Foundamental Closes an $85 Million Fund to Support Early-Stage Construction Technology Startups
The Trillion-Dollar Construction Industry: A Shift Towards Digitization
The construction industry has long been plagued by inefficiencies and a lack of innovation. With the rise of new technologies and a growing number of startups, it appears that this sector is finally beginning to undergo a significant transformation.
In recent years, there have been numerous reports of venture capital (VC) funding in U.S. construction tech startups reaching unprecedented levels. According to data, VC funding in these startups reached $1.3 billion in the first half of 2022, representing a 44% increase on the previous six months. This trend is expected to continue, with several new funds and initiatives emerging to support entrepreneurs in this space.
New Funds and Initiatives Supporting Construction Tech Startups
One such fund is Building Ventures’ recent closing of a $95 million fund for construction tech and real estate startups. Agya Ventures has also announced a $32 million fund, while Brick & Mortar Ventures launched an early-stage accelerator billed as the "Y Combinator of construction tech."
Against this backdrop, German VC firm Foundamental recently unveiled its new fund, targeting $85 million at early-stage construction tech startups globally. The fund builds on the success of its inaugural $65 million fund, which closed in 2019.
Foundamental’s Success and Expansion Plans
Foundamental has seen significant returns from its investments, with four exits and one unicorn over the past three years. One notable example is Procore acquiring Indus.ai, while Faro bought Holobuilder. India’s Infra.Market also hit a $2.5 billion valuation last August.
The fund’s general partners have expertise in distinct regions: Patric Hellermann focuses on Europe, Shub Bhattacharya covers Asia-Pacific (APAC), and Adam Zobler targets North America. "Construction is the biggest, undisrupted market in the world," Zobler said. "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."
Foundamental plans to double down on emerging regions like Latin America while focusing on historically neglected verticals that impact everyone, including housing, skilled labor, and public/private infrastructure.
Goals and Investment Strategy
The fund aims for a larger portfolio of around 40-50 companies and will invest across pre-seed, seed, Series A, and Series B rounds. Check sizes will max 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 its limited partners (LPs) as global names from the building and construction ecosystem, it didn’t reveal their identities.
The Growing Need for Construction Tech
The construction industry’s inefficiencies have been well-documented. From delays to cost overruns, there are many areas where technology can improve processes and outcomes.
Startups like Procore, Indus.ai, and Holobuilder are already making waves in the space. With Foundamental’s new fund and other initiatives emerging, it’s clear that the sector is ripe for disruption.
Conclusion
The construction industry is on the cusp of a significant transformation. As venture capital funding continues to pour into startups working on construction tech solutions, we can expect to see more innovative products and services emerge. With Foundamental’s new fund leading the charge, this space is primed for growth and innovation.
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