New Investment Is Powering Growth in Construction Start-ups
Since the market downturn in late 2022, venture capital fluctuations have rocked numerous industries, including the construction sector. The industry saw a sharp drop in funding levels throughout 2023 and early 2024 as rising interest rates and supply chain disruptions pushed many investors to adopt a more cautious approach.
However, by late 2024, signs of stabilization began to emerge. While it’s still too early to say the industry is on its way to recovery, there are encouraging indicators that momentum is building. Key to this growth has been a growing interest in innovative technologies within construction.
Early-stage deal activity increased significantly in 2024, as did the emergence of new venture capital funds specifically targeting construction technology. Corporate venture capital (CVC) firms have also gained momentum, with contractors and other industry players making high-level investments in promising construction start-ups.
While this indicates strong investor interest, turning that interest into sustained growth will mean that start-ups will have to demonstrate their value. To do so, they must present clear value propositions, scalable business models, and measurable benefits that enhance efficiency or drive cost savings. Collaborating closely with their investors will be a key part of achieving those aims.
Investor priorities
Before examining the growing role of CVCs, we first need to understand the broader investment landscape shaping construction today. Investors, to put it simply, are no longer chasing hype – they’re looking for proven innovations that can deliver measurable outcomes in an industry that’s dealing with persistent labour shortages, rising material costs, and growing sustainability pressures. To that end, the industry is seeing a re-emergence of productivity solutions that are aimed at tackling these challenges head-on.
Contractors, in particular, have become more active as investors, driven by first-hand experience with the pressures of optimizing operations. The focus is now on technologies that can strengthen project management, improve scheduling, and enhance overall workflow. This renewed interest in productivity is further fuelled by the potential for artificial intelligence (AI) to unlock efficiencies.
For example, Outbuild – a company that provides construction scheduling and planning software in the U.S. – has seen growing demand from clients eager to see AI-powered features in the platform. These AI-driven capabilities include predictive scheduling, which analyses past project data and external factors like weather patterns and material availability to optimize timelines. Additionally, AI-enhanced risk assessment tools help identify potential bottlenecks before they occur, allowing for more proactive decision-making.
Another critical trend has been the growing focus on sustainability, with a strong push for green building practices and technologies designed to reduce carbon footprints and address environmental concerns. While sustainability remains a top priority, there has been a slight slowdown in momentum, particularly in the United States as shifting priorities under the new administration take effect. The big question for 2025 is how much ongoing support these green initiatives will receive. In contrast, Europe continues to uphold strong fundamentals for green construction, with ambitious net-zero emissions targets that will keep sustainability at the forefront of industry discussions in the years to come.
However, a major area that will demand greater attention from both investors and the industry in the future is the supply chain. Issues related to logistics, materials handling, and material supply are still among the construction sector’s most significant hurdles. While supply chain issues may take longer to address fully, it remains one of the most pressing concerns for the industry and is expected to play an increasingly prominent role in future investments.
The role of CVCs
One major driving force behind this new investment landscape is the expanding role of corporate venture capital (CVC). Unlike traditional venture capital firms that tend to prioritize financial returns, CVCs typically operate with broader objectives. They are designed to foster innovation, support open innovation ecosystems, and align with the strategic priorities of their parent companies.
However, the specific approach that each CVC takes when engaging with start-ups can vary widely. They may invest directly or serve as accelerators or mentors. Or they might act as key clients or even acquire start-ups through mergers and acquisitions. This adaptability allows each company to structure its CVC arm to fit its specific needs while still sharing common industry characteristics.
That said, financial performance does still matter – CVCs must ultimately justify their investments. CVCs will eventually expect a return on their investments. To secure this return, CVCs should outline a detailed plan for collaboration, specifying both the level and the nature of the hands-on support they’ll provide.
However, aligning internal stakeholders around these initiatives is not always straightforward. While a CVC leader may have one vision for strategic growth, operational teams, such as those on the ground at a construction site or manufacturing facility – could have a different perspective. Bridging this gap and securing internal buy-in is critical, as a lack of alignment can hinder the delivery of the tangible ROI that CVCs expect. Overcoming this disconnect is one of the biggest hurdles to ensuring the success of CVC investments.
Attracting CVC interest
For start-ups aiming to secure CVC investment in this evolving landscape, a strong pitch is a good starting point but start-ups must also provide a clear demonstration of real-world applicability. You could have a very interesting innovation, but if it’s not solving a pressing problem or meeting a critical need in the industry, it’s unlikely to gain traction with CVCs. To reiterate, the industry is past the hype phase – it’s now prioritizing practical solutions that offer proven industry integration and scalability. This is one of the first things a CVC leader will assess when considering a potential investment – real-world value.
Another major consideration is a strong partnership mindset. Start-ups that view CVC investments as a collaborative opportunity, rather than simply a funding source, are more likely to achieve long-term success. CVCs typically seek start-ups that are receptive to feedback, adaptable, and open to leveraging the CVC’s expertise, networks, and resources. This mindset helps create an environment in which both parties can thrive – start-ups gain valuable industry insights, mentorship, and access to new markets, while CVCs see their investments generate healthy returns.
Lastly, start-ups seeking CVC investment need a compelling story that clearly communicates what their company does, why it exists, and where it’s headed. While a strong narrative is important for all VC investments, it carries particular weight for CVCs due to the close collaboration inherent in these partnerships. CVC leaders need to ensure that a start-up’s mission aligns with their corporate and industry objectives. Start-ups that meet this criteria are more likely to gain the trust and ongoing support of CVCs.
Final thoughts
Looking ahead, the intersection of AI, productivity, sustainability, and supply chain optimization will likely define the next phase of construction technology investment. While challenges remain, the growing involvement of CVCs and the continued influx of new start-ups with innovative ideas suggests that construction technology is entering a new era.
Those who can navigate these dynamics will be well-positioned to drive the next wave of construction innovation.
Article by Gonzalo Galindo, Head of Cemex Ventures.