5 minute read
Up until very recently, ConstructionTech has remained a new and surging space in the eyes of many horizontal VCs. At Foundamental we are recently having more of our friends at top tier horizontal VCs reach out to us as those firms begin to formulate in-house theses on our sector. They see the same rising tide that we see:
“The best time to plant a tree was twenty years ago. The second best time is now.”
Now: One of the earliest and most publicly covered technologies in our space is 3D construction printing (3DP). As such, it is the topic that horizontal VCs new to our space tend to ask us first about. Within Foundamental we identified 154 players in the 3DP space, and we looked deeper at ca. 30 of those companies across North America, Europe and Asia-Pacific in the last 12 months. We were intrigued by a handful of those during live deals, and so far ended up investing alongside our friends at Khosla into our favorite full-stack 3DP housing leaders at Mighty Buildings. Our diligences produced a number of initial learnings on 3DP.
Here are my 10 slices on construction 3DP:
1/ By material, 85% of companies applying 3DP in construction are applying concrete, while 15% make use of other materials such as polymer-based material.
2/ By location, 70% of 3DP construction players focus on on-site printing, while 30% print off-site.
3/ By application, 50% focus their technology on printing entire houses. The go-to floor size is still below 70 sq.m. (ca. 700 sq.ft.) in most cases, but scale is picking up and some of the more advanced players are in the process of reaching 300+ sq.m. (3000+ sq.ft.). The other 50% commit to not print houses but instead print components such as walls, columns, floors, or stairs.
4/: By degrees of freedom, half of the 3DP players apply a gantry system. These are 1:1 the same players that focus on printing entire houses (see above) due to a railed gantry’s ability to create one batch as a terminal production line. The vast majority of those is printing on-site and with concrete (eg. the vastly talented crew over at ICON), with a few notable outliers in this category (eg. Mighty Buildings who produce off-site with substitute materials). The other half relies on a non-gantry system, most commonly six degrees of freedom robotic arms and - more rarely - circular robotic arms (eg. Apis Cor).
5/ Finally, by mode of discharging the material, 95% of players rely on extruder heads calibrated to their material mix and environmental/atmospherical conditions. The remaining 5% are using alternative modes such as discharging with pressurized air.
6/ But: there are product challenges that occur more commonly with extrusion-based concrete printing technology:
- User experience of finished product vs. additional labor required to finish surfaces
- Compressive strength, structural walls
- Printing of ceilings and overhangs vs. gravity
- Calibration of extruder head to locally available aggregates
- Integration of MEP, esp. electrical wiring and plumbing
7/ And: in terms of value, we believe there are fundamentally 3 value levers that 3DP players address:
- Replacing labor. While automation can have a cost effect, in construction the bigger lever is raising the cash ceiling, as labor shortage is the bottleneck for fulfilling projects and hence for cash generation.
- Decreasing setup/rampup times by producing in small series/batches.
- Reducing cost of rework by creating traditional production learning effects and reducing the rotation of crews and workers.
8/ Now, all of the above is well known for industry insiders. Which is why there is a pattern that emerges and that strikes us: you can separate the 3DP space in construction - today, in November 2019 - into two oceans. On the one side, there are highly-talented companies who found a segment and value model they want to serve, and built a to-purpose technology that fits their model. On the other side, you can see companies with strong tech talent who started their journey based on a technology they master and who seem to be still looking for a fitting segment and value model to apply it to. In our assessment, the latter contains 90+% of the players in the 3DP market, while the former are the ones that scale more rapidly in construction.
9/ We have developed our own framework of which 3DP technologies - defined by the above parameters - and which construction applications we believe are likely to have a good product-segment fit based on intrinsic value. For example: A pressurized air “shotcrete” solution that can be shot around rebar using two 6-axis robotic arms with modularized deployment and lightweight logistics is ideal for an on-site printing of structural parts for bridges and tunnels. This solution will never be ideal for printing tiny homes, but it has an intense product-segment fit. On the other hand, solutions that focus on single family homes we look at through the lens of Clay Christensen’s disruption theory. Here we like solutions that begin in underserved home segments and hone their production, logistics, customer experience and revenue model and work their way up to the volume home segments from there.
10/ When we get to see a new 3DP deal we look immediately for fit and intrinsic value of the combination of technology, segment and revenue model. With that we identified a few Founder Opportunities we would like to fund more:
- Mixing/applying carbon nano-fibers or graphene directly in the 3DP process. By doing so, reducing the amount of material (especially concrete) required to achieve compressive strength. As a result, reducing CO2 emissions from cement by factor x.
- Printing/applying retrofit facade insulation to existing single family homes.
- Printing concrete formwork in situ in high speed, rather than printing the concrete. Rationale here is that gravity-based pumping of concrete is highly time-efficient already, while the laying of the formwork is tedious manual labor.
- Printing non-structural interior walls 10x cheaper than today.
As always, credits for providing the data go to the wizards in our Foundamental Insights group.
: 3DP = 3D printing in construction
: Foundamental deal flow and due diligence