Startups are everywhere in construction. Builders want them to know the timing.

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Construction has a reputation as a Luddite industry.

This label is not without merit. Consider the the oft-cited 2017 Productivity Report from consulting firm McKinsey, which revealed that labor productivity growth in the construction industry was only 1% per year over the previous two decades, compared to 2.8% for the total world economy and 3.6% for manufacturing.

This improvement gap remains a problem: A McKinsey 2024 Monitoring Report showed that construction productivity improved by only 10%, or 0.4% per year, between 2000 and 2022. Again, these productivity gains lagged far behind the global economy and manufacturing, which recorded gains of 50% and 90% respectively.

But the tide is turning as contractors across the country embrace new technologies to help with tasks throughout the built life cycle, such as to speed up billingto implement autonomous machinery in workplaces i deal with the management of change ordersnot to mention the advent of artificial intelligence and generative AI.

Builders themselves are taking advantage of this environment and these offerings by making moves into the investment arena. These companies, which manage multimillion-dollar projects, partner with later stage startups adapt a company’s product to its specific needs.

All of this means that technology is much more common in workplaces than it used to be. As builders become more technologically literate and comfortable, the onus that once lay on those construction professionals to adapt may shift back to the startups themselves, which experts say are struggling to meet the demands that construction companies actually have.

Contech products must innovate

In construction, a solution doesn’t just have to work — it has to be 10 times better than something that already exists, Jim Barrett, chief innovation officer at New York City-based Turner Construction, told Construction Dive.

“It has to be much better to make us want to spend time thinking about changing an existing solution or trying to spend time integrating it into our organization,” Barrett said.

One such example would be Turner’s implementation of Clearstory change order management technology for all of its project teams. The contractor announced a deal with the company in October.

“Clearstory layers a high-touch workflow that affects hundreds, if not thousands, of people on our projects and makes it simpler and faster in a way that raises the bar for results,” Maria Pantelaros, Turner’s chief innovation officer, said in the announcement. “That’s the kind of innovation we embrace.”

Barrett added that there is only so much time and energy a company can give to startups, especially companies that come up with unproven solutions.

“The effort it takes to bring a new solution to our organization is significant,” explained Barrett.

This is compounded for companies dealing with AI offerings. Turner recently revealed a collaboration with OpenAI this has led Barrett to question the value of cultivating the development of AI agents. He questions whether it’s worth paying an organization to build an AI tool when a Turner employee could build it in-house, likely with more information about the desired functionality to address existing needs.

These circumstances can put a builder at odds with a startup that wants to prove its product works. Startups can’t rely on a single contractor to prove that products are a general solution for the industry, said Henning Roedel, founder of startup Hardhat Robotics and former head of robotics at DPR Construction.

Rather, startups must demonstrate that their products can work for the entire industry.

“It’s really important that you get high exposure and a lot of exposure as a startup founder,” Roedel told Construction Dive. “When I was at DPR, I tried to optimize speed for these startups.”

What startup builders need

Market fit is key to selling any product. If it doesn’t fit a consumer, from retail to robotics, it won’t make money.

That’s a problem Aaron McClellan, manager of construction technology at infrastructure builder Granite Construction, has encountered in his work. Technology can often target vertical construction, he said, rather than the horizontal infrastructure his company builds.

“I think there’s definitely a trend in technology to focus more on the vertical construction side,” McClellan told Construction Dive.

McClellan said Granite connects with venture capital firms, startups and attends tech conferences to help clarify the differences between vertical and horizontal construction, but the trend remains.

McClellan said the products can also be tailored to a financial sponsor, which can lead to a situation where the rest of the industry is left to figure out what to do with the solution.

This can be especially true when a startup founder has no experience with the construction industry. Given the gap in construction productivity gains, the industry has been an attractive target for disruptors looking to change the status quo. But as these entrepreneurs try to solve the “problems” they see in the industry, they may be surprised by the industry’s many quirks.

Nowhere was this more evident than the fantastic one-shot burst Katerra, the high-flying modular behemoth. By trying to bring all trades in-house and cut out middlemen from the industry in the name of efficiency, the builder alienated those accustomed to the industry’s relationship-first nature, an aspect that contributed to its downfall.

Solve the biggest problems for builders

Turner’s Barrett pointed to a different problem: founders coming up with an untested hypothesis for a specific building problem. In the past, the company would have made itself more available in such cases. But due to bandwidth limitations, this is no longer the case.

“If you’re not sure what problem you’re solving and who you’re solving it for, honestly, we tell people to come back in six months when you figure it out,” Barrett said.

Roedel added that many startup founders today are looking for easy problems to solve. On the contrary, he pointed out, construction has many difficult problems, which can provide better opportunities.

“My advice to everybody is if you’re tackling something for construction, you’re tackling a tough problem. The industry will reward you for that,” Roedel said.

What startups can do next

So, without contractor bandwidth, how can startups show their value and improve their products for the construction industry?

The answer may be programs aimed at construction start-ups, such as Suffolk Technologies BOOST programan annual technology accelerator that helps these companies find their niches. The eight-week initiative helps startups access jobs and adapt their products for industry.

In fact, the perceived lack of founder and construction industry knowledge of startups may be changing, said Parker Mundt, partner and platform chief at Boston-based Suffolk Technologies, the investment arm of Suffolk Construction.

“Historically in the past, maybe the interactions between the stakeholders themselves, and where most of the value of these tools is really recognized, I think they were muted for the first wave of construction technology,” Mundt told Construction Dive.

Now, the next startups may be run by serial entrepreneurs or people with construction experience. The products and founders of this wave, which Mundt said began after the COVID-19 pandemic, are more informed.

Now, if a founder can get out into the field and see what isn’t working, that’s a good start. It’s really the only way startups can see what’s there to fix.

“Go out, be with the operations, understand the skepticism, understand the needs, the wants, face to face.” Granite’s McClellan said. “If you’re not building a relationship with people, you’re making a lot of assumptions. I think we need to clean up those assumptions, get feedback, and actually start building together.”