Startups working in the ‘constructiontech’ industry have raised $98 million from investors in the last year and hold the potential to add $25 billion year-on-year value to the Australian economy within the next decade, a recent report has found.
The Digital Foundations report was delivered by StartupAUS in partnership with the Victorian Government and industry players Lendlease, construction startup Aconex and Ersnt & Young. It found ‘constructiontech’ companies will be a key driver of change in Australia’s $134 billion construction industry.
Constructiontech startups are defined in the report as those creating digital and technological solutions for the planning, design and building processes of the construction industry, explains Alex Gruszka, one of the authors of the report and chief operations officer of StartupAUS.
The report finds emerging trends and technologies in the space included building information modelling (BIM), 3D printing, smart buildings and even robotic bricklaying.
Using these types of tech solutions to equip the traditional construction sector could potentially add $25 billion in value to Australia’s economy year-on-year within the next decade, according to the report, which also found the construction industry will add a further 100,000 jobs for Australians within the next five years.
“There is a huge opportunity here,” Gruszka tells StartupSmart.
“The construction sector already contributes 8.1% of our [Australia’s] GDP, and with fullscale digitisation, constructiontech could add an additional $25 billion per year to GDP within the decade,” he says, adding that these figures “pale in comparison” to the international picture.
“Digitisation could potentially lead to over $US1.5 trillion [$1.95 trillion] [in GDP contribution] globally in the sector,” he says.
Constructiontech is enabling, not disrupting
Drawing on interviews with 42 individuals from 31 organisations in the construction sector, including 16 representatives of the startup community, the report found that instead of disrupting the construction industry completely, startups in the space are looking to provide digital solutions that add value, enhance safety, and ensure greater efficiency.
“There’s widespread support and collaboration across the sector — startups aren’t looking to disrupt the tier-one firms, they don’t have the means or capital to take on billion-dollar projects,” Gruszka says.
“Instead, they’re working actively with the tier-one firms to solve specific pain points and integrate software to either increase quality, speed, safety or reduce costs.”
Sean McCreanor, chief and co-founder of constructiontech startup Assignar, agrees his offerings stand to complement, rather than disrupt, traditional industry players.
“As a startup, we’re not often competing against industry heavyweights, but we’re often asked about collaborating or integrating with them,” he tells StartupSmart.
“When you have good product market fit, and know the pain points of the customer intimately, we’re finding that they [industry players] are signing up quickly because we’re addressing a real problem for them.”
With over $98 million invested in constructiontech startups since the startup of 2016 in Australia, according to the report, it’s clear the sector is a rapidly growing area of interest for the construction industry.
Assignar recently raised $3 million for its cloud-based construction management offerings, and says construction companies are quickly realising the need to innovate or become obsolete.
“Tech adoption is growing in the space, and most customers are recognising that they need to embrace technology to remain competitve and relevant,” he says.
“Construction sub-contractors compete on quality, safety and efficiency, and their margins are constantly under pressure. Construction companies typically just want to continue building, so the right tech tools are enablers for them and can give them a competitive advantage.”
This rapid growth of innovation is spurred by the concentration and market-share of industry heavyweights in the sector, with the report finding only 20 of more than 345,000 businesses in the sector account for 68% of contracts in the space, meaning startups selling products to these organisations could quickly achieve serious reach and impact in the industry.
“Australian construction companies and their workforces are becoming more tech savvy and really want to embrace technology,” McCreanor says.
“We have the opportunity to become a global leader in this space because we have willing customers that want to embrace innovation.”
“Flying under the radar”
While StartupAUS chief Alex McCauley labelling constructiontech is a “thriving startup sector”, he also notes it’s one that has “so far been flying under the radar”.
Gruszka explains that the construction sector often experiences “an underestimation of both how large it is, and how much technology can contribute”, which means it can sometimes be overlooked as a hotbed of startup opportunity.
“Stereotypes of construction might suggest that this is a sector not interested in technology, yet that is absolutely not true,” he adds.
Going forward, Gruszka says “owning constructiontech as its own sector” will go a long way to supporting the growth of startups in the space, while a dedicated constructiontech accelerator and hub would “do a lot to put the space on the map”.
“Stone & Chalk has achieved that for fintech, and I think a similar approach for constructiontech could be highly effective,” he says.