Five Reasons Why AEC Investing Will Take Off in the Next 12 Months

Patric Hellermann is the co-founding General Partner of Foundamental, the largest global investor in technology for construction, architecture, engineering, design, renovation, blue-collar industries, and their supply chains. Founded in 2019, Foundamental backs ambitious early-stage founders across the Americas, Asia-Pacific, and Europe, and was an early investor in several category-defining startups, including Infra.Market, Wiz, Speckle, Enter, Snaptrude, Welcome Homes, and Forge.

The construction industry, valued at $10–$12 trillion and accounting for approximately 10 percent of global GDP, has historically received a mere 0.15 percent of global venture capital investment. While this disparity might appear logical for an industry rooted in physical infrastructure rather than software, construction urgently needs technological innovation to address its low digital penetration and productivity.

Recent trends indicate a paradigm shift. Investments in architecture, engineering, and construction (AEC) have tripled to 0.5 percent in just two years. Here are five factors driving this remarkable transformation.

Constrained Housing and Infrastructure Supply

We’re facing a global housing crisis. The UN reports that 1.6 billion people lack adequate housing—a number projected to rise to 3 billion by 2030. Meeting this demand requires constructing 96,000 affordable homes daily. To put it into perspective, the equivalent of New York City’s floor area needs to be added every month for decades to come.

Moreover, 40 percent of buildings and 75 percent of infrastructure needed by 2050 have yet to be built. Humanity is embarking on its most ambitious construction era in history. However, there aren’t enough construction companies, workers, or materials to meet this demand—especially while integrating sustainable practices.

Technology offers solutions. US-based companies like Mighty Buildings and Reframe are leveraging automation to create pre-fabricated, environmentally friendly homes. Icon is tackling the issue with innovative 3D printing. Construction professionals must embrace such technologies to create time and cost efficiencies as demand grows.

Deepening Labor Crisis

The construction industry faces a critical labor shortage. In the US, approximately 20 percent of construction workers are over 50 and nearing retirement. Europe, meanwhile, needs 2.5 million additional workers to meet current demand.

The tough conditions—outdoor work, exposure to the elements, and physically demanding tasks—are deterrents for new entrants.

Technology can help bridge the gap. Monumental, a Netherlands-based startup, is developing AI-powered autonomous construction robots. Starting with bricklaying, these robots achieve human-level precision, accuracy, and efficiency, filling the void left by skilled labor shortages. Importantly, they don’t replace workers but augment the workforce where skilled labor is lacking.

Companies must explore similar technologies to address labor challenges while inspiring more people to join the industry.

Building Sustainably for the Future

The real estate industry is responsible for 40 percent of global greenhouse gas emissions, making sustainability a critical priority. The demand for green materials and energy-efficient construction is rising as regulators and consumers increasingly prioritize eco-friendly practices.

This need creates opportunities for tech innovation. For instance, Tangible simplifies the selection of low-carbon materials by providing businesses with detailed carbon impact data for construction projects. As sustainability becomes a decisive factor in purchasing decisions, construction professionals must adopt sustainable processes to stay competitive.

AI Integration Opportunities

Construction’s siloed and analog workflows hinder data collection, making it difficult to deploy AI and machine learning for productivity gains. However, this is beginning to change as the industry builds better data infrastructure.

Foundamental predicts that data infrastructure will create even bigger opportunities in construction than AI over the next decade. This is vital not only for enabling construction robots but also for applications like energy-efficient renovations.

Large organizations are starting to collaborate with tech firms to co-develop solutions. Startups that integrate software and services seamlessly into the construction environment are poised to become industry leaders.

A Maturing Tech Market

The construction tech market is approaching a significant turning point, with several IPOs expected in 2025—particularly in India. These IPOs will likely create a "flywheel effect," where early team members reinvest equity into new ventures or launch their startups.

This pattern, already seen in fintech and AI, is set to attract further investment and innovation in the construction industry.

Transforming a Legacy Industry

The construction industry is on the brink of a technological revolution. The necessity for change is converging with unprecedented opportunities to drive meaningful innovation in one of the world’s largest industries.

As we move into 2025, the stage is set for AEC investing to take off, ushering in a new era of sustainable, efficient, and technology-driven construction.