Now Reading
Why are there no startups in the actual property building sector?

Why are there no startups in the actual property building sector?

2023-07-07 07:25:06

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.

Biggest cost drivers for construction are land prices, permits and taxes,
materials, and interests.

You cannot make permits, taxes, and land prices to go down.
Interest can be “tamed” if you build quick and sell quick.
And most material prices are driven by transport.

Before you jump into the sector remember a great technology for construction was drywall (Pladur, Knauf, etc): it lowered time (and costs) to build inner walls.

Anything electronic, like automated window blinds… etc is not interesting for the sector: prices are high, cost to deploy are also high. It won’t get mass adoption unless customers want to pay 2x-10x more for a house.

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.

It is a highly profitable business..

I don’t know anything about construction, but generally speaking founding a startup in a historically profitable industry means that there’s a lot of room for competitors to counter if you try to disrupt the industry (eg they can afford to invest and improve, they’re just not bothering because they don’t need to), and it’s hard to win on price because competitors aren’t particularly cost conscious as they don’t need to be.

If you want an easier time when you found a startup look for an industry with potential to grow. Then you can focus on growing the market rather than trying to compete for customers. Customer acquisition is far harder, and far more expensive, if you’re trying to take market share from other businesses. The smart move is to go where no one has gone yet.

There’s loads!

Historically it’s not seen much investment, there are definite cultural issues but I see the sector as a sleeping giant that’s often overlooked.

Here’s a long lists of startups:

Regular Conferences:
AEC Tech run by Thornton Tomasetti,
MIPIM NY is a big PropTech event

I work for a construction tech startup ( which is building a platform to bring the world of construction system manufacturing closer to that of architectural design.

Maybe because building is tough?

There are a few start-ups about 3D printing houses, but – at least for those that I have seen that actually demonstrated something – they seem to be the “usual” startup led by some brilliant people that never worked in traditional building/construction[1] and propose a new, revolutionary approach that resolve a non-problem (building the walls) and forgets to address all the rest of the building (where the actual problems are), let alone compliance with the various technical norms (very often local, i.e. not even country or state wide).

They can usually print a rudimentary shed in little time, but the same or better shed can be built in less time with prefabricated elements or in a little more time (at a comparable cost) with traditional means.

[1] and know nothing on the complexity of building a house

See Also

Honestly those 3d printed houses scare me, it basically turns houses into non-repairable junk that will have to be torn down the first pipe that bursts. Normally framed houses out of metal or wood are king for reparability that can be repaired for over a hundred years if not more.

The biggest obstacle to building houses in my opinion are entirely legislative/political. Towns oppose density and cause suburban sprawl galore which drives up costs of everything.
Rich elites have also bought up land en-masse over the country so that even if you want to plop a house on a empty lot in a quaint town, they’ll charge you half a million just to acquire the lot.

This is true, but the only reason Uber could get to a large size was that local governments (mostly) ignored it for a while, often over the protests of taxi companies. With building, they are more likely to come down, hard, on the very first building that isn’t up to code, if it’s done by a newcomer (existing incumbents might get away with it longer).

That doesn’t work. You can’t get hook ups to power, water, & sewer without the right permits. The police or sheriff absolutely will be dispatched to halt your construction if you try this.

I wouldn’t be willing to dump a significant chunk of my wealth into a structure built by a company who makes a point to ignore building codes and zoning laws.

Sounds like a disaster.

Not clear what do you mean by “primary association with real estate construction”. Like Blokable? Or Juno? There are a lot of companies, they aren’t really present online because their customers and investors prefer shaking hands. 😉

It’s nearly impossible to be a “startup” in the construction industry. Aside from employment, permitting, funding, and real estate, the whole notion of a startup just does not work in the construction industry. The timeline is long and slow, the upfront commitment is high, and the entire endeavor is risky. It’s not just writing code and creating a website.

Edit: There might be startups brought on as subsidiaries to do specific tasks, but I think those are very rare.

Source Link

What's Your Reaction?
In Love
Not Sure
View Comments (0)

Leave a Reply

Your email address will not be published.

2022 Blinking Robots.
WordPress by Doejo

Scroll To Top