Construction Tech Sector Funding Rises As Prescient Raises $50M More

If we learned anything when I first covered funding in construction technology startups back in May, it’s that this industry is hot.

Construction might not be top of mind when one thinks of sexy sectors in tech; however, that could be exactly why it’s one of the faster-growing sectors when it comes to capturing investor interest. It’s been around forever, with companies conducting many processes in the same old tired (and inefficient) ways for decades. What (multi-trillion dollar) industry could be more ripe for disruption?

If we had any doubt about construction tech’s momentum, third quarter funding numbers proved us right once again. They showed the same upward trend we witnessed when looking at 2017. Specifically, North American construction tech startups raised $220.7 million across 14 deals in the third quarter. That’s up 348 percent from $49.3 million raised over 19 deals in the third quarter of 2017, and a staggering 5,865 percent higher than the $3.7 million raised in six transactions in the third quarter of 2013. Here is what that pace of investment looks like year-over-year.

In the first three quarters of 2018, construction tech startups have brought in $1.27 billion in venture funding—124 percent higher than the $563.5 million raised in all of 2017. Admittedly, most of that was raised in the first quarter alone because Menlo Park-based Katerra brought in $865 million from Softbank, RiverPark Ventures, and Four 

Score Capital in a Series D round. Per its Crunchbase profile, Katerra is “a technology company optimizing every aspect of building development, design, and construction.”

While digging into the third quarter numbers, we uncovered an under-the-radar company in this space that’s been quietly doing some pretty cool stuff for some big-name clients: Durham, N.C.-based Prescient. Unlike Katerra, there hasn’t been much published in the media about what it’s doing. Company officials said that is by design.

The Oracle Of Housing

By definition, prescient means “having or showing knowledge of events before they take place.” And that’s been part of the company’s goal since inception: to be a visionary in the multi-housing construction space.

Crunchbase News talked with Satyen Patel, Prescient’s executive chairman, and he explained how a powerpoint presentation in 2012 has led to 75 patents across 30 countries (and 64 more on file), $195 million in equity funding, a pre-money valuation of $650 million, and a 119 percent compounded annual growth (CAGR) since 2012. Over the past six years, Prescient has also built more than 5 million square feet of more than $1 billion worth of finished buildings, according to Patel.

What sets Prescient apart, Patel believes, is that it offers both a software and hardware platform in the construction industry. Many firms in the space are typically a software or hardware company, but not both. All we need to do is look at Apple for confirmation that the software-hardware combo play has been hugely successful model for that company at least.

“We can manage the entire process of construction, improving efficiencies—which impacts time, money and risk, to develop a superior product,” Patel told Crunchbase News. Prescient specializes in apartments, student housing, senior housing, and hotels. Prescient has a number of large projects under its belt, including Hyatt House Belmar in Lakewood, Colorado, a six-story, 80,000 square foot hotel. It recently branched out to armed forces housing as well, challenging in that it recently had to build a structure that could withstand a bomb or grenade blast.

“We use laser cutting systems, robotic welding and automated roll forming. Buildings go up like an erector set,” said Patel.

Prescient has a 135-person team of software and design engineers working out of Krakow, Poland. In total, it has 350 employees with 167 being recruited in 2017 alone. Looking ahead, Patel expects to have about 500 employees by 2019.

“Our plants are pretty lonely, with about 14 material handling people working across an entire shift,” Patel said. “They’re highly robotic and automated, as our software runs the plants.”

Prescient can even provide add-ons that go into buildings such as elevator shafts, proprietary stairways, and balconies.

“We look at what we’re doing as what Oracle has done for the enterprise IT sector or what Shopify has built for ecommerce enablement,” he said. “We believe we’re on the cusp of creating the leading platform on which buildings will be made in the future, and we believe we’ll be leading in the multi-unit housing category[…] Our vision is to deliver attainable housing for all.”

Prescient is using its latest fundraise to continue software development and to expand its plants. It’s also launching a new product on the West Coast, having just been “seismic” approved in California up to five stories for now and taller later. The company also has been approved to build structures that can withstand winds of up to 150 miles per hour, which also will give it entry into hurricane-prone markets, Patel said.

“I think this technology is very scalable globally,” Patel noted. “And we’re looking to expand into Canada and Mexico in 2019, and into Western Europe and the Asia-Pacific region in 2020.”

Prescient investor and board member Loren Bough, who has experience in real estate development, believes the opportunity for Prescient is significant.

“Construction is one of the mega-size land grab opportunities in an undisrupted sector of the economy,” he told Crunchbase News. “This is an enormous sector of the economy, and until now, no one’s done it properly yet. Prescient is improving quality compared to standard construction techniques, and it’s developing a big fan club in the general contracting and development world.”

And overall, that excitement seems to be leading to funding for construction startups, which often have higher capital requirements. But while they may be booming now, construction is a temperamental sector. VCs may be into the building industry during boom times, but the real test for construction startups is maintaining growth in a downturn.

Top Image Credit: Li-Anne Dias.