In March 2022, aec+tech hosted a discussion with a panel of Investors and Venture Capitalists who invest in AEC Technology start-ups (see the event recording here). Shahriar Shams-Ansari, Investor from Brookfield Growth; Marie-Sophie Ando, Venture Capitalist from Foundamental; and Vyshakh Kodoth, Venture Capitalist from MetaProp joined the discussion, throwing some light on the notions of funding and finance behind AEC start-ups.
Shahriar Shams-Ansari — Brookfield Growth
An Investor at Brookfield growth, Shahriar invests in growth-stage companies across software, hardware, and marketplaces, with a focus on areas including PropTech, SoftTech, and Travel. He entered the Venture Capital Industry in 2017 after a stint in Investment Banking; being extremely passionate about technology and growth, he says he has one of the most exciting jobs, getting to sit across founders and listen to their ideas.
His team at Brookfield Growth seeks talent by connecting their Brookfield Operators with best-in-class technology companies, creating operational partnerships between the two. They invest behind a subset of these partnerships out of a $500 million fund.
Shahriar says finding talent comes, on the one hand from talking to investors in their own circle, and on the other just from the noise made by founders and problem-solvers in the market.
He talks of a massive shift toward software and cloud-based solutions over the past two years, primarily in the Construction and PropTech space, as operators are beginning to realize how efficient and time-saving software can be for their work. Besides, there are different sub-verticals within the AEC space: construction finance, 3D rendering + visualization, LiDAR and Photogrammetry, all making the lives of construction companies easier. He adds that it has been enabled by founders who understand the use case really well, having spent quite the time analyzing the problem they are trying to solve. Such founders go on to build their solutions knowing what exactly needs to be done, which he says, really excites investors the most. An example of it would be the idea of Digital Twins to track building performance, ensuring the sustainability of systems and processes, and using it further to improve and then automate the same; ultimately this enables the building to run autonomously on a larger scale.
Shahriar says such technological paradigms committing toward a push for sustainability in the real estate industry, are critical as one of their main levers for determining their investment choice.
Talking of the fundraising process, he says it is highly beneficial to meet like-minded people in groups, forums, etc., potentially find a mentor who has fundraised in the past, and try to learn from their mistakes. It could sometimes even be a trial and error process: he says that it is not necessarily a bad thing to not succeed on one’s first venture. The learnings that you obtain and apply in your next one are what matter. Besides, he insists on the resources available online to learn directly from CEOs and founders — their ideas and thought leadership practices enable one to learn a lot. He further adds that their decision of if and when to invest is based on a multitude of factors: it depends much on whether or not the founder has captured the voice of their customer and is able to communicate their value proposition clearly and concisely. It also depends on the founder’s financial position, how much of the company they want to own, how much capital they want to raise, and how quickly they want to scale. Whereas, there could also be no one way to generalize an answer to when to invest.
Marie-Sophie Ando: Foundamental
Venture Capitalist at Foundamental, Berlin, the largest global fund focused on Construction, Marie-Sophie Ando has been on the investment scene since 2019. With a background in Mechanical Engineering, she’s worked with and focused on the Business Development and Production Planning sides of organizations, currently in the AEC space. Marie shares her interests in identifying inefficiencies in the larger AEC processes, particularly in the construction execution phase, and how they could be solved through technology. Being a global fund, Marie explains the scales and extents of their investments, providing more than 80% of their capital outside of Europe, to Asia-Pacific, and the Americas.
She says that finding talent comes from talking to people who are really deep in the field and have acquired a lot of knowledge, understanding the pain points that demand to be solved in a broad range of problems. She feels glad to be involved in the investments area, getting to know the many successful playbooks and founders all across the world, and being able to transfer the learnings from one place to certain market conditions in another.
She points out two facets concerning rapid tech adoption in the AEC industry: remote working since the onset of the pandemic, and the labor/employee shortage. Now seeing a greater level of incorporation in industry-level operations, remote working and cloud-based collaboration make it highly straightforward for accessing and using information. Likewise, a shortfall of labor and employees, both in construction execution as well as in offices, leads to automation of a considerable portion of work. There seems to be a general trend of larger AEC companies moving towards choosing tech. solutions over the last two years.
Talking about how to choose to invest in founders and their solutions, Marie says that the industry is highly nuanced with a lot of founders, but those that they’ve seen succeed have a lot of appreciation for the pain points and as well for their customers, being very down-to-earth and relatable. They don’t shy away from getting their hands dirty and venture very deep into the field by doing a lot of research, ultimately solving the problem in the most bottom-up way possible.
In recent months, Marie says that the most disruptive products and solutions that funders have come up with are those that enable interoperability, unifying the different silos of work areas that AEC professionals handle.
Such tools continue along the whole value chain, causing a higher degree of efficiency and collaboration. The other kind of products that are emerging rapidly includes toolkits and solutions targeting SMB companies, which in fact represent the majority of the industry. Focusing on the pain points of the really smaller companies adds so much value to the industry, and is responsible for most of the value created.
Having your story ready and being confident with it, she says, is the first step to starting fundraising. Your research and diligence on your side being strong, along with a clear understanding of the pain points, she remarks, are key to succeeding as a founder. Likewise, investment companies like Foundamental put out a manifesto detailing their experience with founders and solutions in their portfolio, creating a playbook to be handed out to new founders. This helps them understand their investor better and enables them to approach them easily, resulting in successful funding stories.
Vyshakh Kodoth: MetaProp
Vyshakh is a Venture Capitalist and Investor at MetaProp, an early-stage and growth-stage VC firm based out of New York. They invest out of four funds across the real estate value chain, taking a broad view of what they define as Property and Real Estate technology. Investing across multiple categories including software, hardware, etc. in the early stage domain, they also recently kicked off their new growth stage investment vehicle.
Vyshakh says that personally talking to founders is a robust sourcing mechanism to find talent; a 30-minute phone call with a founder could reveal more about cutting-edge technology than from any other online resource.
Furthermore, in a city like New York, there is always an event, a seminar, or a conference on the construction and real-estate space, so the buzz is consistently present. After the pandemic, people are now able to make meaningful connections by meeting people in real life, and engaging in successful investments.
Before starting on your fundraising journey, Vyshakh suggests that it is important to seek and find a mentor to understand the nuances of the process. With a lot of capital out there in the market currently, and a lot of people looking to invest, it is highly critical that one obtains the guidance required to go about their fundraising journey the right way.
Vyshakh adds that there is no one particular stage in a business to look for funding, and MetaProp has even funded companies with just a pitch deck. Sometimes, people seeking an investment think that they are too early for it, or sometimes, a little bit late; in such cases, it is fine to change one’s strategy as the requirement demands.
Vyshakh emphasizes that it is in fact advisable to start early, have initial conversations, build a rapport with VCs, and keep investors in the loop from the onset of the business itself.
Again, it does not have to be a formal pitch every time; it could as well be casual conversations with investors if possible.
Talking of their own proceedings when choosing which founders to invest in, Vyshakh says that there are two cases for their company: in the early-stage investment case, they look at the market size, the pain points that the solution is trying to solve, and most importantly the technical talent of the founder and their team. Besides, they also look out for opportunities that they could give their founders in terms of finding customers, or concerning the nuances of the pain points. When in growth-stage investments, he says it gets easier for the investors since there has already been some traction of around two to three years. Besides, obtaining customer feedback about the solution’s performance in the market is highly critical in helping the founder out in this phase.
All three panelists encourage founders to reach out and interact with VCs and investors at any stage of their business to help get their solutions/services up and running!
This article was authored for aec+tech, by Harish Karthick Vijay, a Design Journalist based out of Bangalore, India. Currently an undergrad student of Architecture, Harish has a high level of interest and exposure to the domain of Design Computation and Data-driven Design. Having authored multiple articles and essays for different editorials in the past, he is all set to develop a professional Design Technology career in the AEC Tech Industry.