Building Ventures — Q&A with Partner
He started his career in construction before college with a summer job at Wilhelm Commercial Builders, in between internships at NASA and Honeywell. The contrasts were striking. Since then, Gregg Wallace has committed his career to modernizing the construction industry. He now invests with the team at Building Ventures, focused on empowering startups that are digitizing the construction industry and collaborating with others as the industry moves forward.
We talk here about how the construction industry is currently so interdependent, how it can feel like it can only be as fast as its slowest adopter, how a company like Hilti was able to innovate despite having roots in the physical world, and what “constructuring” means.
Building Ventures is focused on investing in and nourishing new digital technologies in the built environment. What’s been your personal journey in construction?
There’s what I call three phases in my career: pre-career, early career, and then my work at Hilti Corporation.
The fun founding story for me was back-to-back high school internships. One was working at Wilhelm Commercial Builders, a family-owned company between Baltimore and Washington D.C. that does a lot of interior finishing work. I was age 16 at the time, hauling trash drywall off a construction site and making $8.25 an hour.
That was between jobs working at Honeywell on a DARPA-backed software coding project, and as an intern at NASA Goddard Space Flight Center. Reflecting back now, these early pre-college experiences were critical for understanding the role of engineering and technology on the physical world.
As an intern at NASA, alongside Steve Leete, we would watch VHS video recordings of prior Hubble Space Telescope servicing missions and produce what we would now call a digital twin. Each turn of the wrench during the space walk, second by second, needed to be encoded into a CSV file.
The back-to-back internships, between NASA and construction, were as far apart as you could get technologically. Both tasks were very mundane and now we have computers doing things like deep learning. It was all just very illustrative.
During college, I discovered a love of traveling. I had never been on an airplane before college but once I got a passport and started traveling abroad, I was hooked. I spent a lot of time in Latin America — specifically, in Mexico, Chile, and Argentina. I did three semesters abroad and completed a Bachelor’s in interdisciplinary studies, focused on Spanish and Economics.
I then joined Bain & Company out of college. I spent about eight years there working a whole range of sectors and clients from tech to media to telecom to newspapers to acquisitions and private equity.
Bain had just opened a Texas office in Houston, and I would fly down from Dallas for two client assignments. Seeing the massive capital expenditures that went into both greenfield and brownfield developments was inspiring.
The cases I worked were very much people and process oriented, but it was clear that new digital technologies would be a frontier for the industry. Yet at that time, it was apparent to me that so many talented MBAs were shifting focused beyond careers in finance in New York City, and heading out west to work for big tech companies. Heavy industries like manufacturing, logistics, energy, and construction felt overlooked by the staggering needs to power and run the world.
In 2012, while working at Bain, I became aware of an opportunity to work abroad and join the strategy team of Hilti, working at that time alongside a team from Bain & Company.
Those in the trades tend to know Hilti pretty well. They develop, manufacture, and bring directly to the jobsite professional grade power tools and fasteners: anything needed to cut, core, saw, fasten, anchor, and safely fire stop.
Hilti is a family-owned multinational company based in Liechtenstein. They now operate in 130 countries, developing tools and fasteners for the construction industry. As a company with a 70-plus year history, Hilti invests around 400 million dollars annually in R&D with around 1500 people in R&D-related roles.
The company was witnessing this wave of digitization coming into construction and the roles that I held there, both at headquarters and then opening a tech office here in California from 2018, had me looking at what were the ways that Hilti could partner together with outside companies in the software industry to help advance industry solutions.
So let’s pause there, on Hilti. I’m curious because that was right around the time that construction had its latest dance with technology and was trying to figure out how to make it all work together. And I’m curious because Hilti, as a manufacturer, are very literally in the nuts and bolts. Was it a natural step to begin looking into digitization and software?
Innovation runs deep in the company’s DNA, from management through to the factory employees who are looking for warehouse and manufacturing efficiencies.
I would call out one difference and that is that physical product innovation can often take three to five years from concept to early production — testing with users, iterating, getting the product ready for manufacturing, and then shipping it around the world.
A good software programmer might be able to iterate on her or his software package in a matter of days or weeks. It’s that proximity to the customer and the ability to keep adapting while it’s still a prototype that implies a different pace and a different skill set.
The first wave of Hilti’s digital related to the idea of how to get fasteners into the BIM model. How do we create usable 3D images of different products and expose some of the characteristics of those products in a way that designers and engineers can get into the BIM model? That was one of the first pillars of digitization at Hilti.
A second came up around tool tracking with ON!Track, which was the first sellable software-as-a-service that Hilti developed entirely in house and that now sells globally.
So, was it a natural fit? I think that for a company like Hilti it was — but it wasn’t going to, nor expected to, happen overnight. It’s an evolution, not a revolution, to became a solutions-oriented company that goes beyond transactional selling. I also think that Hilti wanted to do digital Hilti’s way. There’s not a lot of time for bells and whistles, and by the time it gets to the customer, the customers expect it to work and work flawlessly.
I think the company is unapologetic about saying that it’s going to take time to produce a quality product. They will take it to the customer when it’s actually ready versus the messiness of taking something half-baked to the market early. Start-ups will take a different approach. It’s helpful to have seen both sides, and to consider that there are more than one way to climb a mountain.
That makes a lot of sense and I completely agree there are a number of differences between building things and building software. While we’re on it, time on tools was a domain that we looked at pretty extensively at Bechtel. When you start to look at productivity tracking and utilization of different assets on a jobsite, rattling bolts and installing material is hugely important to understanding total output.
Yeah, that’s where I actually love to draw comparisons to automotive, though with a disclaimer that that not all comparisons are fair.
You cannot legally go in and tinker with the software system in your car because it needs to be approved to be on a public road with other drivers on it. But last week, Google sent me a 2022 year-in-review of my location. I love these statistics, I’m a data person. The point is that the data coming out of Google is much richer than what I could get off of my own car because these products are across different industries.
The key question is, “What are we trying to learn?” You could lock everybody from the industry into a room and ask them all to answer what they would do if we had all of the machine data from our heavy machinery and all of our power tools. What solves a need versus what solves a not-yet-realized or a latent need? It’s going to depend on the perspective.
We talk a lot about data in construction. But I actually think a big part of the industry’s challenge is asking the right questions of the data, for the right person, at the right time. Every person is going to have a different need depending on where they are on a project and within the project lifecycle. Whether they’re an estimator during planning or a superintendent during execution or a project engineer during handover, it’s this complexity that I think defines the industry today. I’m curious how Building Ventures approaches this complexity and what informs your investment strategy?
Building Ventures looks holistically at the Built Environment. If we think of the project life cycle from concept and design into construction into building operations and then into the user experience inside that facility, we’re asking, “How is this life cycle optimized and where are their business opportunities at the juncture between these phases?”
This is an industry of industries, as you said, very, very, very complex depending on project types and builders and subcontractors. There’s just a ton of heterogeneity. For that reason, each of us on the team comes at this with a different set of industry background.
Also, it’s critical and a point of humility for each of us to know what we don’t know, and where to find that expertise. We have a strategic network of industry leaders, which helps keep us in close partnership with builders, real estate operators, architects, and engineers. Oftentimes, a start-up founder’s degree of expertise will easily exceed ours.
Since this is an industry pursuit, we’re trying to collectively involve other experts who can help us understand the opportunity and who are keen to get in touch with these innovators as well. In turn, this benefits our network by also helping regularly connect them with some of the top innovators forming and growing start-up companies.
At buildingventures.com/network, you can see this range of companies. We take a very collaborative, community, and strategic approach. We meet, on average, 400 to 500 start-up teams per year — that means every business day taking about two pitches across our team.
We want to know the founder. Let’s not jump straight in and talk about dollars and financing. Let’s get to know this person. We want to know who the person is and what they’re looking to accomplish. Out of this, we often find a range of opportunities.
To quickly paraphrase here, it sounds like you’re active investing in what we’d call the integrated project delivery space, which is looking across the entire value chain to encourage a more holistic approach rather than silos.
Yeah, that’s right. It’s hard to put a word or phrase around it — it’s the connective tissue. It’s the inter-party collaboration. It’s what the cloud does really well by enabling multiple stakeholders to selectively access information that they need, just when they need it, and then collaborate during different phases of the project.
Formally, we’ve written and published three theses that we think are defining the future of the built environment, and I can touch on those briefly…
They are, first, “Constructuring” which is the idea that the future of construction looks more like manufacturing. The goal of finding repeatability with more planning up front so that execution can flow more smoothly.
Second, we talk about “Space-as-a-service”. Rather than looking at real estate as a ten year asset that you’re going to own and lease out, we look at space as being in the service of its users. That service can be quantified economically by the hour or by the shipment or by the meeting that you host in the building.
And then third, we talk about Sustainability. Anyone reading the news over the last two to five years, they’ve seen the huge uptick in attention around this notion and realization that 39% of global greenhouse emissions that are related to the building and operation of our global real estate footprint.
What’s your perception or the pulse these days around pain points that construction tech start-ups are addressing?
Let me talk about computational design that accelerates digital design of a project and then leveraging modern SaaS tools to collaborate during pre-construction. I’ll talk about two examples from our portfolio.
One of our earliest investments was in Hypar. They had a few beliefs — and I’m going to oversimplify this, so I recommend listening to podcasts with them pitching their own team — but it’s the idea that architects and engineers and designers can use Hypar to create recipes for how they design and build and that these recipes are repeatable. Maybe a building isn’t repeatable, but the elements within the building and how they’re designed are.
This is similar to how a super user in Excel can develop macros to automate their work processes and financial scenario planning. Designers use Hypar to do something similar. You shouldn’t need to draw aspects and elements of the building in the same way each time you’re working a new project. Hypar developed the software architecture for how this works and they make it super easy and repeatable to use elements and deploy them at scale.
The second is Join.Build which has built out a pre-construction collaboration platform. Ultimately, the owner is going to sign off on a certain budget level and within that given budget, optimize all of the decisions that need to be made. Join.Build is the collaborative platform that general contractors, architects, engineers, and owners can look at as a series of decisions are getting made.
Throughout the course of pre-construction, all of the decisions that need to be made are rolled up into answering what implications it will have on the time and cost to construct.
And then you can have these pre-construction meetings on the fly, while running scenarios that ask, “What if we added more budget? or “What if we extended the time for the project to be completed?” Instead of general contractors going back and running the numbers and coming back in two weeks, you can run these scenarios on the fly in real-time and accelerate pre-construction with better information.
Finally, I always like to ask, what do you see as the biggest challenge facing construction right now?
I don’t think there’s a clear definition of construction. It depends on the project you’re doing and what application you’re completing. If you’re working within this collaborative system, where there can be up to 30 to 40 specialty contractors and subcontractors on a project, then if any one of them races ahead 3X faster in innovation it would still be constrained by all of the remaining workflows that are interdependent.
In this marketplace of ideas, there are certain innovation communities that are organizing and regularly meeting to address this. Our team at Building Ventures works be a good steward and contributor with these communities, and also creating a community of our own to advance things forward.
Still, there’s a major challenge at construction companies that there simply often are not enough staff dedicated to these growing areas of digital technologies. Lean managers have existed for a while, but a new emerging class of digital innovation managers will need experience in construction, consulting, and digital implementations. It’s hard to find talent that crosses these varied experience sets.
We need to more efficiently match who’s looking for certain solutions with the technologists that are solving the problems. This would do a service to both the users of technology as well as the creators.
Nate Fuller is Managing Director of Placer Solutions, advising leadership teams to transform their organizations in ways that improve performance and agility at the field level.
He provides construction companies with a Field Assessment that delivers transformative information about their field operations and is proven to accelerate innovation & technology adoption for Top ENR contractors.
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