The construction and real estate market has changed in recent years. But none of them have slowed down the growth of technological projects – their number and range are only expanding. Whether this can be called a miracle or a natural process – the answer lies in the specifics of how startups work in this industry. Investors and partners play one of the leading roles in stimulating their development.
We tell you in our article what a young company should pay attention to, and how a startup can look for reliable investors who will see the project’s potential.
Among each area of startups, one can identify features that play into the hands of the fledgling company, or complicate its path. Whether it is the development of technology as part of implementing an ESG strategy, remittances, the best bank accounts for your startup, or the addition of a mobile app, they will all go through the classic stages of development and market entry. Another question is how much time will be spent on each stage, and what options are available to speed up the realization process.
Startups in construction and real estate are far from unique cases in this respect. However, several nuances in their formation should be taken into account.
The first of them is the increased financial costs in the development and implementation of so-called “iron” projects. These include developments that involve the creation of new materials, structures, equipment, and so on. This field itself involves large investments in materials, means of production, logistics planning, and other issues. Hence the need to finance projects early, which entails certain risks for the investor.
The second nuance concerns digital technologies. In construction and development, this segment was relatively small a few years ago: the same fintech and retail sectors are far superior in terms of the scale of digitalization. But nowadays, the digitalization of construction is outpacing many other sectors of the economy.
Of course, apart from the complexities of real estate technologies, they also have qualitative advantages over projects from other areas. For example, there are now a large number of startups whose founders come from the industry. Such people understand the needs of the market and create relevant industry solutions that have many advantages over competitors.
And the second important point is that if a startup is already established, it has ready-made digital solutions that can be easily adapted to industry specifics.
Now, back to the nuance we talked about earlier – construction and real estate startups often need early-stage funding. At the same time, most of them, as a rule, avoid early investment with the sale of a large stake in the business to have room for maneuvering without increased obligations, and investors, in turn, want to invest in promising projects, the effectiveness of which can already be assessed. In this case, these patterns cease to work and other motives have to be guided.
For a startup in real estate and construction, the best option would be to attract an industry investor, partner, or strategist. At an early stage, it is difficult to reflect a real business model to get support from a financial investor or fund. A strategist, on the other hand, understands how the solution proposed by the startup is used and implemented.
Such investments include, for example, personal investments by managers and owners of development businesses, who enter projects as business angels and strategic investors. For an early-stage startup, this is the most correct, and perhaps the only, approach to finding an investor.
In this case, there are two relevant options for a startup: searching for a business angel or requesting grant support. For example, various foundations have grant programs that allow a project to receive additional funding. Such grants help startups go through the initial stages of development, bring their product to test models, and use in the industry.
An alternative method of finding an investor can be solution integration. That is, turning to a company already a contractor for a major developer. However, in such a case it is important to take into account the loss of part of the margin, which will be partially transferred to the integrator.
Another simple and obvious solution is to knock directly to large developers. Individual competitions and programs organized by them will help here.
Bringing a development to market is a labor-intensive process, which, moreover, is accompanied by risks. Some of them can be closed painlessly if there is a good partner and investor.