Green construction tech is attracting billions of dollars in investment from venture capital firms

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The world is moving towards low-carbon building practices in a bid to achieve greenhouse gas emissions targets. This has resulted in growing investment in green construction tech from venture capital firms over the last few years. In 2022 alone, billions of dollars have been invested in the sector. According to ConsTrack360 estimates, over US$3.7 billion has been invested in 2022. During the 2017 – 2022 period, more than US$6.5 billion has been invested in firms that are focusing on decarbonizing the architecture and construction sector. The firms are using venture capital funding for green building design, building material procurement, and lower carbon construction methods.

The demand for prefabricated housing is growing, especially in the United States, due to rising material prices and construction delays. The accelerated demand for sustainable construction solutions is driving these prefabricated construction startups to raise funding rounds to invest in manufacturing facilities and capacities. For instance,

• In July 2022, Nexii Building Solutions, the Canada-based green construction firm, announced that the firm had raised CAD 45 million in a funding round, which was led by Horizon Technology Finance Corporation and Trinity Capital. The firm is planning to use the infused capital to meet the growing demand for sustainable building solutions by expanding its manufacturing capacity.

In 2022, the firm opened its first manufacturing plant in the United States amid the rising demand for prefabricated construction in the North American market. The July 2022 funding round has taken the valuation for Nexii over US$2 billion.

• In September 2022, Modulous, a construction tech startup that assists developers in building prefabricated homes, also announced that the firm had raised US$11.5 million in a Series A funding round, which included participation from SFV, Regal London, CEMEX Ventures, and others. The construction tech startup provides software that automates planning for multifamily home design and a proprietary kit of parts that developers use to assemble homes.

With the growing prefabricated construction market, traditional construction firms are also looking to expand their capabilities in the segment. This is trend is expected to result in several strategic collaborations and mergers and acquisition deals over the next three to four years. In Europe, where the competitive landscape is growing at a rapid rate in the prefabricated market, these trends have already started to emerge. For instance,

• In November 2022, Michelmersh, a traditional brick manufacturer, announced the acquisition of FabSpeed, a startup that specializes in prefabricated building materials. The acquisition, worth £6.25 million, will Michelmersh to further make inroads in the growing prefabricated construction market in Europe from the short to medium-term perspective. As part of the acquisition, Michelmersh will also acquire the customer base of FabSpeed, while getting access to an added distribution channel.

Globally, the trend of prefabricated building construction is expected to gain accelerated momentum from the short to medium-term perspective. The global construction market is facing severe headwinds due to labor shortage issues and other factors including rising prices and construction delays. Prefabricated construction methods solve the majority of these problems that are plaguing the growth of the conventional construction industry. Furthermore, prefabricated houses are less expensive compared to traditional apartments, therefore, they offer a perfect solution to drive the affordable housing program launched by government organizations around the world.

As these housing units are manufactured and assembled at a different location before being moved to the actual location, the growing demand for prefabricated units means that firms will have to boost their investment in manufacturing facilities and capacities over the next three to four years. Consequently, ConsTrack360 expects these green construction firms to keep raising funding rounds around the world from the short to medium-term perspective.

To know more and gain a deeper understanding of the global construction market, click here.