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.
The first lesson to learn is that construction doesn't happen behind a laptop or on a phone. From your user's perspective, time spent fiddling with your app is time not spent on real work. So naturally you focus on selling to the "office workers" who spend more time on planning and administration. The problem with that segment is that the tools they already have are good enough. Construction projects always take far longer and cost far more than expected because of what's happening in the field, not because of what's happening in the office, so software simply isn't a bottleneck in this industry. The fact that your tool was specifically designed for their use case, or has an AR feature that allows them to walk the site virtually, or whatever -- it's cool, and you can get a few sales that way, but it's not going to result in better project economics, so it's not going to revolutionize anything.
The problem is that nobody can align the incentives of the tradespeople and the office folks when it comes to integrating into an information system together. You have to cross multiple organizational boundaries between owner, builder, contractor, and subcontractor of which very few people have a bottom up understanding. Mostly the people with the incentive to put everyone on a single platform (owner / builder) think very low of the tradespeople, which is why tradespeople are beginning to make more money than the accountants and PMs.
Exactly this. What you describe is basically the same as every ERP and CRM problem. In the end most of them all somewhat converged to SAP or SAP equivalent.
It takes a very specific and special sets of skills to align and understand both, if not all parties interest.
As for people talking about "why is the software industry like that?" I have great personal anecdote that to me explains why. Years ago I was tasked with a small team (~5 people) on a software project. We all got together and spent a good solid 3 days on planning and estimation, and our estimate was something like 5 months. Sales team freaked out, they said they needed it next quarter, so we had 3 months. So we looked at our original estimates and tried to find ways where we could cut scope, and came back with a "well, if we cut out literally anything remotely non-critical, and pray a little, I guess we can say 3 months." When all was said and done, the project took nearly exactly 5 months, just with a ton more stress and worse quality.
So these days, I'm more wise to the ways of the world. If someone says "we need you to find a way to cut the schedule by 25%", I basically say "OK, we can cut scope, but in my experience it always takes the time of the original estimate anyway." So then when things eventually go over budget, I don't stress at all - I leave work at a normal time, and just say to myself "everyone knew how long this was going to take, we just wanted to pretend it wouldn't take that long."
A big reason software is chronically over budget is that people simply want to pretend it will take a shorter time than it actually does, but they also know there is some real value to everyone engaging in that "mass pretending" in the first place.
I worked with a GC who bragged about tripling the budget of a highschool build. If you are doing large projects the only way you're going to win is to be way off on bid day and to be good friends with the people who figure out the financing.
We can recognize all these problems with budgets - that sales is incentivized to sell under budget, and submit change orders or project renewals later to get more money. Yet why does this happen? Can a private company really compel a government to change a contract? If the government really wanted to, they could take steps to limit the budgets, sue, nationalize a business, etc... This brings concerns that a government could wield it's power to exploit private companies, but I don't think people would be that opposed to the idea of a government trying to save taxpayer money.
The core of the issue is actually cultural. In business circles, closing a sale is considered a "skill". Lying, cheating, bribery - these are all culturally laundered as a method of sales tactics, and businesses laud salesman that can close above all else. I would argue that this is a cornerstone of business culture, at least in the US.
I think this is the core of why bids are so far off, and even a core issue with the world economics. A large portion of business occurs in the "enterprise" space behind closed doors, and the sales process is very obfuscated. It is the opposite of a free transparent market. These deals occur behind closed doors, net salesman a bundle in commission, and fall apart when they have to be implemented.
Same as with software really.
The external factors are also a thing, material shortages or finding something unplanned that needs fixing (for renovations)
For example, you don't know what's in the old wall (but you have a pretty good idea of the amount and odds but you don't mention that) and so you don't include it (because the other guy won't and you have to stay competitive). Instead of including in proportion to the odds. You then later go to the client with "uh oh, we need to fix that. It happens. What are you gonna do?" And the client accepts it. This is mind boggling. If that's not the signs of a thoroughly broken industry, I don't know what is.
Before someone mentions that it's the same for software, not it's not always like that. With experience we got very good at estimating each in a series of comparable projects. It's very possible to fail to estimate large one-off projects. It's very possible to get it right with series. And house building is a very repetitive business. They are all different, but only so different and they are all built of human-sized rooms.
But putting aside the various incentives and psychological reasons why people tend to underestimate, I think there is a mathematical reason too.
Most complex processes with a large number of varied tasks tend to follow a log-normal distribution or something similar. And a property of this law is that when you go faster than expected, you don't go faster by much, but if you are late, you are late by a lot.
So, imagine the guy who does the estimate is completely unbiased and competent and tells you how long it usually takes (the mode), then there is more than a 50% chance that it will take longer (the median is greater than the mode), and on average, it will be even worse (the average is greater than the median).
You make a budget but then one of suppliers drops out, so you find a new one that can do the job on such short notice but you pay the price for that. Also You always make the budget as tight as possible so that it is very attractive, but there are clauses so you know you can go over budget in certain ways.
Why Construction Projects Always Go Over Budget https://youtu.be/dOe_6vuaR_s
Do they usually? I don't know, but curious.
My only experience with the construction industry was the construction of my house and those of a few friends where I was able to follow along.
The cost was exactly as estimated a year+ earlier and the timeline was pretty much spot on except for weather-induced delays (can't blame them for mother nature).
The people I've seen complain about cost/delay are also those who changed their minds in the middle about details, so of course it caused delays and cost.
Compare that to auto manufacturing. Ford knows exactly what an F150 costs. They can then price for known profit within a range.
Most jobs take bids and so many people hire the lowest bidder. Because of this, a lot of contractors price their bids as a best case scenario... Or they bid an exactly what was asked and nickel and dime for everything extra.
It seems like there are at least two problems software could solve here.
The first is that right now it takes effort for tradespeople to find work. They have to advertise or form relationships with general contractors etc. But then they have the incentive to draw out the work, because it's easier to extract more hours from this job than to do this job quickly and then have to find another one. Make it easier to match buyers and sellers so as soon as you finish a job you've got another one lined up and that incentive disappears, and maybe even goes the other way, because if you were the lowest bidder on a job you thought would take three days and you can get it done in two days, you still get paid what you bid. Which gives the general contractor more slack in the event of some other construction delays.
The second is efficiency. A lot of jobs are small and the major cost is travel time to the site. If you could get many contractors into the same system, you could do some optimizations there, by assigning jobs to whoever is nearest and minimizing the transportation costs, or letting contractors automatically adjust their bids based on their proximity. Which the contractors should like, because it reduces the travel time they don't get paid for.
Hmm. The government takes place in an office, doesn’t it?
Do you think a law could make construction faster and cheaper? A regulation? Change in policy? Non enforcement of existing policies? So no votes required? I don’t know, some of that could be extremely impactful and it could happen extremely quickly. Non enforcement of all sorts of regulations can happen in a stroke of a pen. Then, think of the impact of immigration policy on construction labor. Think of all the levels of government that could impact this, local state federal. With no votes whatsoever, no campaigning, none of that slowness.
I don’t know. You worked in this for 5 years. How could your takeaway be that construction doesn’t happen behind a laptop? Like I get the spirit of what you’re saying, poopooing AR whatevers, but I am just a layperson, and it’s just common sense that if the policy were “there’s no minimum wage” or “there’s no limit on immigration,” both of which can and do occur without legislation due to nonenforcement, dude, construction would get a lot cheaper and faster. And maybe that’s not software in your limited sense, but gig economy companies essentially achieved part of those specific policies I’m describing for all sorts of things. So c’mon, of course what happens in the office in every sense has the biggest impact on construction.
The biggest innovations to construction are probably to be had in better/faster/easier plumbing and electrical connections, making it faster and more reliable to install all the fixtures. Being able to plumb and install a whole bathroom in a couple of hours instead of most of a day while reducing the odds of needing rework would be a decent boost. We've seen some improvement in this already though with things like PEX and Wago, I imagine even more modular designs can improve this even more. The challenge with this is actually getting adoption and approval for some of this stuff.
I think there’s a massive opportunity in modular bathrooms. I’ve seen them done amazingly badly (think: the plastic cube badly perched in a corner of your Victorian seaside hotel, in which you have to crouch under the shower, while it hoses down the toilet paper), I’ve seen them done so well you wouldn’t have a clue you were in a room delivered in a box. The latter, I’ve only seen in Latvia, by a Latvian company - but I think the concept has legs.
I'd also add Viega to the list, it is well accepted in many places and makes copper soldering unnecessary to join copper pipes in many applications by instead using a crimped fitting that only takes a few seconds to crimp with a power tool, it's a game changer for plumbers working with copper and even carbon steel pipes up to 4 inches in diameter.
Don't forget the even earlier: https://en.wikipedia.org/wiki/Lustron_house
I think maybe 90% of the benefit could be had by simply having good, efficient design in the first place with the same traditional connections. It is unbelievable how much quicker it is to build when all the plumbing is stacked within a small footprint, rather than running all over the place.
If it is just "mold plastic differently so it can be put together quickly" and doesn't add much cost, it is worth it, but if you prefab walls cost more than raw materials + labour to build something similar... and on top of that are less elastic (just certain width and height etc.).
In retrospect, doing the job myself that way wouldn't have been too bad. The sharkbite connectors seem pretty reliable. I used some when I first bought this place and they've been installed for about 20 years now. I still prefer the traditional sweat joints, but maybe it's just not worth the investment of time?
Having said that, it definitely has limitations. There’s a lot more structure in the modules which means more material overall and makes it harder to fit in services. You’re also limited architecturally.
Modular is mature technology and would have taken over the whole industry decades ago if it was actually a lot better.
There are a lot of people who don't want their friends to know their McMansion was delivered on a bunch of trailers.
I think it would have taken over if it was cheaper. But for larger size buildings it isn't and that's what I think stops larger scale adoption. But they are faster to deploy.
Do you mean a skeleton laid on already poured foundations with water/sewage/electricity drawn, and ready for finishing after this weekend? finishing, carpentry, windows, internal plumbing and electricity takes a lot more to complete than the skeleton itself.
You just "plug in" each room to the central connections.
Slightly OT, but I feel like this is a general trend and definitely not limited to construction. There are many companies and founders aiming to 'disrupt' an industry, and a starting out with what only can be defined as arrogance. Seeing some of the startup companies in the sector i'm familiar with trying to explain how the world works to some of the most experienced and established players has been hilarious and infuriating at the same time. At this point, I finally understood where the derogatory meaning of 'techbro' comes from.
The main thing that concerns me is that people still believe technology (primarily software) is the solution to any problem we encounter. Yes, technology solved many problems in the past, but it also created a lot and failed in spectacular ways. If you need a solution to an acute problem, waiting for a technology to hopefully be developed isn't the right call. However, more and more people, governments and companies are buying into that idea. I can't fail to notice many people who where technology skeptic years ago now turned towards a "I don't want to change my behavior, technology will find a problem that solves the issues I cause with it". Autonomous cars are my prime topic that comes to mind, but many other things also come to mind.
But then I realized this is the natural push/pull of conservatism against progress. Incumbents get old and conservative. New companies crop up and try to do things differently. Sometimes the new ideas are stupid, and incumbents are right--the tried and true really is best.
Other times, the incumbents have become so bureaucratic, slow, and out of touch with what matters (customers), that a new company can come in, do things dramatically better, and burn an old competitor down.
Macro-wise, I think we should be glad for this. It's very hard to tell what will and won't work at the beginning. VCs get paid a lot of money for trying to guess this and even they can't get it right. I myself have been surprised many, many times when an idea I thought was incredibly stupid, turned out to have legs.
One way to change your mind on this, write down your predictions about what companies/approaches/techniques will/won't work 10 years from now. If you do this say, once/year, and you're honest, you'll see how hilariously bad you, and more or less everyone else actually is, at predicting the future and knowing what will and won't work. Sometimes you really do just have to try it, and see what happens.
I work in aerospace and whenever a post is related to aerospace here I expect to see several “why don’t they just <do x which they already do or do y which is easy to discredit>..” comments as if nobody else was smart enough to think of it. I favorite these comments for some reason. Not surprised to see the same thing happens in other fields.
Humble people don't say to themselves "I think I can do this better, so I'm going to disrupt the industry."
It's still a small % of houses built, but it's very cost effective and getting better (and more common)
european companies will build prefab exterior enclosure to retrofit old construction without displacing residents https://www.sciencedirect.com/science/article/abs/pii/S03787...
New construction:
Integrated Project Delivery - AI could solve the problem of aligning stakeholders possibly
Applying scrum/lean to construction -
BIM - there is a lot of data in a building and BIM standards are putting everything into one file,
digital twins: lidar and cameras and ai are all getting better where high accuracy scans can create as built digital twins while referencing BIM file to build it.
lifecycle analysis and building automation: precooling and preheating spaces, I believe we should have better rubric for valuing existing properties eg a window is an asset and a liability (many owners do not account for replacement costs leading to buildings in disrepair)
skilled labor - mixed reality education: if there is a digital twin then worker could use augmented reality to see preferred methods to make that happen while being credentialed and upskilling (crazy brick facades become possible)
Hadrian robot competitors: crane placing concrete blocks autonomously
This is the same problem that plagues electric car startups. Most of these folks don't know what they don't know. Tesla has had great engineering from day one, but almost went under because it couldn't figure out large scale manufacturing and logistics. Problems that old school companies have been solving for a century.
Tesla started from scratch and developed large-scale manufacturing and logistics from first principles. It was hard, but it's put them in a hugely advantageous position today. It turns out old-school manufacturing for ICE vehicles doesn't translate directly to EVs. Yes, Ford (for example) can build EVs, but they're not cost competitive with Tesla, because they're optimized for something else. Tesla produces 100x as many EVs as anybody else.
Now, was Tesla surprised by the difficulty of manufacturing, because they didn't know what they didn't know? Maybe, I have no idea. But in retrospect, it wasn't a mistake to ignore the accumulated wisdom of the car industry. It turns out the old-school companies don't know what they don't know either.
1. Elon thought they were smart enough to build cars with more robots and less humans than other manufactures. When this didn't work out, then swung to the other extreme and were employing far more workers than you would find at comparable plants.
2. Do you remember when Elon was tweeting about a national car hauler shortage, and that Tesla would start building it's own trailers? Tesla was the only manufacture having troubles with deliveries.
3. Have you watched the Sandy Monroe videos where they tear down vehicles? He has compared the build quality to 90's era Kias.
In the end (current time), didn't they (Tesla) find a better way?
I am truly ignorant here, but based on what I have read, Teslas manufacturing process now is much more efficient/better than the standard GM/Ford, etc...
Perhaps this is a regional/national thing (I sometimes get the feeling that "prefab" is a condescending term in the US sometimes). For reference, here's a page showing the selection from one of Sweden's main house manufacturers [1]. It's in Swedish, but I just wanted to share the pictures. Also it's hard to say exactly what proportion of a house is pre-built, but I expect the majority of the structural things (walls, floors, roof) to be.
https://en.wikipedia.org/wiki/Huf_Haus
According to this random web page, there are quite a few manufacturers:
https://medium.com/blue-future-partners/our-9-favourite-germ...
Brian Potter has some articles: https://www.construction-physics.com/p/why-are-there-so-few-...
Does construction ever get cheaper? https://www.construction-physics.com/p/does-construction-eve...
This is all done using computer-controlled manufacturing equipment, much of which is imported from Europe, where they are much more advanced on this front than in the U.S. One of the advantages of having computer controlled nail guns and vaccuum operated "wall flippers" is that the construction tolerances are far tighter than if you have humans nailing in the shingles, sometimes while on a ladder 15 feet above the ground.
The downside, of course, is that they only today have their one factory in New Hampshire, and while the walls can be shipped trucks on highways, if you want to build a large, luxury pre-fab home in Arizona, the trucks have to travel a long way, and that adds to the cost. This hasn't stopped some of their customers, though. Take a look at their web site for some example houses that they have built --- it's a far cry from what most people think of when they hear about "pre-manufactured houses". These are not trailer park homes!
Should you look at the fragmented composition of participating professions, fragmented nature of players and organizations involved, the fragmented and fluid supply chain, all combined with the long realization phase and complicated responsibility (legal) relationships of the actors perhaps? Generic contracting is more like a conductor role for the numerous groups involved, be it joined or independent ventures, than a subject of startup 'disruption'. Management, including financial.
Sub tasks will see some unicorns, but not much though, mostly in software area. The opensystemslab.io comes to mind as one construction adjacent one concerning the structral components mostly, but with systematic vision and novel mentality.
This approach is not quite as efficient as it initially appears:
First, it does nothing for the site construction (grading, excavation, utilities, paving, septic, well, etc.) Those tasks, which make up a decent portion of the project, are done in exactly the same way as in conventional construction.
Second, the modular boxes are either A) the width of shipping containers, which severely constrains the house layout, or B) somewhat wider than shipping containers, which makes them oversized loads that require escort vehicles, highway permits...increasing cost.
Third, you have to hire a crane to set the boxes, and then make all of the connections between the boxes, and install various mechanical and electrical components, complete the finishes, install staircases, etc. This costs quite a bit and still involves the hiring of various local subcontractors, just like in conventional construction.
When you add everything up, modular sometimes saves a little money and often reduces the project timeline (unless there are delays at the factory). But it's not a massive improvement, which is why modular hasn't taken over everything.
Aside from customer expectations for customizability in the US (and other countries) I believe regulations also contribute, with prefab homes actually requiring more robust construction than conventionally built homes.
[1] https://builtoffsite.com.au/emag/issue-05/sweden-became-home...
I would not want to live in a house whose builders took an “innovative” approach to dealing with “regulation”. Building codes are often written in blood.
Not everyone is so rich. People should have the choice about whether or not they want an unnecessarily expensive house. Regulations assume one size fits all and that everyone wants the same thing This isn't true. and trying to outlaw poverty doesn't work, it just makes things worse.
I wouldn't want to live in a house that was unnecessarily complicated to point of doubling it's cost just because of endless regulations forced vast increases in costs. You should see one of the links shared above: it talks a great deal about what's driving the increased costs in housing and it's all to do with increased building complexity, much driven by regulation.
The Titan submersible didn't violate "regulations", though, it violated industry standards. Standards that are updated more often than regulations. In so doing, it it was denied a certification. Since it operated in international waters only, there were no applicable regulations to evade.
Regulatory bodies which are poorly funded may write overly restrictive rules because they don't have the resources to do a more comprehensive assessment. In particular, many HUD rules are split into "single-family houses" and "everything else", with little consideration for small apartment buildings, townhouses and other "missing middle". The requirements for houses are much less strict than for apartments, and construction costs per square foot are correspondingly lower for detached single-family homes.
If you live in a detached SFH built after 1970, it's arguable that you already live in a structure where the builders took an "innovative" approach to dealing with regulations, because it was built to the lower house standards and not the stricter apartment standards. And if it was built before the 1970s, the regulations were probably very lax.
Nonetheless, I think the solution must be to reexamine the regulations, rather than evade them. But this "written in blood" is a thought-terminating cliche that prevents progress.
Regulation is just an enabler of laziness.
This is why I believe the future of construction is portable 3d printing. Imagine a 3D printer which fits on a truck, yet can be assembled in an hour and can print something the size of a large house from fiber-embedded cement. The printer would have nozzles for paint, foam, tar, electrical wire and PET plastic. It would also have a scoop to remove soil.
A team would drive the truck to the worksite, assemble the printer, start it going, and come back in 2-3 days when it was done. The printer would dig foundations, lay a fiber-cement foundation, damp proofing tar layer, build double skinned walls with foam between, paint the inside and out, install wiring and pipes, and build a foam, cement and tar roof. The house would have premade cupboards, bathtub, washbasin, etc.
Humans would come back to fit carpets, electrical outlets+fusebox, appliances, windows, vacuum formed liners in the bath/washbasins, etc.
You lost me there. I’m guessing you’ve never had to deal with rocky New England soil and non-flat grades. I’m sure many other regions have their own challenges, such as water tables and custom insulation requirements.
Even a tiny creature like an ant can dig holes in tough soil. A machine can too as long as it has feedback (ie. it can see the rocks and keep digging around and bashing till it comes lose.)
> non-flat grades
Well you dig it till it is the same shape as the plan...
> water tables
Either lay the concrete underwater (most concrete can be laid underwater) or dewater with a pump on the end of the actuator arm.
All of these problems just lead to increased build time. Obviously your machine is quite expensive - so if it takes 2 extra days of machine time to build a house on a steep grade in rocks, then thats gonna cost more, and at some point might make it not worth it.
I predict that that won't matter eventually though, because over time, the cost of human labor goes up and the cost of materials goes down (relatively). That means anything that reduces the labor cost to build a house will always eventually happen, even if more materials are needed (unless another technique reduces the labor further first).
I would go for the printer being far less weight by making the whole thing a cable truss and winch structure. That should cut the hardware cost in half or better, like the way a travelling circus tent can be assembled entirely without a crane, yet packs into a tiny box. The downside is you can no longer assume a rigid structure, so you need cameras and alignment marks for precise positioning - but you probably needed them anyway. You also can't make any accelerations above 1G, but that should be fine for housebuilding.
And obviously, their design only makes the walls, but I would want to do foundations, roof, insulation, plumbing and electricals all with the same machine.
The elaborate on your idea, there are a couple startups that do work in "real estate" if you can even call it that, they ship ready-made prefab aimed at people looking for separate mancave/home office from the actual home.[1] Those are things you can ship in highways and load in with a crane. But that's about it. These startups had their boom during COVID but you don't hear much about them now.
[1] https://www.dwell.com/article/prefab-home-office-accessory-d...
As a whole, yes. But there are a number of companies that are building segments (walls) in a factory and then shipping those to be craned-in like Lego® blocks. Some factory tour videos:
* https://www.youtube.com/watch?v=r-RTlbv84T8
I like ti watch these houses go up: the walls & roof trusses are all laminate and come in to the job site in segments. It's takes a crew of 2–4 (depending on the size of the house) about 4 days to assemble the exterior.
The interior is about 50% 'modular', and the rest is traditionally framed. It's pretty insane.
Have humans in the loop to clear the land and drive construction materials to the site, but build the rest with robots that can work through the night and faster than any human, constructing the same template again and again in different lots?
Sure, bureaucracy is a major bottleneck, but it's not like human construction finished within a month...
SAM, one robot, a dozen engineers in the race to revolutionize the way we build (https://www.audible.com/pd/1797102168)
It does not really support your hypothesis, instead giving a bunch of examples of inertia, which collectively make it extremely difficult to demonstrate a return on investment
There are modular homes that are shipped on highways, usually in sections.
And therein lies the problem.
The guys that work in construction aren't "dumb". They're most likely way way *waaaay* smarter than you, particularly about construction, but maybe not so much about the computer industry.
Guess what? Construction is absolutely nothing like the computer industry, and nothing the techbros know about it remotely maps onto construction.
And that’s just one component of a building.
Buildings are not simple things…
Building a bookshelf is SO much harder than software, and that's WITH clamp on guides, power tools, and pocket screws, giving myself every possible advantage. Things like painting, skateboarding, or guitar are an order of magnitude beyond even that, I can't even imagine what it would be like to be able to do those.
Software can easily become kind of a useless toy or hyper niche thing, unless the whole field can be changed to make it work like software does(Like how money and shopping is done, where every process has been changed to work with the software).
Once you change the whole field, stuff gets easy, otherwise, you're just spending all your time translating between paper notes and digital files, which are useless because there's no management system to do anything with the files, so they just sit there till someone has to run to the computer to check them.....
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 seems we stopped doing this in North America when highways took over.
High-rise apartment complexes go up pretty fast too, when a new station gets built. Coming from the West, it's fascinating to watch: an area that would normally be somewhat insular, suddenly becomes a viable bedroom community for people who work downtown, and then there's a rush to get in on the relatively cheap real estate, and night markets open up for your after-work entertainment, and so on. All within a couple years.
OTOH there's massive oversupply in these high-rise complexes, so I'm not sure about the business dynamic for the developers, other than the fact that a lot of money is still desperately seeking a parking space outside the PRC
It mostly didn’t work out that way, and it is a key reason a lot of the parks and native land reservations have a bunch of dumb isolated parcels that no one can get to.
It does seem it would make more sense near a city with some existing transit today you could add to. I do know the MTA has used real estate to subsidize a few projects like the Fulton St transit center, but less so for entire new lines.
The secret sauce for construction is just finding the cheapest labor you can. There’s not a lot of efficiencies to be had.
And then "sorting out" all the mistakes you can expect from such kwality.
A strategy of mergers and acquisitions seems more productive, but good management to actually build something without going bankrupt is still needed.
It is very capital and labor intensive, and the margins aren't all that great [0]. It involves an asset class that has a slow-moving market. It also is very labor intensive with lots of local competition all over. Finally, financial instruments for investing in real estate construction already exist without venture funds.
Software is a completely different beast. You mention CAD and other secondary software, but finance is also a place where software is used extensively. The latter is so prevalent I was able to use a smaller language (Clojure) at two banking companies, one a startup and one established. The margins of software and the size of the markets for it attract VC money.
I do think there are places outside software for startups here, but it will be startups that are further up the value chain from the actual builders.
[0]: 17% now, 8% in 2021 - https://www.angi.com/articles/construction-overhead-profit.h...
Another example: I recently learned from someone who specializes in foundations in a rural area that he only has two options for ordering large volumes of concrete: a quarry 5 miles away, or a quarry 15 miles away. Any further, and there is a risk of the concrete drying out before it arrives at the site. He prefers the nearest quarry, even though it's smaller, because the owner hasn't yet moved to computer-controlled mixing and errs on the side of caution when creating a new batch, which leads to a better grade of concrete than its supposed rating.
ETA: concrete, not cement per @gtfoutttt
If you've stuck around and dealt with the ups and downs with the same guy, you're getting your concrete. If you're the kind of guy that shops around, you're not getting concrete.
These relationships are highly personal.
Normally for "sidewalk concrete" that binder is an ingredient called "Portland cement", and the final product is "Portland cement concrete" or P.C.C. Probably the stuff your friend is working with.
For road paving, often referred to as black-top, the binder is Asphalt, and that is called "Asphaltic Concrete," or A.C.
And of course these terms might be local as well, this is what we call them in Southern California.
But the fact that the smaller company doesn't computer control and errs on the side of caution is a great illustration of the difficulty of working in this space. And that 10 miles can make a difference. I believe it!
For large road projects in the boonies they typically have to build concrete mixing plants on site! The look like a collection of huge round tank-style trailers tilted upright and assembled all together.
Edit - spelling.
Unfortunately they're (obviously) more expensive to purchase and operate, but they are super neat and could pave the way towards 3d printing options going forward.
Many successful ones are already mentioned, like Procore for example. There are many more focusing in the data collection and modeling space including BIM. For example, there are still tremendous opportunities solving little problems with data collection and selling to Trimble. Or automating tasks in software and selling to Autodesk. Or add CAD like tools to a PDF reader and sell that for a hundred million (BlueBeam). The list is pretty endless, no shortage there. I believe the shortage is perhaps the humble humans that understand construction thoroughly AND understand technology to a level that would allows a bridge between the two to be constructed.
My favorite failed unicorn startup in this space that I believe demonstrates the difficulty of construction is Katerra. I personally dealt with them as a vendor and immediately knew they would fail even before Softbank gave them a billion dollars. The hubris was off the charts. A bunch of tech people that tried to hire people in the business but just couldn't understand the scale of difficulties or challenges. I must admit they generated a fair amount of schadenfreude in me.
That made me chuckle :-)
Imagine the disruption if every second skyscraper would be leaning Millennium Tower of San Francisco.
Fundamentally reject the premise of this question.
BuildZoom (YC), Capmo, ProperGate, Arqlite, Buildcon, Mechasys, Branch Technology, Plant Prefab, Ergeon, Cove.Tool, KEWAZO, Rebartek, etc, etc, etc
The Googleable term you're looking for is "contech".
Construction is one of those industries that has trouble believing anything not designed for construction will work for them. It’s basically a completely parallel reality to what a lot of people here are familiar with. Procore and Plangrid are the darlings, with Procore being the big independent one left.
It’s also important to understand that construction is very much an accounting service. It’s endless bookkeeping, keeping track of material and labor. Nearly every company now is either 1) rooted in an industry specific accounting system 2) tied to estimating, and or models 3) some ultra specific tiny shoehorn to alleviate some specific manual process. There’s also a lot more hardware involved than people might realize like laser scanners for generating point clouds.
> although the secondary works related to construction like B2B market place for construction materials or layout designing softwares startups are there but no startup is primary associated with real estate construction
And the same answer is like for a lot of industries: "startups" (per Paul Graham) are defined as companies designed for high growth. And certain industries difficult to achieve high growth; by definition you won't see many successful startups in them.
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: www.aecplustech.com
Regular Conferences: NXT DEV, AEC Tech run by Thornton Tomasetti, MIPIM NY is a big PropTech event
I work for a construction tech startup (KOPE.ai) which is building a platform to bring the world of construction system manufacturing closer to that of architectural design.
There's a decent talk/demo here but it requires signup: https://nxtdev.build/view-on-demand/
- it is immensely capital intensive at scale. Your average excavator runs in the mid 5 digits, cranes and other specialized equipment way more. If you want to start a nationwide company, no one is stopping you, but be ready to shell out hundreds of millions of dollars before you made a single cent of income.
- Staffing is just as bad... you can't outsource the grunt work to the cheapest contractor overseas, you need actually certified people on site and most young people don't want to work in that area anymore as it is really hard, literally back breaking work.
- it is, and that for good reason, extremely regulated by government. No one dies if Facebook is down for an hour because someone fucked up a deployment. Mistakes in construction can cost lives or cause serious bodily harm or damages to nature (e.g. a sewer leaking into a groundwater table).
- almost none of it is automatable or in any way "disruptible" by a startup. Sure you can improve a bit by investing in automation or better digital tooling, but the ROI is in the single digits.
- most of the industry is decentralized small contractors. You can't go viral with construction, you can't build monopolies to extract rents later on.
- regulations are completely different everywhere on all levels, meaning you can't do a "build a standard whitelabel solution and sell it for cheap" job.
- most of the industry is extremely local and "knowing" people is how you get business. At the same time, purchasing is extremely local as well. If you want to construct a new home, you ask other home builders on recommendations for contractors.
- ETA: Yes of course there are giant companies in the construction world, but these companies don't do any small scale shit, these companies don't even return calls unless you're talking dozens of millions of euros of volume. But you can't really "disrupt" these either because of the sheer amount of everything you need just to get off the ground.
- ETA2: Another issue is a lot of the trades are run by older people with a ... seriously lacking understanding of modern IT. You'd be surprised how many essentially run off of Outlook, Excel and a CAD program. You'll have a very hard time pitching something to a crowd that has specialized in a specific thing and all but ossified there.
- Testing opportunities are scarce. Construction is an insanely risky business, delays causing significant followup costs and penalties, so you'll have it even harder to pitch something unevaluated to someone.
I've done all my own construction plan reviews with cities/counties. It's mind-blowing how it all works. You sit down with a reviewer, who looks at your plans drafted by an architect. You go back-and-forth with the reviewer about the length of a rafter and the type of wood, grandfathering existing structure, etc. Then, he pages through big-ass books to find the latest codes for insulation R-values or whatever. And the process goes on and on for hours. It's painful how inefficient it is. One reviewer I sat with actually fell asleep during the review. Seriously. I asked him if he was okay and he said he was hungover because he went to the Raiders game the night before. And the funny thing is, he was the toughest reviewer I've ever had. Another lady didn't even look at my plans; she just talked for an hour about her daughter's college graduation, then "stamped" my plans.
I often wonder how people who do lots of large projects deal with this. I assume they just dedicate staff to it, which seems totally unnecessary. As a software/systems guy who's always striving for efficiency, I wonder why all these various "codes" can't just be plugged into a system, then the "plans" be evaluated against those codes, kinda like a series of unit tests. All these "codes" are documented in the big-ass books; it's not magic. Has anyone heard of companies trying to do something like this (plan approvals as unit tests)? Just curious.
However, I'm reminded that city governments have zero incentive to streamline the process. That was painfully obvious during the plan reviews I was involved in.
I closed last year on my new home northwest of Houston. The suburb is one that's growing like crazy, but still is run like the small town it was once was. (We didn't get a water bill for some 3+ months due to a ransomware attack).
The final certificate of occupancy was potentially held up due to the one person who signs off on them, who wears multiple hats and apparently only processed them one day a week. If you got on his bad side (and this included trying to bribe him to hurry up), he'll put yours at the bottom of the stack.
Try systemizing and scaling your way around that.
There is a fundamental mismatch between the economics of startups and the economics of trades. Startups and technology work best when you can achieve scale quickly and without friction by using the same solution repeatably. Software is ideal for this, it scales (nearly) infinitely and can continuously deliver the same result. Work in the physical world frequently requires site-specific solutions. It's more akin to consulting than engineering.
It's not surprising that startups in the space came in overly optimistic and imploded quickly. I think most tech people have a bias against the trades and think it's easily understood grunt work. The reality is that it requires deep subject matter expertise, familiarity with local markets, sites, and housing stock, and a healthy amount of on-the-fly creativity.
At least around my area (in the PNW somewhere), and specifically for residential construction, the opposite happens. The builder has a bunch of small contractors he uses -- but they are only legally separate. And disposable, to be crude. They arrangement is a monopsony -- the plumber only has one customer: the builder. Same for the electricians, framers, etc. Even though they're not employed by the builder, they might as well be. Hell, even the realtor who sells their houses is an independent contractor with only a single customer. Guarantee she isn't making 2.5% per sale.
https://en.wikipedia.org/wiki/Laser_level
A quick google search of "laser grading" shows its still a thing attaching to heavy equipment.
https://www.starequip.com/construction-equipment-dealership-... https://www.burchlandmfg.com/products/lgx-laser-grader/
Construction Companies are pretty competitive and always looking for an advantage. They have some interesting ideas. (Using radiation to measure soil compaction was my favorite).
https://www.virginiadot.org/VDOT/Business/asset_upload_file7... [pdf]
This is the angle I would attack if I wanted to get into a construction startup. Logistics & data. Single digit ROI might be worth going for if we can keep the rest of the costs under control. Maybe you aren't replacing Lennar 100%. Maybe you get into a B2B partnership with them and gradually go for a bigger play with them as your construction partner. How much would they pay you to reduce their opex by 1%?
If you are trying to revolutionize the art of construction and push the entire market towards some crazy idea involving off-site fabrication, I agree... Total waste of energy. All of the factors you describe point towards "work with an incumbent, don't fight them".
I don't think there is much scale you can pull off there though. They have been doing this job for a while and can figure it out.
I dont think we could tackle construction as a whole. But if "Tech" ( Not just Software ) could help with all the smaller things. Like somehow make excavation 10-20x faster and cheaper.
https://techcrunch.com/2018/11/20/autodesk-agrees-to-buy-pla...
First HN post: https://news.ycombinator.com/item?id=3659159
Only difference is we deal in 3D rather than pdfs, and we're open source for too many reasons to type on a mobile phone, but happy to elaborate if needed.
I think what is fascinating about this space is that the tech is there for full 3d models, machine control, and BIM smart design.
It's all just so expensive, only the huge companies get deep into all of it. As a PLS, we've been delivering site topos for decades with full 3d surfaces, only to deliver those to the engineers and after design they print out a plan set.
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.
Don't forget labor. Any tools that can significantly reduce labor will at least get someone to listen to the pitch.
The standard SV "ignore the laws until too big to fail" Uber/Airbnb is just not going to fly. You've never seen enforcement until you've seen the building inspectors crawl up someone's back unpermitted retaining wall (going so far as to take the sheriffs to order a backhoe to knock things down).
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
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.
Zoning is the biggest issue in most cases as you said.
Compared to a handyman just handling it in 2 hours at most with typical wallboard.
But that works better for some things than others.
IMO, there's nothing stopping house-printers from printing components, so that you can only partially replace them. There is also nothing stopping projects from having repairability and some flexibility builtin; in fact, for example printed walls can have holes for every kind of wiring, and let the routing free, in a way that brick walls can't. Also, they don't need to only extrude concrete.
But anyway, none of that will happen any soon. The 3D printing culture is about prototyping, throwing again, prototyping again.
It’s not. Margins are thin. Most companies make money though sheer size.
At the end of the day, what you are building is typically a single individual's most valuable possession, and they have every right to nitpick poor build quality (which is endemic). A couple "bad make-up jobs" can end a contractor entirely, and usually quite suddenly (even in the middle of a project).
In my 20 years working residential, it was extremely rare to find a crew that didn't have a scheduling, drug, and attitude problem. Towards the end of my career ("retired" 2020) I began working primarily on 5000sqft homes thinking that this wealthier clientele might have less difficulties — turns out there's more.
ADVICE: invest in commercial/industrial tradeshops, because residential is "fly by night" in their much shorter existences.
SRC: Retired residential electrician (IBEW-trained).
I guess the only area for potential improvement by a startup is the physical labor, which no one wants to perform. As others mentioned in the comments, there exists stereotype that people in construction are dumb which is linked to the profitability "secret" - finding the cheapest labor. To the point even of importing entire crews from dictatures on another continent.
Otherwise real estate is full of architects, designers, inspectors, controllers, agents, and whatnot. They oftentimes have education and qualifications, access to data not available to you, and a professional network.
I'm stereotyping my own kind, and once thought of myself as "a fairly intelligent person" — but my occupational history would prove otherwise.
I absolutely loved the freedom of running my own shop (typically just myself, one-man one-van) — but after standing up for a few undeserving GC's, one of them sat me down and explained that "he has insurance for a reason, and necessarily must continue using sub-qualified labor to remain competitive [insurance covers his good name, he says]".
And the opportunities for cost-savings have often already been done (simplified design, cookie-cutter, etc).
And every single time the housing market even slows down, tons of builders go bankrupt. Many you've never heard of.
That was two years ago, and I can clearly see the building is still not done. It's gone up at a snail's pace compared to "traditional" construction nearby. Might be that the company is having financing and/or supply-chain issues.
If you think a house starts at the foundation, you've already missed half the battle. Lot subdivision is a massive amount of work and expense. You have utilizes and roads which in new construction takes around 2 years from concept to finish where I live.
Then when you lay a foundation and plumbing, which again takes a licened plumber to inspect before you put concrete on it. Then some time for concrete to set and dry before you can build on it.
Walls go up fast. Doesn't matter if it's wood, or where I live 3d printed concrete. What takes longer is services in the walls. Again plumbing, power, and possibly gas all requiring inspection. A builder inspector, city inspector, and many times the bank inspector will show up at this point. You still have a rough house that requires another month or two of finish work or more now.
Building off site and moving it in place has not worked well in practice, US new builds are typically huge. And even then moving finish work tends not to go well which requires massive amounts of time and labor to complete.
Sounds like a disaster.
We understand very well how to build housing, and we have understood how to build housing for a very, very long time, but for political reasons, because communities have been taken over by political interests that outright opposed to new housing we choose not to.
You could come up with some novel construction technique that makes building homes more efficient, but it wouldn't matter if the city doesn't approve new homes to be built.
This said density regulations tend to be the problematic ones.
The problem is not just the regulations, but that these regulations differ a lot from place to place. This makes an economy of scale nigh impossible.
Real-estate is capital intensive. The aggregate real-estate value in a small city is billions of dollars.
Real-estate timelines are long. Think thirty year mortgages.
Scarcity of desirable locations. Manhattan Kansas apartments are not fungible with big apple Manhattan apartments.
At scale real-estate is primarily used as a vehicle for wealth retention not wealth growth. If you have a few billion dollars, your problem isn’t scraping up a nickel for a hamburger. It’s finding someplace to store all that money (it won’t fit in your mattress).
So the real-estate market is bivalent. The low end ranges from people just trying to get by to people trying to make money.
The high end is real wealth with no incentive to sell in ordinary circumstances…what to do with a few billion in cash? is a real problem.
And again, a few billion can move a local market, but not a regional one.
I'm not sure this one applies. The bank holds the thirty-year debt, the builder gets the money immediately.
The builder typically is paid via bank loan. The loan is originated only under the bank’s expectation the resulting improvements are mortgageable.
Small and large VCs are paying more attention.
- https://1984.vc/ - https://www.beatventures.com/ - https://www.metaprop.vc/ - https://www.buildtech.vc/
This conference crosses over into real estate but it's all pretty much the same network of entrepreneurs: https://blueprintvegas.com/
Point is, this is not a vacuum. It's just not getting a lot of attention due to the points above.
I believe (and am biased, see profile) that climate and housing crises combined will bring a lot more attention to contech/proptech/climatetech in the coming months and years.
GNSS can technically get down to mm accuracy but that typically requires static sites with lots of data.
[0] https://en.m.wikipedia.org/wiki/Real-time_kinematic_position...
A lot of stuff is already done.
There's total standardization of parts sizes, and has been for decades. If you order a 2x4" wall stud from your local lumber yard, it will be the same size as the ones you order tomorrow. (It won't be 2x4, but that's another story.) Doors, windows, stairways, plasterboard, switchboexes, plumbing parts, basically everything in stock at a Lowes, are all designed to standard sizes, made in factories, and delivered to the site. The CAD software has all those standards built in.
Payroll and scheduling for workers? Done.
Ordering? Done.
I imagine any startup app opportunities will be in something you'd only learn about by going out to jobs sites and swinging a hammer for a year or two. If someone came in with such an idea, it might be wise to say "let's go on a tour of the jobsites you've been on in the last year" just as a way of validating real experience.
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.
Isn’t conventional wisdom creating a business for an existing item line on a budget statement?
Going by the tech definition of startup though, sectors like construction simply don't have the kind of economics that VCs want to put their money behind. Barriers like:
- lots of regulation
- lots or manpower requirements
- low margin
- established hierarchies, relationships, and general ways of doing business that are hard to disrupt
- need to have hyperlocal presence
- need to deal with people rather than technology
- scaling has a high variable cost
all make it unattractive for the "three dudes with a laptop looking to disrupt" types, since it is very unlikely that they are going to be able to have hyper growth and a large exit a few years down the line.
Although we are still working on early pilots, we are looking to expand our founding team to bring in engineer & business development talent that has construction tech experience/interest. Feel free to DM me rj@raap.builders if you'd like to chat.
Our primary selling point is our AI detection of subcontractors - so we focus more on software than our hardware.
https://www.youtube.com/watch?v=zNTMxSUsFrM The third home built using Hadrian X® robotic bricklaying technology in Wellard has reached lock-up stage and is now up for sale.
This four-bedroom, two-bathroom home was built in conjunction with Inspired Homes, a multi-award-winning turnkey home builder in Perth, and features a stylish open plan living area, modern kitchen centrepiece, comfortable home theatre, relaxing bathrooms, outdoor alfresco area and a double car garage.
But pretty quickly you could pivot to better “blocks” that interlock or align automatically and need less (or no) mortar. Then you’d be really flying along
2) They aren't so visible (here) because the VCs don't have a bikeshed moment where they think they know how to do things in that market and thus aren't tossing money at it. There are far more unicorn possibilities in other (bikesheddable) markets, so that's where the startup funding flows.
3) Inertia. You're dealing with entire industries and governments and etc that are entrenched, more or less conservative/bureaucratic/regulated, whole lot of nepotism and similar effects, where you really can't just make it up as you go and PR your way through it. Disruptors are killed or acquired/disappeared pretty quickly.
I think in general though construction tech is hard because the margins aren't as crazy and it's extremely labor intensive. I briefly looked into working for a hardwood flooring software business and I realized that most flooring companies cap out at around $10m revenue and most are family owned/operated with no desire to change things around because "that's how it always was done".
SBIR-style startups involve discovering new things. Success in real estate construction (strictly speaking) doesn't seemingly rely on having deep and novel insights about the world.
https://www.washingtonpost.com/archive/realestate/2004/12/11...
There have been numerous improvements in construction methods and materials, even in recent years. One that sticks out to me is vinyl plank flooring. Vinyl used to be a good material but a pain to install. There was a change to make the material into planks that clip together instead of a large rollout sheet. Now this is one of the fastest, cheapest, and dare I say best materials for your floor, and it just took a different approach to the manufacturing and delivery to change it. Any new or old home I see features vinyl planking prominently because it takes only a weekend to install.
But no one like "owns" vinyl plank flooring. One company probably developed the idea mimicking how wood planking works, and every other vinyl company copied them. Even new companies entered the market because it sold well.
So the opportunities are out there, but if you change something in the materials or method of installation space you generally are only innovating something the rest of the industry with later ape. There's not as much opportunity to become the new Facebook of some new material or easy-to-install method you've developed.
Now if you could somehow replace one of the big time or cost sinks to construction at scale I think you'd have something: inspections, specialists, and the wait for these two to interact. Inspections are generally there for a good reason and are government-run, so it would be a tough nut to crack, and it would take a maverick to do it, but it does seem like there is opportunity there. Scheduling between specialist roles like plumbing, electrical, and HVAC also seems like a big one. I've noticed the bigger HVAC companies in my area get business because they can promise quick results, and they do that by having those specialists on the same staff and scheduling them all out appropriately. Contractors take forever because they need to sub-contract and coordinate people. If you have everyone under one umbrella you can manage the timetable better. But none of these things scream "start-up tech business" to me.
My city has a local construction startup that is trying to drop the cost of housing units by fabricating panels and rooms offsite and assembling at the construction site: https://www.modulehousing.com/
Edit: There might be startups brought on as subsidiaries to do specific tasks, but I think those are very rare.
Because time has made people actually good at it. Construction is overwhelmingly safe and solid and reliable. It has well thought out processes and failsafes. Perhaps most importantly, it has real liability. If the building causes harm, someone's getting in trouble.
None of the above is meaningfully true for software.
Because your assumption about it being a highly profitable business is incorrect. It’s highly competitive, and net margins for large construction firms are in the single digit percent range.
What insights do you think a computer programmer has about construction that a field of professionals hasn’t already considered?
Those aren't software problems
For example, the world's largest and most advanced modular building company was just a tiny startup in Hunan making niche HVAC equipment 2 decades ago: http://en.broad.com/ProductShow-131.aspx
Any "tech will revolutionize this" ones die before anyone notices.
Successful ones make a small piece of the puzzle have less friction and their value is multiplied by the massive scale that building operates at.
Millions of people have had their minds on this for millennia.
[0]https://www.construction-physics.com/p/a-brief-history-of-co...
- Dusty Robotics? They make a robot that prints wall, piping etc layouts on floors.
- Canvas, who make a robot for drywalling
I'm pretty sure there have to be more, but probably not many doing construction themselves since that doesn't scale well for a typical startup. But tools and software surrounding construction, there's companies for that.
Here in Austin TX, there is a company, ICON that is trying to mass 3D print homes. It is not going so good. They are slower than framing, drywall & mason crews. Also final finish is ugly in my opinion.
If you can help construction companies winning the right projects, you’ll be very useful.
So many construction companies has died simply because of winning projects they couldn’t deliver.
So innovation usually stems from new materials or tools hitting the market, but that does not happen every day.
My friend owns a small window & door company and he told me so, at least in Quebec.
The existence of startups in a space isn’t the default. There needs to a be reason (a novel model of some kind, for instance) for them to exist.
The existencd of startups in a space isn’t the default. There needs to a be reason (a novel model of some kind, for instance) for them to exist.
Do you have doubts that there are lots of newly founded bussineses in the construction sector?
You may be thinking of new businesses attempting to grow fast and capture market share using equity investors to subsidize low initial prices charged to consumers. I'm not sure that makes sense as a business model in the residential construction sector. Your revenue just comes from selling houses. Pricing is a fairly strict matter of supply and demand you have little to no control over. There is no alternative revenue model. People buy the house and tend to stay there a while. They're not going to buy a subscription service, or accept a discount in return for you collecting data from their home and selling ads or something. Companies that want to do that are selling smart home devices, not the homes themselves.
As others have mentioned, there isn't a ton you can do to push costs down. The unskilled labor is already cheap. The skilled labor is scarce and unionized. Material costs are set by global commodities markets. Timelines are heavily determined by external factors. It's easiest to build in the middle of nowhere, but then there is lower demand for the houses. Denser places where more people want to live tend to have most lots already developed, so now you're looking at convincing people to sell, possibly trying to get existing properties condemned, possibly rezoning, lot division, possibly needing new utilities hookups but instead of doing it in some brand-new exurb where nothing exists, you need to dig and shut down roads and sidewalks in places where people already live and work. You need permits, easements. You're disrupting things and people who don't want their lives disrupted slow you down. The skilled tradesmen who represent the major bottleneck in your workforce largely don't want to do this kind of work because it takes longer and payment is less reliable. So even in a place with relatively lax zoning where no one explicitly tries to stop you from building, you still may not be able to do it in any timely manner because you're competing for a tiny pool of laborers who can do the electrical and plumbing work and they can only be in one place at a time.
there isn't much accountability for waste in construction and wood has been cheap compared to other costs
Vendor and BOM management on top of a bunch of other stuff
put that in your post titles
Higharc.com.
Any two of those factors above can be dealt with, but all four in concert is problematic. The reasons why are:
- Capital intensive: on its own, this is VC-funded business heaven. However, combine with labour intensive and you can't get good margins; long lead times and you can't iterate; heterogenous high regulation environment and you can't get economy of scale.
- Labour intensive: on its own, this is fine, but the labour here will cut into margins because it is not R&D-markable and it is controlled (unions). Combine with long lead times and your payback period is insufficient to maintain cash flow without massive funding; combine with heterogenous high regulation and you can't hire labour consistently across places
- Long lead times: This is okay for businesses where you have cheap acquisition and the demand variability is low; but real estate markets are fixed, it costs a lot for you to ship your product. Combine with heterogeneous high regulation and you cannot rely on being able to take your product to the new place if local demand has changed.
- Heterogeneous high regulation: Homes are heavily regulated. Some of these are for safety, and others are because of the idiosyncrasies of local markets (SF's "windows must be made of wood"), so you have no fungibility of product. You need cheap customer acquisition, low counterparty risk, and low demand variation for this to work.
Uber was capital-intensive, and labour intensive, but I think the lead times were short. They could spin up and spin down markets quite fast, and though some markets had regulation heterogeneity, most were unprepared for Uber and the regulation was not strongly enforced.
WeWork solved the problem with offices by acquiring existing buildings. This is a strategy that is commonly used in high-regulation environments: one of my friends acquired a FedRAMP-compliant company and another acquired a compounding pharmacy to advance their startups. You can bypass the regulation by acquiring someone who has achieved compliance. But compliance in RE is a per-product outcome!
Gusto/Rippling et al. solved the labour intensiveness of things through automation. This is great in non-tangible domains. You don't have a physical product. Automation is easier to build for that than something that requires robotics.
Long lead times are the real killers, though. You need a real technological or regulatory advantage to break that open. Tesla had a bunch of those: pioneer of mass-market EVs, regulatory EV credit timing. SpaceX also did: government contracts. Honestly, dealing with long lead times (and the resulting customer payback period) is probably the hardest thing in the world, and his rare skill at doing that is why Elon Musk is so wealthy.
Honestly, you can build a debt-funded self-storage company and it takes grit and good location choice. There's no formula to it, and you will likely do better making L7 at Amazon, but it's a thing you could do. But otherwise, I'd stay away from real-estate unless you have the sheer bullheadedness it takes to deal with a high-reg environment.