Should VCs Invest in Construction?
Since the spike in artificial intelligence, venture capital firms have begun identifying start-ups that successfully integrate AI into untapped industries. The construction market may just be the new pioneer.
The value of the U.S. construction market has significantly increased by approximately $1 billion from 2023-2024, though high interest rates and unpredictable tariff rates have created a temporary halt in 2025. However, as the Fed reduced interest rates which makes borrowing cheaper, and as consumers adjust to post-tariff prices, the construction market is bound to begin growing at a rapid pace. Additionally, residential real estate is arguably the backbone of the global economy, and with an increasing number of local government laws issuing more land for residential housing, construction will ultimately remain a stable market for the foreseeable future.
As the construction market is predicted to continue growing, venture capital firms are looking to invest in construction startups that integrate AI into their core business models. For instance, construction businesses with AI adoption could optimize quality insurance, general logistics, delivery timing, and supply chain management, allowing workers to build more efficiently. Over the past three years, venture capital firms have been focusing on startups that integrate AI in just a few industries, such as healthcare, legal tech, financial services, and aerospace. According to ConstructionDive, “Contech” has made up more than 1.1% of total venture capital spending in 2024, a small percentage that has been steadily increasing since 2019. Venture capitalists are looking for a new frontier that has not yet incorporated a large AI presence, and the construction industry has great potential.
Buildots, an Israeli startup backed by Intel, raised a cumulative funding of $166 million for their product that allows construction projects to reduce up to 50% of delays by having AI progress tracking and computer vision analyze construction sites. Attentive.ai, a U.S. venture-backed startup, automates measurements for construction properties, saving time and manual labor. Most importantly, these startups allow for greater cost efficiency and a reduced need for manual labor.
Moreover, according to CoinLaw, venture capital firms are struggling to raise large amounts of capital as they have in the past, which means investments have become more selective. As venture capitalists are specifically targeting sectors with strong potential for AI integration, the construction industry aligns with their goals. According to StartUs Insights, the global AI construction market is expected to grow at an annual rate of 24.6% over the next seven years, reaching a value of $22.68 billion by 2032. Venture capitalists wish to locate the markets that have potential to receive the highest yields, and there is no doubt that a strong candidate in the race is the construction industry. * Written by Andrew Spielfogel, Guest Contributor
Andrew is a Sophomore at the University of Chicago studying economics and psychology from Manhattan. His area of expertise lies in the intersection of real estate and technology.
