Modular and prefabricated construction has gained popularity in recent years and the scarcity of building materials will continue to fuel the sector, according to executives in the industry.
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Startups in the construction sector have raised nearly $ 1.5 billion so far this year, more than the nearly $ 1.2 billion the sector raised throughout 2020, according to Crunchbase data. Companies that focus specifically on building materials have raised more than $ 430 million this year, according to Crunchbase data Looking aheadThe $ 190 million round of funding in May leads the field, followed by Veev$ 100 million round in March.
The main reason for these new forms of construction is clear: The United States has a very real housing shortage that has been getting worse since the outbreak of the COVID-19 pandemic, disrupting supply chains and impacting the construction industry as some projects have been paused.
According to mortgage loan company Freddie Mac, the shortage of US housing to meet demand grew by 52 percent from 2.5 million apartments in 2018 to 3.8 million in 2020, with this number expected to increase. According to Freddie Mac, demand is increasing, especially with low interest rates that encourage home buying.
To add to the problem, many homes in the US were built 70 years ago and are set to be rebuilt for one reason or another Amit Haller, CEO of Veev, which builds prefabricated apartment buildings and additional housing units primarily from steel and other alternative materials.
There is also a lack of skilled labor as only so many people are able to build houses the way they were traditionally built, he said.
“We not only have so much to catch up with, but also to build up again,” said Haller. “That means one thing: it’s a non-linear problem. This problem requires a lot of construction stoppages. “
That has spurred many new startups in the housing sector, including some that use alternative materials to build houses and others that use technology to streamline the construction process. While they have been in the spotlight lately as the construction industry has faced a material shortage and the shortage of wood has received the most attention, other areas such as copper and windows have also faced shortages.
Recently funded civil engineering companies include Veev, which raised $ 100 million in March, and Mighty buildings, which uses 3D printing to build prefabricated houses from materials like synthetic stone, and raised $ 40 million in February.
The continued venture investment in the space even came out as the world’s most highly funded construction technology startup, Katerra, was about to implosion. The startup had raised at least $ 1.6 billion in known venture funding, mostly from SoftBank, but Filed for Chapter 11 bankruptcy protection on Sunday.
The prices of building materials such as lumber and plaster of paris are the latest pressure point for the industry which has sought new ways to increase productivity, reduce costs and increase sustainability Kathleen Egan, CEO of a construction technology company Ecomedes.
Timber prices skyrocketed at the beginning of the pandemic, so Salman Ahmad, CEO of a construction technology company Mosaic building. Although those prices finally fell a bit last week, they are still up 300 percent year over year, according to the National Association of Builders. And a record number of builders reported material shortages last month, according to the association.
Companies like Veev that use alternative materials are less affected. Veev, for example, primarily uses steel instead of lumber, and uses heavy duty surfaces instead of drywall. The company was not significantly affected by the shortage of materials, said Haller.
Modular builders in the public markets are also in an uproar. The share price of Skyline champion, for example, is up 102 percent over the past year.
Prefabricated construction involves making the parts of the structure off-site, while modular construction is a form of prefabricated construction in which entire sections are assembled off-site and assembled on site.
A person’s house is the largest, most expensive and most widely used consumer product, said Haller. Houses are not often seen as a consumer product, according to Haller, but in some ways they are. And just as a consumer might want to buy a new phone with the latest camera, so is home technology, he said.
“When you start thinking about the home product, you have to ask yourself questions about usability and sustainability. Is it the latest and greatest in technology? ”Said Haller.
There has always been a little curiosity about alternative materials in the construction industry, but there was renewed interest as people looked into how technology can make the construction industry more efficient, Ahmad said.
“I think there is some acceleration that you have seen in the past and I think there is a renewed interest in being quite frank about where timber prices are today.”
Illustration: Dom Guzman
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