Modular and prefabricated construction has grown in popularity in recent years and shortages of building materials are expected to further elevate the industry, according to space executives.
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Startups in the construction space have raised nearly $ 1.5 billion so far this year, more than the nearly $ 1.2 billion the industry raised in 2020, according to data from Crunchbase. Companies focused specifically on building materials have raised more than $ 430 million this year, according to data from Crunchbase, with Prescientthe $ 190 million round of funding, leading the pack in May, followed by Veev‘s $ 100 million in March.
The main reason for these new ways of building is clear: There is a very real housing shortage in the United States, and it has only worsened since the COVID-19 pandemic hit, disrupting government chains. supply and impacting the construction industry while some projects were on hiatus.
According to the mortgage company Freddie mac, the housing shortage in the United States to meet demand increased by 52%, from 2.5 million households in 2018 to 3.8 million in 2020, this figure having to increase. Demand is increasing, especially with low interest rates encouraging home buying, according to Freddie Mac.
To add to the problem, many homes in the United States were built 70 years ago and should be rebuilt for one reason or another, according to Amit Haller, CEO of Veev, which builds prefabricated multi-family homes and secondary suites using primarily steel and other alternative materials.
In addition, there is a shortage of skilled labor, with a limited number of people able to build houses as they traditionally have been, he said.
“Not only do we have so much to catch up, but we have so much to rebuild,” said Haller. “It means one thing: it’s a non-linear problem. This problem requires a lot of construction disturbance.
This has prompted many new home building startups to spring up, including some that use alternative materials to build homes and others that use technology to streamline the building process. Although they have been more in the spotlight recently as the construction industry has faced a shortage of materials and the lumber shortage has received the most attention, there have also been shortages. in other areas such as copper and windows.
Some of the recently funded construction technology companies include Veev, which raised $ 100 million in March, and Mighty buildings, which uses 3D printing to build prefabricated homes using materials such as man-made stone and raised $ 40 million in February.
The continued venture capital investment in the space has come even as the world’s most-funded construction tech startup, Katerra, was heading towards implosion. The startup had raised at least $ 1.6 billion in known venture capital funding, mostly from SoftBank, corn filed for Chapter 11 bankruptcy protection on Sunday.
Wood prices soared at the start of the pandemic, according to Salman Ahmad, CEO of a construction technology company Mosaic building. Although those prices did eventually drop somewhat last week, they are still up 300% year over year, according to the National Association of Home Builders. And a record number of builders reported material shortages last month, according to the association.
Companies such as Veev that use alternative materials have been less affected. Veev, for example, mainly uses steel instead of wood and uses high performance surfaces rather than drywall. The company was not significantly affected by the material shortages, Haller said.
Builders of modular homes in public markets are also on a tear. The share price of Horizon champion, for example, has grown 102% over the past year.
The construction of prefabricated houses involves the fabrication of parts of the structure off-site, while modular construction is a form of prefabricated construction involving the assembly of entire sections off-site and their assembly on-site.
A person’s home is the largest, most expensive, and most widely used consumer product, Haller said. Houses aren’t often seen as a consumer product, according to Haller, but they are in a way. And just as a consumer would want to buy a new phone with the latest camera, so do home technology, he said.
“Once you start to think of the house as a product, you need to ask yourself questions about usability and sustainability. Is it the latest and most efficient technology? Haller said.
There has always been a bit of curiosity about alternative materials in the construction industry, but there has been a resurgence of interest as people examine how technology can make the construction industry more efficient, according to Ahmad.
“I think there’s an acceleration of that from what you’ve seen historically, and I think there’s a resurgence of interest in that frankly with where lumber prices are today. “
Drawing: Dom guzman
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