How This VC Fund is Trying to Win Over Skeptical Investors

When Darren Bechtel, whose family has been involved with construction company Bechtel for five generations, started talking to institutional investors about a venture capital fund focused on technology for the construction industry, they were skeptical about a strategy specializing in the sector. After all, construction lags when it comes to tech innovations — one of the reasons behind the industry’s notorious cost overruns and schedule delays in residential and commercial building projects.

Bechtel believed he could ultimately attract traditional investors like endowments and foundations if he first secured backing from the corporations that would be using the tech applications of his start-ups. Bechtel’s firm, Brick and Mortar Ventures, has since raised almost $100 million — making it the largest institutional fund exclusively focused on the sector — from companies including Autodesk, CEMEX, Ferguson Ventures, and Sidewalk Labs. 

“When we started talking to traditional LPs, they told us, ‘What makes you think this industry is ready to adopt technology? Even with a long history of poor productivity and cost and schedule overruns, we think it’s going to be a while before the industry gets there,’” Bechtel, a founding partner at Brick and Mortar, said in an interview with II. “But then we talked to the corporates, and they said, ‘We need help. Tech issues are keeping us awake at night.’” 

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The new fund is designed to ultimately demonstrate to institutions that Bechtel is addressing a real need and that a specialized fund on the burgeoning sector makes sense — and to make sure start-ups in the industry are addressing the right problems. Bechtel has directly invested in 40 start-ups in the so-called built world sector since 2012 as an angel investor. 

“We want to make sure that our intuition about what the market wants is correct,” Bechtel said. 

Funding of construction tech startups in the U.S. increased by 324 percent to $3.1 billion last year, compared with $731 million in 2017, according to data from Crunchbase. Brick and Mortar’s fund will help its corporate strategic backers think through their digital strategies, source technology for pilots and other uses, and provide opportunities to collaborate with other limited partners, Bechtel said. 

“By demonstrating that we were able to secure capital commitments and ramp up digital transformational efforts of these corporations, we will be able to gain the confidence of traditional LPs,” he said.