of local competition all over. Finally, financial instruments for investing in real estate construction already exist without venture funds.

Software is a completely different beast. You mention CAD and other secondary software, but finance is also a place where software is used extensively. The latter is so prevalent I was able to use a smaller language (Clojure) at two banking companies, one a startup and one established. The margins of software and the size of the markets for it attract VC money.

I do think there are places outside software for startups here, but it will be startups that are further up the value chain from the actual builders.

[0]: 17% now, 8% in 2021 – https://www.angi.com/articles/construction-overhead-profit.h…

I talked to someone who created a startup in this space, specifically a two sided network for a type of construction material. She said it’s all hyperlocal (no one is ordering from a supplier 3 hours away), most orders and planning are done on the fly and over the phone, and there are lots of local quirks that frustrate attempts to provide a one-size-fits-all solution.

Another example: I recently learned from someone who specializes in foundations in a rural area that he only has two options for ordering large volumes of cement: a quarry 5 miles away, or a quarry 15 miles away. Any further, and there is a risk of the cement drying out before it arrives at the site. He prefers the nearest quarry, even though it’s smaller, because the owner hasn’t yet moved to computer-controlled mixing and errs on the side of caution when creating a new batch, which leads to a better grade of cement than it’s supposed rating.

FYI. If you’re talking about the stuff in the big round trucks that final product is concrete. Cement is an ingredient in concrete, a chemical binder.

Normally for “sidewalk concrete” that binder is an ingredient called “Portland cement”, and the final product is “Portland cement concrete” or P.C.C. Probably the stuff your friend is working with.

For road paving, often referred to as black-top, the binder is Asphalt, and that is called “Asphaltic Concrete,” or A.C.

And of course these terms might be local as well, this is what we call them in Southern California.

But the fact that the smaller company doesn’t computer control and errs on the side of caution is a great illustration of the difficulty of working in this space. And that 10 miles can make a difference. I believe it!

For large road projects in the boonies they typically have to build concrete mixing plants on site! The look like a collection of huge round tank-style trailers tilted upright and assembled all together.

Edit – spelling.

Before COVID, but especially during/after, there is also loyalty to consider. You need 18 yards of concrete by 8am. You go to the depot, and there’s not enough concrete to go around.

If you’ve stuck around and dealt with the ups and downs with the same guy, you’re getting your concrete. If you’re the kind of guy that shops around, you’re not getting concrete.

These relationships are highly personal.

There are quite a few of them. They just aren’t part of the HN eco-system, but tend to originate in contracting companies and their associates (suppliers, family members). I’m aware of several of these and there is some interesting innovation happening in this space. Do keep in mind that anything you do in this space still has to conform to building codes so your ability to innovate is limited and ‘move fast and break stuff’ isn’t really an option (fortunately so).