Radar – our selection of innovative businesses #13

A look back on the Innovation in AEC, through and beyond the Covid crisis conference, by Leonard

On 28 April, the “Innovation in AEC through and beyond the COVID crisis” conference took place, which was organised by Leonard as part of our daily “minute conferences” since the beginning of the lockdown. This was an opportunity for Ray Levitt (Partner at Blackhorn Ventures) and Darren Bechtel (founder and Managing Director of Brick & Mortar Ventures) to answer some of our questions about developments in the construction sector over the coming months.

Below they shed some light on four questions that we asked:

Coming from $3 billion three years ago, investment in Construction Tech rose to $10 billion in 2019. This is a remarkable but delayed increase. Why did it take so long for venture capital investment to boom in the construction sector?

Ray Levitt mentions that we should first remember that the development of the first computers was originally closely linked to the construction sector. In the 1960s, IBM’s first application, developed alongside MIT, was a structural engineering application. However, after this initial phase, two factors slowed down the development of new technologies in construction. First, there was a lack of portability. As laptops did not exist yet, only offices could be equipped with computers. Next, the development of wireless networks. It was not until the 1990s that the Internet allowed computers to be used not only for computing purposes, but also for communication purposes. It was then that their potential on building sites began to grow.

In turn, Darren Bechtel emphasises the development of financial channels that he believes have enabled the sector to take off. For a long time, large construction companies were developing the solutions they needed in-house. This business model was not optimal however: each company was developing their own solutions, costs remained high, and it often took longer to install technologies on a construction site than to run the site without any digital solutions. Gradually, these large companies realised that software development was not their core business. A change in the financial model was therefore needed to support external entrepreneurs. Venture Capitalists, who until now were not major players in the construction sector, backed this and invested more substantial amounts, while recording positive returns. This virtuous circle was set in motion and we are now seeing it pick up speed.

In practical terms, how will the crisis and its economic repercussions impact innovation in our industry? 

The construction sector has always had dramatic fluctuation in its demand depending on the economic situation, says Ray Levitt. But in times of economic crisis, there have also always been some interesting businesses set up. The first strategy that Levitt applies as an investor is to provide bridge capital (financial advances) to companies that are still in the early stage so that they can hold out until projects resume, which he believes will happen very soon. Demand is likely to pick up in the coming weeks as schools are taking advantage of closures to carry out work, hospitals will need new infrastructure and buildings will need to be adapted. That said, this downturn is different from the previous ones that both investors have experienced. As an example, Ray Levitt mentions the financial crisis of 2007, after which San Francisco’s construction sector fell by 80% over two years, before recovering. This time round, the crisis is likely to bring about some structural changes. “For example, companies should not be expected to build as many offices as before, due to the growth of remote working” he stresses.

Darren Bechtel feels that the situation forces entrepreneurs to be more creative and investors to separate the best projects from the rest. The situation also creates new painpoints for which solutions must be found: how can we run job sites with fewer workers? What new collaboration tools are out there? These are all new opportunities for entrepreneurs.

Both speakers raise the issue of taking into account the time available to investors, which currently works in the favour of entrepreneurs. VCs (venture capitalists) and large companies that did not have the time to talk to start-ups now have more leeway, and entrepreneurs can take advantage of this.

If we are to be less optimistic, can we expect companies to reduce their investments, at the expense of financing these new solutions? 

According to Bechtel, the opposite is likely to happen. Before the crisis, companies operated in a favourable economic climate and had substantial resources. We can therefore expect that they will use this increased availability to find new solutions suited to the future situation that will favour the best prepared companies.

For example, 4 months ago nobody would have invested in a real-time pandemic tracking solution, says the founder of Brick & Mortar Ventures. Today, people would. Likewise, only a few weeks ago, few people were interested in complex solutions for building modular buildings in accordance with health & safety requirements (insulation, quarantine, etc.). Today, this is a major issue.

For both investors, the message is clear: “If you have a good idea with a good value proposition and levers for profitability, you will have people to listen to you”.

Can we expect an environmental shift in the construction sector after the crisis, or will “business as usual” take over?  

Both investors say that Europe is currently ahead in this area and that it is likely that new solutions will emerge. However, Darren Bechtel mentions that the most environmentally-friendly solutions are still the most expensive today and target a certain customer profile. That said, “green” materials and solutions are gradually bringing about other benefits than their basic environmental aspects: they are easier to fix and replace, while they have less costly life cycles in the long run. These shifts in value proposition are making a real difference and they can be expected to accelerate after the current crisis.

How can airports manage the current sanitary crisis ?

Once lockdown is progressively lifted, airports will be at the forefront of the battle against covid-19. What measures can they take to limit the circulation of the virus?
Here are some thoughts and examples of startups offering services that could make life easier and safer in the airports:

  • Ensure deep and regular cleanings: regular disinfection of buildings is essential to avoid the circulation of the virus. For example, new UV sterilization systems allow automatic cleaning of escalator ramps like here in Hong Kong. Visitors can play an important role in this process by providing real-time feedback on cleaning. Skiply (SMILIO) has developed devices that collect feedbacks from passengers using simple smiley buttons. The start-up works with Vinci Airport group and has already deployed its concept in 3 airports in Cambodia.
  • Control the temperature of passengers: airports could detect infected people and isolate them. For example, Baidu, a giant on the Chinese tech scene, has released a detection system capable of controlling the temperature of 200 people/minute which is currently being tested in a station in Beijing. In Italy, the main airports are now equipped with thermal cameras just like Delhi, Abu Dhabi and Dubai.
  • Anticipate peak traffic: thanks to flow prediction techniques, airports can adapt their hygiene measures to the frequentation (by having more cleaning staff for example). In this market, Predictive Layer offers an AI solution to airports that takes into account many factors (aircraft calendar, weather report…) to predict the passengers flow. In another area, Stanley Robotics offers automated parking management using a small robot to park cars autonomously. This concept saves time for users while permitting social distancing (it avoids more contacts between people).

Qarnot is raising €6M and wants to ensure a greener future to cloud computing

The French startup Qarnot succeeded to raise €6 million from a pool of investors, including la Caisse des Dépôts, la Banque des Territoires, Engie, A/O PropTech, and Groupe Casino.

Qarnot provides an eco friendly cloud computing solution. The heat released by its servers is reused to sustainably warm buildings and water. Qarnot gives a greener alternative for companies to host their data because traditional data centres can have a huge environmental footprint. In 2018, they represented between 1% and 3% of all electricity consumption worldwide according to different studies.

Qarnot is already offering its services to three major French banks (BNP Paribas, Société Générale, and Natixis). The startup is also working with Illumination Mac Guff (Universal Pictures), a studio developing 3D animation.

Today in France, 1000 social housing units are heated by Qarnot. In Bordeaux, its technology is used to heat an entire building for free using heat generated by computers.

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The VINCI Group created Leonard to tackle the challenges posed by the transformation of regions and lifestyles. Our goal is to unite a community of key stakeholders in order to build the city of the future together.