Transcription

• Speaker #0

  The construction industry is in full swing. New standards, use of materials, energy consumption are our stakes. My name is Richard Mita, I am a serial entrepreneur and CEO of Sinax. At Sinax, we digitize the construction materials industry. My passion? The digital applied to sectors that did not expect it. In the builders, I interview industry visionaries to inspire you in your own environmental, digital and managerial transformation. Welcome to the Builders, the podcast of those who build today for tomorrow. Welcome to this new episode of the Builders. This episode is part of a session I do with Buildworlds and Contech France. And today, I have the great pleasure of welcoming Darren Bechtel. And I'm going to do it in English. So, hi Darren.

• Speaker #1

  Hello, and thank you for doing it in English. My French is appalling.

• Speaker #0

  So we are recording in Paris in Darren's hotel. So Darren, you're one of this one-of-a-generation kind of guy that we are very happy to meet. Your background is amazing. You are now a leader and a leading investor in the construction industry. I'm very happy to have you with us and we'll try to get as much as of your brain, you know, and everything that we can have from you. But first of all, can you please introduce yourself? Yeah.

• Speaker #1

  So Darren Bechtel, founder and managing director of Brick and Mortar Ventures. We're a San Francisco headquartered but global construction technology venture capital firm. So we have... Two years ago, opened an outpost here in France, led by Guillaume Bazwin, formerly from Vinci-Lenard. We've been excited to help with the launch of Contech France. And we've got a team member out in Pune, India. And then there's a total of five of us in California, and that's the brick and mortar team. So roots in the San Francisco Bay Area, but we invest globally. We try to have direct inroads to projects across the globe.

• Speaker #0

  But before digging into brick and mortar, tell me more about the Bechtel family. Because this is quite a well-known family in the construction sector. We were just talking just before, and we can find it online, but you've been a mason, a plumber, a carpenter during your summer jobs. Tell me more about your background and your family background.

• Speaker #1

  Yeah, So, you know, fair to say I was born into the world of engineering and construction. I joke and say my first job site experience was when I was six months old. We moved from the San Francisco Bay Area into a construction trailer in the jungles of Borneo in Indonesia. My dad was working his way up within the family business Bechtel at that point doing project management. And so... Me, at the age of six months, my brother, about a year and a half old, moved with my parents to this job site on a camp job. And so we were there for a year and a half, and then New Zealand for a year and a half, London for about two and a half years, and then we came back to the San Francisco Bay Area, which at that point in time was headquarters for Bechtel. Our family business is in its 126th year of operations. it was started by my great great grandfather who had two donkeys and a scraper and a dream you know he was one of the the first grading operators to retire the donkeys and use this newfangled technology that was the steam shovel and kind of continued to just sort of build upon that dream and eventually um builds bechtel into the the world's largest privately owned engineering and construction firm

• Speaker #0

  And still today, right?

• Speaker #1

  Yes. Okay. And mega projects, kind of first of its kind projects, that's really the bread and butter. So it's not, you know, commercial office buildings. It's, you know, the first signature mega project was the Hoover Dam, which was a bit of a battlefield promotion, I think. And since then, here in the backyard, Bechtel had the pleasure of being involved in the construction of the Eurotunnel. Which was a fun thing. We, I was here actually for the opening of that.

• Speaker #0

  You were there for the opening or were the two channel joints?

• Speaker #1

  Yeah, one of the first, no, one of the first, um, uh, passenger trains through. Yeah. Which, uh, you know, as, as a little kid, it seemed really exciting, but it's a pretty long tunnel and, you know, I think we needed some, some sugar, um, to keep going. But, um, no, so it, you know, that was the, the, the family in the world that I grew up you know that the Project life is what we lived early on. You know, for our family that's now in its fifth generation family leadership at Bechtel, you know, there's some very thoughtful and deliberate strategies around how do you try to groom the next generation of leadership or at least test, you know, out the family members to see if it's maybe a fit. And so, you know, we were all encouraged from a young age to work throughout school during the summers, you know, learn by doing. you know try to keep kids grounded it's nice to to teach them the satisfaction of a hard day's work and the value of a dollar so there was there was never any um pressure to work at bechtel but an encouragement to at least keep ourselves occupied and learn you know pursue passions or interests and so i had worked a number of summers at bechtel in a variety of roles but also worked for a local home builder. Um, that's where I was doing carpentry and masonry. I was a forklift operator. Uh, I had done field engineering work on a light rail project that Bechtel was managing. And then at the, uh, the ripe age of 17, I was in Newcastle, New South Wales, Australia, over team, uh, overseeing a team of pile drivers on the expansion of the world's largest coal terminal. So, you know, random summer for a 17 year old, but par for the course growing up in the Bechtel family, you know, following school. one of the policies that the family had was that if you're interested in working for Bechtel full time, you're actually required to go work somewhere else for at least two years first. And then at that point in time, if Bechtel seemed like something that we really wanted to commit ourselves to, we'd still have to apply for a job. We'd have to earn it. You know, my dad made it very clear, you know, for any family member that wasn't delivering, he'd be the first to fire us. And so, you know, in many ways it was, it was. very high standards put upon family in a way to sort of pressure test people. But a big one was to make sure that anybody that was joining the family business was doing so because they wanted to and not out of some feeling of obligation or need, the difference between should and want. In my case, I got recruited out of the Stanford Mechanical Engineering and Product Design program into a commercial architecture firm. out in washington dc um that and i'm the same as california right yeah they're very different i was i was a a real alien there as a long-haired californian that showed up with a longboard skateboard um but just before going into that what

• Speaker #0

  strikes me is that even you know i had a family business you know in the construction in our podcast it's a maison shiny down They are a big family business, construction family in France. They have similar processes. Like you need to work three years for another company in the construction sector. And then you need to apply for a job. And then you need to go, you know, and climb the ladder.

• Speaker #1

  Yeah, exactly.

• Speaker #0

  And it's the same, if I'm not mistaken, about, you know, the process that you just described. Very. And so, sorry, coming back to Washington.

• Speaker #1

  Yeah, yeah, yeah. Well, I mean, and just, you know, on that again, there's a lot. of case studies of how family businesses don't make it beyond the second generation. And there's not a one size fits all. And like everybody and every family needs to try to develop their own strategy around how to, you know, break away from the statistics. You know, I think it's ever evolving. You know, it's worked so far for our family. But yeah, I think every organization is unique.

• Speaker #0

  you know the culture that you build fifth generation it's like it's it's a lot uh it's amazing i mean it's it's I don't know if it's something that it's, uh, it's, I'm not sure that there are a lot of families that go up to this fifth generation, you know? Uh, but, uh, that's, that's, that's amazing.

• Speaker #1

  Yeah. That in, in, in many ways it's, uh, unchartered or, or very infrequently chartered territory. So again, it's, you know, there's a need to kind of continue to revisit that strategy. And I don't think that it would be arrogant to assume what's, what's worked for Bechtel so far would work for other people too. So, but yeah, in my own. journey, which I can loosely tie together in hindsight as some deliberate strategy, but really was sort of a serpentine pattern. I got recruited into this commercial architecture firm as a kind of in-house engineer. The title was architect. It was, it was more like indentured servant that I was, I was a CAD monkey, you know, I was converting hand sketches into CAD models.

• Speaker #0

  Auto CAD monkey. That's what you were saying. Okay. I didn't know that the job exists at that point. Yeah,

• Speaker #1

  yeah, yeah. And this was, we were actually using a pretty archaic system called MicroStation at the time. That it was, you know, our version or instance in our model library was riddled with bugs. So, you know, I was new to that platform, but figured it out pretty quick. I was always a pretty tech savvy guy. And so, you know, kind of debugged. a lot of their model library, try to streamline a few things. And I got to wear a lot of hats, which was fun. That was my first exposure to commercial construction because my background, I had worked for local home builders and then on Bechtel projects, but never these commercial projects. And this firm, their bread and butter was kind of like the no budget, ultra high end, contemporary, beautifully designed and a design that resonated with me. They would say that they used a consistent design language. It means if you could do some pattern recognition, all of a sudden I was able to do a fair amount of the actual design work. So over the couple of years I was there, it was CAD modeler. I was building physical models. Actually, my first week there pulled an all-nighter Sunday night after having worked Friday till midnight and Saturday until 11 p.m. building a physical model. for one of their clients. So yeah, that was an interesting experience. But I was doing construction administration and I enjoyed working on the design side. And my undergrad training...

• Speaker #0

  Was design, no?

• Speaker #1

  Yeah, it was within the mechanical engineering program and it was the product design track. So it was this amazing mix of the engineering core classes mixed with what Stanford and their D school is really well known for now is this concept of design thinking or kind of rapid prototyping, user-focused design. And so it was this great blend of the right brain and left brain, you know, that kind of creative problem solving, you know, not just coming up with a design, but having that design rooted in design for manufacturability or, and also that iterative design process, kind of that sort of product-driven or user-driven. kind of need finding like school of thought.

• Speaker #0

  Sure. That's really the design thinking school of Stanford and now that you can find in different corporates.

• Speaker #1

  Exactly. And so the Stanford Product Design Program predated the establishment of the d.school. And so it was a four year program instead of the kind of condensed sprint paced program the d.school offers now. And so it was great. And we were kind of jacks of all trades, sort of tinkerers or, you know, sort of a renaissance man or woman's major. So it was a lot of fun. And, you know, we'd be doing engineering classes on one side. And then I was a TIG welding instructor in the machine shop, helping teach a bike frame building class on another and, you know, doing thermodynamics over here and then photography over here. So it was, it was great and got to use a lot of those skills, um, at this architecture firm. But, you know, as architects, we would take the design to the point where you'd have to start to figure out how to build it and then the architect's job would then be to farm it out to you know the engineering consultant who would then tell us how to build it and i enjoyed design yeah yeah how to build it or not yes exactly exactly and you know i would have failed all of my undergrad classes if we designed something without any consideration for the manufacturability of course And so this disconnect that happened in the built environment of somebody being employed to come up with a beautiful design that had never actually built anything themselves, you know, would come to an agreement with the client around what looked good. And then when you start to figure out how to construct it, that design was considered kind of rigid. Someone would say, well, I, you know, I wouldn't have done it that way myself, but here's. the cost. And then you would either get sign off from the client, or you'd have to do value engineering, which seemed like a broken process to me of, you know, why, why does value engineering happen after, you know, we've kind of locked in a lot of the design, the conceptual design. And so I then was reviewing a lot of the engineering shop drawings coming in, I would regularly, you know, bang my head against the wall and, you know, start challenging some of these. you know, consulting groups around why they made this decision and why aren't we building it in this different way. And, you know, I realized pretty quickly that I needed to get back into engineering, um, and back to my core. And right at that same time, medical devices in the San Francisco Bay area were really booming. And a lot of my classmates, um, from the product design program were getting recruited into the program.

• Speaker #0

  When was that?

• Speaker #1

  Uh, so this would have been, uh, 2006, 2007. Yeah. And so, you know, as I was, you know, trying to figure out what next, realizing, you know, my career as an architect was coming, you know, towards a close, I reached out to a bunch of classmates from my program and everyone said, you got to check out medical devices. You know, we weren't trained doctors. I happened to be a EMT, emergency medical technician, but that was kind of as a hobby and to make sure I knew how to repair myself and my friends as we. you know, had an affinity for, you know, adrenaline sports. And so I started looking into it and it, it very much was the product design program just happened to be that, you know, we would be tasked with coming up with a novel solution to some sort of design challenge. There, there'd be unique constraints that say, you know, here's the science is known, but the sky's the limit, come up with some creative solution to how we solve this one pain point. don't use these materials, don't touch this, you know, alarm go off if you hit this thing. But, you know, what do you got? And so I found a startup, it was a venture-backed startup focused on women's health in breast cancer diagnostic and surgical tools. And so I joined as a fairly low-level R&D engineer, but at a great time where I was able to help finish the design on a breast cancer biopsy device that we took from early prototypes through to FDA approval, early commercialization. You know, it was a very wild journey that either right place, right time or wrong place, wrong time. You know, I eventually was the turnaround CEO launching that company's three products out of a bankruptcy restructuring following the subprime mortgage crisis and global financial collapse. And two years back at Stanford getting my MBA.

• Speaker #0

  Out of university you went directly to your first love, you know, architecture, let's put it this way. And at some point you were saying, well, you know, that's, I need, I mean, it's getting to a point where I'm not finding the right fit. And then you were saying, okay, let's go to, you know, you call your friends, let's put it this way, go back to Silicon Valley. and then it's and go into this company that does medical devices. And then the first devices that you do is for detecting cancer, breast cancer. Right.

• Speaker #1

  That this was a, it was a corneal biopsy device. So that it was for the sort of specimen collection. Okay.

• Speaker #0

  And then I didn't get what happened afterwards. Like the company, the company got FDA approval. Then you start commercialization. And then you were saying you became a CEO of this company?

• Speaker #1

  Yeah, that it was, you know, if we had like five hours, I'd give you the full story. Yeah, but I, yeah, yeah. We don't have five hours,

• Speaker #0

  but just for me to understand. So you became the CEO of this medical device company.

• Speaker #1

  Yeah, so I was, so I was there for a couple of years as R&D engineer. They had gotten FDA approval on three different products that there was two biopsy devices. One that was a surgical device for actually. performing lumpectomies. I went back to Stanford to get my MBA.

• Speaker #0

  Okay. Executive MBA in general management. Yeah.

• Speaker #1

  Yeah. Yeah. So this was the two-year MBA program. Okay. At the Stanford Graduate School of Business.

• Speaker #0

  Yeah. The GSB.

• Speaker #1

  Yes, exactly. And so I started September 2008, graduated June 2010. So could not have lucked out on timing any better because as the world's financial systems started to collapse, you know, I was already admitted to school. We were able to say like, oh, well, if we were in charge, this wouldn't happen, that wouldn't happen. And by the time we came out, job markets were significantly better. So I was there. The medical device company went through a bankruptcy restructuring. They had taken on a pretty significant amount of venture debt. My last quarter of business school, I was actually working halftime for a green tech company that was developing carbon negative concrete. Okay. That their lead investor, Kossler Ventures, had recruited me in with the intent to go full time as chief of staff.

• Speaker #0

  Okay. So Kossler Ventures from Vinod Kossler, right? Yes.

• Speaker #1

  Okay. Yeah. And I was working halftime my last quarter. two weeks before graduation, I got the call from the acting management of the, you know, we say new co of the med device company, you know, having come through the bankruptcy restructuring, asking me to come back and lead the turnaround effort. And so like many Stanford GSB grads, I was a little overconfident, a little overoptimistic, thought it was going to be a slam dunk. And instead it was a very humbling and, you know, grueling three-year turnaround effort that, you know, we got a lot done. There was a lot of fuzz on this situation. I'll spare you all the details. But that was really where I cut my teeth in startup operations and management that, you know, I was, you know, on the fundraising side of the table, you know, we were restarting manufacturing, bringing things back into compliance with the FDA. You know, we were, we had inherited some pretty complicated commercial partnerships. And as a result, We actually focused entirely on distribution through third parties in, you know, markets outside the US. And so, yeah, that's, that's where, you know, I, I, again, kind of on the theme of learning by doing this was, yeah, trying to resuscitate this business while navigating a pretty major cleanup effort, raising capital in a fairly challenging environment. And so in parallel and starting in business school, I started doing venture investing. kind of industry agnostic, mostly backing fellow classmates and young alumni at Stanford that were launching ideas out of the engineering school or the business school or the biodesign program. And that, you know, I had, I had worn so many different hats and kind of had controlled ADD at this combo of the, the sort of product design program mixed with the MBA. It could make you a pretty dangerous, you know. agent of sorts where I could pretty quickly dive into a new market, kind of understand some of the, you know, either unique challenges or opportunities. You know, when you're meeting with a founder, you know, you're kind of underwriting or pressure testing the merits of the solution that they've developed and how big of an opportunity could this really become, you know, testing out their go-to-market strategies and where there's, you know, the real secret sauce or something defensible. And so it was fun and frankly therapeutic for me to be able to work with all of these young founders that I would get beat up all day in the med device world and then be able to have these sort of, you know, war veteran PTSD moments trying to advise and mentor founders around some of the realities of kind of like leading a startup or in my case, a turnaround. and some defensive moves that they might want to take or the importance of, you know, really evaluating the investors you're bringing onto your cap table or some of the key hires you make or some of these corporate partnerships that you're embarking on. And I, you know, it was deeply satisfying and I found it really intellectually stimulating to be working with kind of a portfolio of founders. And, you know, at that time, my angel investing was industry agnostic. It was kind of all over the place

• Speaker #0

  So that was you personally, right? Yes. Initially.

• Speaker #1

  Me personally, I also built out a very duct tape and, you know, toothpick kind of crowdfunding platform to allow other students and young alumni at Stanford to be able to pool in. They were actually carving out positions after I had led rounds of funding. So they were just kind of trading dollar for dollar out of a position we did. And this was, yeah, again, like, you know, sort of taped together. you know, sort of like an angel list before angel list was in operation. And, you know, there was no fee associated with it. There was no carry. So it was a very unlucrative business model, but a way of encouraging, you know, sort of first-time entrepreneurship and first-time venture investing. And it's been fun to see that some of those earliest investors now have gone on to become fund managers. And in two cases of them, these classmates of mine, who I actually act as their lead investor of the startup they launched now both independently have venture firms with more than three billion dollars in management each so you know i i aspire to have as large of a platform as them someday um i'm sure i'm sure you'll get it you know you know we're given our focus on construction tech you know we try to remain disciplined on the the

• Speaker #0

  size of the funds and the cadence that we're deploying so coming from this turnaround CEO position in the medical device. Then, having this side business, you know, of venture capital. It was like a side business, the way that you are telling it. And by the way, when you were talking about this turnaround time, we could feel, I could feel, you know, the pain or the effort this way. So what's, you know, what's the link to Brick and Mortar?

• Speaker #1

  Yeah, yeah, yeah.

• Speaker #0

  Your company, Brick and Mortar, your company.

• Speaker #1

  Exactly. That, you know, the, I lasted. Three years in the turnaround effort for the MedDevice company and we got a lot done, but it proved an impossible task or at least for me. Nearly killed me, but I made it out alive. That when I finally did have to throw in the towel on the MedDevice company, I took over the office space, opened up an incubator and co-working space for Stanford entrepreneurs. I joked and said I was the Stanford slumlord. It was like a very ghetto version of WeWork with a built-in discount and kind of an unofficial community around it. So it was fun and more of a way to just try to build out this entrepreneurial community of people trying to help each other out, continue to tap into the Stanford network. So I was the Stanford slumlord, but full-time hustle was focusing on the angel investing. Now kind of dedicated myself entirely to that. Now that was between 2013 and 2015 when my, my own direct angel portfolio got to about 40 companies. You know, I knew ventures, what I wanted to do. I knew that my stage preference was early stage because I enjoyed helping founders think through refining their solution, you know, kind of going through that iterative design process, which again. you know, part of my undergrad.

• Speaker #0

  It's kind of messy middle, right?

• Speaker #1

  Totally. And even instead of messy middle, like the earliest days, sometimes, you know, I was engaging as early as napkin sketches. Okay. And so it's, it's still developing the product, thinking about first pilots and first customers thinking about go-to-market strategy. You know, I wanted to be a value-add investor and my core competency was not how do we squeak out additional margin? It was like, how do we build a solution that people need. You know, how do we use this user-focused design, iterative design process that was hammered into me in undergrad to really try to build a scalable solution that customers can't live without and that they're willing to pay a fair price for? And how do you sell that initially? How do you scale that? How do you scale the organization and hopefully have meaningful impact as a result?

• Speaker #0

  And this is how it started with Fieldwire or not?

• Speaker #1

  Yeah, so the...

• Speaker #0

  I'm taking this example, but I'm sure you have other examples of it.

• Speaker #1

  So my, my, and kind of rounding out the, the Genesis story for brick and mortar, you know, again, in 2015, as I knew venture is what I wanted to do, I knew early stages, what I wanted to do. You were also seeing that early stage capital was starting to become a commodity that, that Angelus was really gaining traction, um, that a, a sort of gifted presenter could kind of cook up a pitch deck. and usually... at least in the Silicon Valley, be able to raise a million to $2 million to get something going. And so I really wanted to build out, you know, a proper platform or earn a reputation as the kind of must have value add investor for X, fill in the blank. And what was going to be, you know, our, our competitive differentiation, you know, what was going to be that category, you know, that, so there's a bit of soul searching exercise to figure out, okay, is it going to be market or sector specific? Is it going to be technology specific? You know, what's, what's going to be the strategy that helps inform and provide our due north? The same time doing that exercise, I looked at this portfolio of 40 direct investments and kind of a mixed bag to see if there were any common traits between the breakout performers. Like if there was some pattern recognition of like, where did we have, you know, where did I have, you know, unique access or, you know, ideally judgment.

• Speaker #0

  Or the insights that you managed to find.

• Speaker #1

  Yeah. And lo and behold, the embarrassingly late realization was that the common thread between the breakout performers was that they all fell into what is now brick and mortar's investment thesis and narrative. That like whether by dumb luck or decent judgment or a mix of both.

• Speaker #0

  I was the largest investor in the seed round of PlanGrid. I was the largest investor and led the seed round of Levelset. I came into the Series A round of Fieldwire, was in the seed round of Building Connected. And so these were companies that in 2015, you know, that they were, you know, in the late, you know, 20 teens, they were making real progress, but it was unclear, you know, what the end of their journey looked like. But at least they were, they were. demonstrating that they were accomplishing the impossible and that the construction industry was starting to pay for new tools and solutions and they were changing their workflows, that they were embracing the cloud and mobile devices. And so it seemed like a no-brainer in my case. And my first construction tech investment was the seed round of PlanGrid. And so that was an opportunity that was brought to me by Google Ventures, a friend of mine that was a partner there at the time said, hey, we just looked at something and we're planning on investing. I think you might like it and we think you could add value. And it seemed like a no brainer to me at the time. And I was kind of surprised to then find out that I was the largest investor and that all these other big names had much smaller checks. But, you know, to me, it was an elegant solution designed around a very specific need with a great initial strategy, how to get this out into the field.

• Speaker #1

  Tell us what they do.

• Speaker #0

  Plangrid? Right. Yeah, so Plangrid was the first to really take, you know, in the early days, they were saying that they were taking blueprints to the cloud. You know, and that's, you know, most people in the industry wouldn't say blueprints, but it's...

• Speaker #1

  That's what they were doing, yeah. Okay.

• Speaker #0

  And that they, you know, the kernel of tech that they had figured out was how to actually, like, render large PDF documents on mobile devices that you could quickly and easily navigate drawing sets out in the field. and connect to the cloud. So you were able to get the information you needed when you need it. You had, you know, version tracking and revision tracking. You were able to do punch lists. So it was really trying to bring, you know, avoid having to bring paper out into the field, but start bridging that gap of real-time data and notification and sort of the old status quo of static, you know, kind of analog info and version control issues.

• Speaker #1

  At some point, maybe the can monkey reacted.

• Speaker #0

  The amount of paper that I had gone through in all those different roles, like as either the gopher to the gopher on a home building crew, or as an architect, we had a full reprographics operation in the ground floor. And we were just going through reams of paper and constantly couriering around the revisions as we were changing them. the bleeding hippie in me from california was excited about the reduction of you know uh you know mauling down trees but more than anything from just a productivity standpoint it's like you know if if there's any delay or you know need for rework because somebody didn't get the you know the revision you know that's like a real shame but getting people comfortable with devices out in the field you know that there was a lot of skeptics skepticism around whether PlanGrid would work because a lot of people claim that the construction industry was not ready for tablets and smartphones. And that, you know, there was a false assumption that, you know, we had a bunch of cavemen out in the field and they would be reluctant. And instead, you saw people really embrace smartphones and tablets with open arms. And so they really blazed the trail for a lot of the startups that followed. But, you know, in those early days of brick and mortar. you know, had developed a pretty good network throughout sort of the traditional Silicon Valley that friends of mine had gone on to launch startups or they were in venture. And a lot of people, you know, kind of gave me the benefit of the doubt, either based on my background or just the last name. It's like, hey, you probably know something about construction. I don't. Like, you know, I'm a VC, you know, would be what a generalist would say. Like, but like, you probably know something. I'm going to go ahead and assume that. And And I do think that there were a lot of people that were just excited about perhaps leveraging the name or inappropriately leveraging the Bechtel logo in their own pitch decks when I had made an angel investment. And so I really tried to make sure that people realized if I made an investment, a brick and mortar made investment, it's not Bechtel, you know, and have to repeat that many times over. but that did not prevent people to come to you because your last name was back yeah and and so there was you know that that i think a lot of people gave me the benefit of the doubt in early days as we were establishing the platform and you can only trade on that for so long that you know it's The family business is a perfect example. It could take five generations to build a reputation and then one dumb move to kill it. This was something that for access to those early success cases, we maybe got a leg up, but saw that there was great responsibility there too, that we needed to actually deliver on our mission of being a value-add investor and a trusted partner.

• Speaker #1

  What I understand from this side business that you were doing, let's put it initially, out of this 40 investments that you made, you looked at your successes, let's put it this way, or the main ones that became successful were in the construction industry. And then at some point, the main reason, and maybe you have another interpretation, but what I understand from what you're just saying is they were getting to you because people assume that you knew the sector and they would say, okay, I'm sure Darren has got something to, Darren will see something or Darren will approve or Darren will, you know, will give me a good, a good, a good feedback on this company. So that's how you got this.

• Speaker #0

  Yeah. That, that some of those deals,

• Speaker #1

  right?

• Speaker #0

  Yeah. That, you know, the, in the earliest days,

• Speaker #1

  this is how you connected the dots as well yourself or not?

• Speaker #0

  Yeah. That, you know, before, by the time we launched brick and mortar, I had already made, I think, probably six, maybe seven construction tech investments out of the 40 angel investments that I had made. And so in 2015, we launched brick and mortar. Now with this narrowed focus on construction, on construction and, you know, it's more accurately. We say we invest in solutions across the full asset lifecycle. So it's not just the construction scope. It's aspects of design and pre-construction and planning. and same in the operations and maintenance. But that's quite a mouthful. So construction tech is usually good enough for most conversations, but it's really solutions designed for the entire construction value chain. And then so it's AEC sector, you know, the vendors and suppliers that support it, but then also the operations and maintenance. You know, nuanced difference from prop tech, which, you know, historically and still today is much more focused on how do you maximize your returns. you know, on the underlying asset.

• Speaker #1

  It's done the same.

• Speaker #0

  This is really trying to serve the vendors, suppliers, and service providers that are involved in either the construction phase or in the maintenance and repair and operations phase. And so, yeah, there was that kind of like aha moment, you know, based on the early track record or at least access to deals that I saw, but then also just realizing that there was a necessity, that there was a lack of early stage risk capital. And, you know, I wouldn't even say subject matter expertise. I would just say familiarity. It was a really low bar at the time. And I even remember when it was three weeks after we launched our website and the logo, we got a call from a real tier one Silicon Valley venture firm, a group that I had long looked up to and kind of had celebrity status. And they said, you know, we're looking at a deal. We understand that like you're the construction tech experts. And, you know, Curtis Rogers, you know, my, my first employee, the first guy to join me on this journey, he and I kind of put the call on mute. And we said, you know, like, holy F, like they think we're the experts. And then you can say what it was. Yeah. And then we, and then we unmuted it and we get into the conversation. And then a couple minutes later, we're like, Jesus, we are the experts. Like nobody understands this ecosystem. You know, it was not because of some. you know, divine gift we had, but the fact that both of us had come from the industry and we'd lived these pain points and that, you know, many of the VCs, their familiarity with construction was limited to their residential projects or their office build out or what they see driving past, you know, congestion on the highway or the streets and saying, oh, that's, that's gotta be the industry. And, um, you know, so there, there wasn't many of us that had sort of lived at that intersection of construction, technology, venture. And so, you know, that kind of aha moment, you know, made it pretty clear that there was a need and a real opportunity to try to galvanize the category as an investable category. And, you know, the scary thing at the time was while thinking about this strategy, you know, we were making a big bet that we would be the first ever to make money on a sector focused strategy because we were on this sector focused strategy because our sector had not yet even had a single unicorn valuation, let alone exit of a construction tech company like when we launched. So that was a big bet that smart people, smart investors had very legitimate reasons for being skeptical around whether a sector strategy would make sense. but having, you know... grown up in the history and like lived and breathed the problems and then being involved kind of on the front lines of developing some of the solutions that hopefully would pull the industry forward at a very different perspective. And I felt comfortable about that risk that, you know, this was a very different era. And just because things that never happened before, it doesn't, you know, it was naive or short-sighted to assume like it's not going to happen. But I definitely understood people's concerns around like, well, is now the time. is this fun life at the time. You know, so we were some of the early crazy people wanting to kind of launch a sector-focused strategy. So, you know, we were the first and only construction tech VC out there.

• Speaker #1

  In 2015,

• Speaker #0

  2016, right? Yeah, 2015. You know, there were some corporate venture groups, you know, at the time, but there was no pure play, early stage investor, kind of independent. of the needs for providing strategic return to kind of the mothership. And so while we were kind of, in the first two years, while really testing out the strategy, we continued investing my own capital. And then in late 2017, early 2018, we raised our first fund of pooled capital. There were 11 corporate strategics that backed us. That was just shy of $100 million. By the time that In 2019? In 2017, 2018. Fund one is technically a February 2018 vintage. That was when the first capital was called and kind of really kicked off the show. But at that point in time, I'd already invested in 17 construction tech companies. So already, by an order of magnitude, I had been the most active investor in the category. And we hadn't even raised outside money yet. Fast forward to today, we've got. over $300 million in assets under management.

• Speaker #1

  So that's fund number two is $200 million?

• Speaker #0

  Fund number two was just shy of $130 million. Okay. And so between our three core funds and then a couple of SPVs, we're now over $300 million. Okay. But still early stage is the focus. Our initial entry point is Series C and Series A. We invest globally. you know the 10 new deals we did last year five of those were outside the us four of those were in europe um and the last one the fifth one was outside of the s was it in japan or that was uh latin america latin america yeah okay and is there a silicon value of construction somewhere um you know it's really spread out that i think you see pockets that have deep expertise in certain categories. And that also can evolve really rapidly. You know, that I think, you know, not too far from here. You know, ETH Zurich has been like a real hotbed of innovation when it comes to robotics. Zurich? Yeah. Okay. Yeah. And specifically ETH as a university. You know, and I think that was largely because of heavy investment from the university in building out a construction robotics focus. But, you know, great stuff coming from there. Aachen, Germany. you know, was some of the real early great minds focused on AR and VR, you know, mixed reality. So some of the reality capture technologies, you know, some of the early BIM stuff, you know, Singapore had real, you know, engineering prowess there. But, you know, you look and the Silicon Valley has still been home to a number of great investments, but we've got, you know, and startups that really helped pave the way, but we've got, you know, portfolio company in Chattanooga, Tennessee. The second largest exit we've had in that, you know, the second largest M&A transaction of a construction software startup. They're based in New Orleans.

• Speaker #1

  What was the name of the company?

• Speaker #0

  Levelset.

• Speaker #1

  Levelset. Okay. So out of the four, your first four investments, all four of them has got massive exit, right? You were telling me about Splangrid, Levelset, Feedwire, and then the last one.

• Speaker #0

  Yeah. And then also in there, we had more on the sort of infrastructure of the future, EV charging infrastructure. There was an early investment I made in a company called EverCharge that also had a very nice exit. They got acquired by SK, a South Korean company. And so, yeah, the, you know, we've been very fortunate that I think, you know, most great VCs will tell you there's a lot of luck that's involved. That, you know, we've had our fair share of luck. But, you know, we're trying to influence the outcomes by actually leaning in, creating, you know, a community of innovators and kind of innovation champions. to try to will some of these new technologies into existence and adoption.

• Speaker #1

  Tell me more about Brick and Mortar now. Ten investments last year, what you guys are looking at, why should we send you a message? Who should send a message to you? To Brick and Mortar, who should reach out? Tell me more about what you do now and what you're looking at.

• Speaker #0

  So the, from the core fund, um, you know, our sweet spot, we, we like early stage and that means something different to everybody. You know, typically we're investing anywhere from a million to $6 million as initial investment. That's typically into a seed or series a round. We like to target 10% ownership at a minimum on that initial check. And so as far as like, From a commercialization standpoint, what stage of maturity are those companies? There's no revenue requirements. We've definitely come in pre-revenue. Usually from a product development standpoint, there's typically either working proof of concept or they're pilot ready. We really heavily lean on customer testimonials and feedback as part of our diligence. We like to get to know companies for quite a while before we make an investment. We like to try to help them out. Like, you know, our category is one that, you know, we can't afford to be undisciplined from an investment standpoint. And we regularly tell founders that they can likely find a higher price with somebody else. But, you know, for us and our disciplined approach, like we have to be disciplined from an investment standpoint to be able to produce venture returns off of a concentrated portfolio. And so, you know, we really try to... you know, demonstrate through action that, that we're a value add partner. We'll do that, you know, independent of whether we make an investment or not. And a great way to not get hung up on valuation discussions is to actually kick off the partnership and hopefully bring them some customers or bring them some feedback and help point them in the right direction. So that, yeah, you know, that they, they see us as having integrity when we say like, look, you know, this is, we're going to be partners. So some of this, like, we're definitely, we're buying into the partnership. But we're not paying a premium, but like we're hopefully going to help set you up for success. And as as oftentimes the first institutional investor they have on the cap table, we are the ones that have the greatest exposure for all that follows, you know, because we're not growth investors. Like, you know, if they execute on this journey, they most likely will still need to raise money and it'll be from like a larger or deeper pocketed organization that, you know, is going to be. trying to take their own chunk of flesh or their own ownership. And, you know, we're right there standing next to the founders as far as, you know, the exposure to dilution that comes in. The big difference is, is that nobody's going to offer brick and mortar a founder top up that like, you know, we are, we have to continue to buy, buy in to maintain our equity or grow our equity. And so, you know, that, that having that alignment of interest and say like, we're, we're rooting for great success because you know, we're. we're beholden to trying to make great returns. Like this is while we're backed by corporate strategics, you know, we have fiduciary obligation to maximize everyone's returns on the investment. Like we're in it for the money. Like we also have a, you know, a bit of like a sort of feeling of higher purpose of trying to bring about, you know, radical improvements to productivity, safety, environmental impact, but that's all, you know. is largely strategy too, that, you know, you want to be on the right side of history. I don't think anybody's hoping we're going to be, you know, less productive or more unsafe or dirtier. And so, you know, that's not out of, you know, altruism. It's out of, you know, realizing that there's like a great need and we can help hopefully be part of developing that solution that pulls forward that kind of better future of construction and the built environment. And so, you know, if we are successful in helping bring that into existence, and if we're smart with the investments we make, you know, we're at least increasing the odds of somebody making money off of that value creation. And so then it's up to us to make sure that we're smart with where we're putting our capital.

• Speaker #1

  At least you're very frank. That's totally clear. That's totally clear. Sorry. What you just said, and I'm going to put it in a different way. You're just saying, well, we've been fortunate enough to have partners that are investing in us, and we need to make them a good return. And while you are doing that good return or great return, you want to make sure that the industry as itself is improved. Yes. And now, is there any specific field that you're looking at, you know, really more carefully than others? What do you see? Because where you put your money is basically where you see the future.

• Speaker #0

  Exactly.

• Speaker #1

  So tell me a bit more where you put your money, where you're putting the money and what you see as the future of our construction, our industry. Yeah. And, you know, we talk about construction, construction tech. Maybe give us a bit of a definition, you know.

• Speaker #0

  Yeah.

• Speaker #1

  What? brick and mortar can invest into many different things. Yes. Yeah.

• Speaker #0

  Yeah. And, and the name of game investing usually is diversification. You know, if you're really trying to make returns, you know, that there's, there are some legitimate strategies around concentration and saying, you know, Hey, we're just going to invest in what we know or what's like our core competency. You know, a risk with that is that you've got heavy concentration then on all of the same risks that might challenge someone's like core business. And so. Fortunately for us, even though we're sector focused, it is such a large sector and there's so many different stakeholders, so many different verticals or at least like assets that exist within the broader kind of, you know, depending on what report you see, the 13 to 15 trillion dollar global construction value chain. We've got plenty of diversification that we can kind of pull together as long as we invest in solutions that span the full asset lifecycle. and across all the different sectors. So, you know, we look at everything from enterprise software that's just kind of digitizing paper-based processes through to advanced robotics and manufacturing techniques to tech-enabled contractors, you know, serving everything from single-family residential through to commercial infrastructure, you know, space and beyond. And so it's everything from the... the plan grids, which in the early days was trying to, you know, was, was allowing people to view PDFs on, on tablets, you know, it's kind of table stakes from, uh, uh, you know, today from a technology standpoint, but they're really building a purpose built product and solution for the needs of the construction field. And then all the way through to, you know, um, a portfolio company that won a NASA design competition for 3D printing habitats on Mars using, you know, Mars rock and recycled plastics from, you know, things being sent into space. We didn't invest because of Mars colonization, but that same company using that core technology is 3D printing exterior wall panels for use in, you know, commercial construction projects and kind of architectural installations.

• Speaker #1

  Tell us about your last investment. Yeah. What was it?

• Speaker #0

  Let's see here. I got to like... dust off uh my memory the uh the last investment we did is a uh a company french company actually is it yeah craft um that is and you guys put money on craft yes yeah yeah i forgot about it okay um so it's building the kind of the whatsapp of construction and saying you know their marketing work yes yeah marketing exactly you know we're all there yeah the whatsapp focus exactly um but we really like their approach to the product that they're developing, the, you know, realizing the need to, you know, kind of meet your users and the contractors where they are and on platforms and workflows that they're used to. You know, you can kind of try to force people into adopting a new tool and a workflow, or you can really try to develop something that looks and feels familiar to what they're already using in other aspects of their life. And so I think that they've done a really great job and it's still early in the journey and there's a lot of work to be done but like we've been really impressed with you know how quickly they've been able to build product how quickly they've been able to get traction we invested for you know the business that they were building in europe and saw this as a potential you know just as a european solution to serve the european market but you know they they very quickly have focused on expanding into the u.s and they're making some great early traction there and you know we we try to make it clear with founders that even though headquarters is in the U.S., you know, there's no requirements in our mind that people have to, you know, cross the pond and come to the U.S. market, that many geographies are large enough to... bear birth to unicorns that are just, you know, built in a market for that market. And that geographic expansion, you know, across oceans or even just across borders can be a lot more challenging than, you know, people really kind of give credit for. Just given some of the nuances in, you know, the difference of contract types or, you know, just kind of cultural...

• Speaker #1

  Even regulations.

• Speaker #0

  And regulations are a huge one, you know, incentives. that when you're trying to sell new solutions, you're asking someone to change their behavior, unless it just happens to be a digital version of an analog process that looks and feels just the same. And that if you're asking people to change their behavior, you need to know and tailor your go-to-market strategy so you understand what motivates people, how to change that behavior, how to incentivize the right behavior. Otherwise, you're going to see real issues with adoption or you'll see increased churn just because people maybe don't see enough value to continue paying for a solution.

• Speaker #1

  Is there a brick and mortar recipe that you share with all the investment or the company that you invest in saying, OK, guys, the go to market, we're going to help you in that. And this is what we see and this is what you should do.

• Speaker #0

  Yeah.

• Speaker #1

  Tell us the recipe.

• Speaker #0

  Yeah, the recipe is to try to build a large community of people we think are smarter than us and then just get them all talking to each other. because, you know, it's definitely what's worked. Work for someone else might not work again or for another solution, but there's huge value in being able to hear firsthand both the pain points, the failures, and then also some of the successes that people who have walked this path before you have experienced. And so, you know, we've had the real pleasure and fortune of backing some of the founders that really... demonstrated early success. You know, we tell people that, you know, there's, there's risks that if they tried it again, they might not be successful. So just take this as an anecdote, but you know, in that journey to success, you know, there were a lot of lessons learned and make sure that you're soaking up as much information as you can. Like there's no teacher quite as valuable as experiential learning. You know, the failures can be really painful. So you might be able to. absorb and like learn through osmosis from somebody else's failure. But in kind of hearing some of those battle stories, it could help maybe inform a new strategy, a new technique somebody maybe hasn't thought about. And the landscape right now for construction tech solutions, you're trying to sell into a very different ecosystem than was the case 10 years ago. You know, especially in the US, it is a much more crowded landscape of competitors. of various levels of maturity. And frankly, it's a lot easier to appear significantly more mature than a solution is. And so there's some anxiety, largely based on bad experiences among customers around like, I don't know what's real and what's not. I saw a great demo, but when we actually went to pilot it, it was a totally different product or it didn't stand up. was not as I was not scaled.

• Speaker #1

  Yeah, you know, scale or be like,

• Speaker #0

  you know, the it was not surprisingly, the demo did not have any bugs in it. And then, you know, we bring it into the real world and out of the, you know, the, the vacuum, and suddenly, like, it doesn't work, or it only works in certain cases. And like, you know, we're, we're, you know, a customer likely has a wide range of jobs and contract types that they're trying to navigate. And it's really hard to be asked to pay for. and deploy a solution across an organization if you can't use it in all your different jobs. And so, yeah, it's, you know, we're trying to make sure that, you know, we're facilitating some of that knowledge sharing that, you know, we've got a quite extensive global network of, you know, some really great minds that, you know, continue to pick up the phone when we call. But we've also been really fortunate that some of our own. capital back and some of our LPs are these exited founders that in many ways, you know, are kind of paying it forward. And some of them, maybe we've, you know, sort of urged them into it and, you know, twisted their arm a little bit, but, you know, and they believe that the future, you know, is going to see a lot more value creation there. You know, the same people we would tap as mentors and advisors to the portfolio, but in this case, they're, they're also buying into the brick and mortar vision.

• Speaker #1

  You mentioned that today in the US, the landscape is completely different than 2015. You can totally come.

• Speaker #0

  and, you know, find customers. The landscape is more competitive, but at least people are more ready and accept to try. From your point of view, as you're making investment, you know, around the globe, what's your view on the different, you know, in Europe, for example? What's your view? What do you see here? What's the difference do you see? What are the differences? You know, how do you see this, you know, this region in terms of, you know, the construction sector? And, you know, you're here the whole week. So. Tell us more, you know, let's dig into that. And then after I'll have one last question. Yeah, yeah,

• Speaker #1

  yeah. Well, you know, I think it's, you know, there's a tendency to talk about Europe as a whole. But, you know, every country and even within individual countries, you can find major differences that make it hard for any individual solution to really scale geographically. And so, you know, that's something that we've really come to appreciate that. you know, especially as like a Yankee, you know, it's, it's false to just assume like, oh, if we've got any traction in Europe, that means like we can conquer all of Europe, you know, in a very Napoleonic, you know, approach. No, that's, that's not okay. And there's, there's a way to do it, but it's got, you know, the, the go-to-market strategies and even likely the product has to be tailored for each geo, you know, much the same as it, you know, we think a lot of products and solutions have to pick. pretty tight swim lanes and figure out like what type of projects we're trying to sell on because what works for infrastructure likely isn't going to work or be considered the best in class solution for commercial construction you know the needs of a specialty subcontractor self-perform contractor are pretty different from a general contractor there's a lot that could carry over but really making sure that you understand the market or you're you're tailoring your early go-to-market strategy around a specific user, a specific market, and your whole sales and marketing, and also product strategy are tailored to that kind of purpose. You know, if you execute, you always can earn the ability to expand and diversify, but, you know, we really appreciate the specificity. So, you know, that's one that, you know, it became pretty clear to us pretty early on that, you know, we want to see people that have a... specific geographic focus, that they're showing that early traction, you know, depending on how large that domestic market is, that there's at least some like early strategies around geographic expansion that seem to hold water, but we fully understand the risk of not knowing for sure until we get there. But that's where we're very much underwriting the founders and their ability to iterate, you know, just saying like there's, there is a way to sell into these categories. And like, is this leadership, is this a founder team that we think is going to be able to roll with the punches and evolve their product strategy or their go-to-market strategy based on information they continue to learn every day? You know, in the U.S., I think there's a lot more similarities. It's a lot more homogenous. It's definitely siloed. But, yeah, and you kind of have these. you know, regional operations that even within some of the large construction firms, many grew to that size through acquisition of regional contractors. And, you know, they may or may not be trying to kind of standardize around some best practices or might just not be looking to rock the ship and say like, okay, you've done well, we're going to try to bring about some efficiency. We're not forcing your hand in any way, but like, here's some tools we found work in other ways, but like we bought you because we like what you're doing. So keep doing it. keep up the good work. And if you're, if you're ready, we've got some cool tools and technologies or improved workflows we think might work, but, you know, trying to avoid exhausting, you know, the field, you know, sort of tiring them out. There's some, you know, social capital that people are conscious of, you know, over, overspending and really want to focus on the big wins. And so, you know, back, back to the specific to your question about some of the difference is, you know, I think we've been. We've been really impressed with some of the founders and kind of work ethic or style in Europe that there's, I think, work ethic is strong. Valuations are definitely a lot more grounded, in our opinion, that I think we in the U.S., and particularly in Silicon Valley. you know we've been home to some of these you know massive successes but As a result, you sometimes get some pretty interesting personalities and egos or entitlement sometimes. And sometimes there's too much of a fixation around how much money is being raised and at what valuation instead of are we raising the right amount and are we getting the right partners? And like I said earlier, you know, we can't afford to be sloppy from a valuation standpoint. And there's sometimes solutions we think are great, but are just. too rich for our blood. And so we wish them well, and we try to introduce them to, to potential partners or customers, you know, and, and also investors, um, that would benefit from that relationship. Um, and I think that that's where, you know, in a goodwill and, and kind of like trust and reputation building way, um, that's, you know, again, self-serving, you know, that, that people feel like they can trust you if you're recommending stuff to benefit from, and we have no direct benefit, you know, other than goodwill.

• Speaker #0

  That's what we do in the construction sector. Yeah,

• Speaker #1

  exactly.

• Speaker #0

  A question a bit on the side of the same question. You talk to all the big corporates here. You were at Vancy yesterday. I know you discussed with other big French corporates. I'm sure you discussed as well with people at Nemetschek in Germany. And what do you see in terms of what are their needs? What do you see in terms of tech? And where do you invest yourself? You know, where do you see the next waves of investment? Yeah.

• Speaker #1

  Oh, man, that's all over the place. So, you know, for the sort of three largest construction firms here are so diversified in the, like, type and size and complexity of projects, you know, ranging everything from, you know, major infrastructure down to, you know, a new stop sign. you know, in like, you know, a rural area. And so, you know, you're, it's a conglomerate almost. And, you know, so I think trying to find any solution that is applicable across like the entire organization that kind of like operating for operating system for construction, I don't know, you know, how realistic that is, you know, for certain more like administrative tasks, maybe, you know, time cards, like.

• Speaker #0

  Time counters, of course. Yeah, yeah.

• Speaker #1

  But, you know, just given the difference in the complexity of the projects, the number of stakeholders involved, like you might see that organizations of the scale of Vinci, Buick, Afash, you know, that they've got a number of different toolkits that vary depending on like how complex or big of a project that they're working on. And I think that their innovation teams can take... you know, a pretty active role in curating what's available in inventory to put into a toolkit and also helping lead the charge of developing some homegrown solutions. You know, even today over at ScaleOne, you know, we saw a couple examples of, of, you know, seemingly simple, but like great new product offerings that, that. The, the Buick teams were able to develop internally and these were not, you know, crazy technology driven solutions allow you to see through walls or do time travel or stuff like that. It was, uh, you know, 3d printed rebar caps, you know, it was modular stair systems. Like it's, it's like good product design that there's like an easy win and it helps solve some of these pain points. Um, you know, those are solutions that they don't cost much that. you know, they improve safety or productivity, or just the, you know, some of the logistical burdens of, you know, moving materials or making a site safe. Those are, those are kind of things that, you know, most VCs are not going to get real excited about funding a solution. So a startup likely is not going to focus on some of that, that like low hanging fruit or easy wins where there's, you know, thoughtful product design or that design thinking that could really help. make a job site more efficient through small wins.

• Speaker #0

  We were talking about WakeCap. Exactly. I was talking with them yesterday. And that's exactly what, I mean, they started like this very simple product that they put on Helmet and that's it. And it really just improves safety. Yep.

• Speaker #1

  Yeah. And that it's, you know, those point solutions, you know, I think that they're, we really like that specificity and the more specific you can get, the better, because hopefully it's an... easier task of demonstrating the value and getting to a quick yes or no. That like you're speeding up that sales cycle that you can demonstrate the ROI. And then the question, you know, something that that we as VCs have to think about and also a founder before they embark on that journey needs to think about is how big of an opportunity is that point solution addressing? Or is this, you know, the wedge that allows us to get in and offer like a whole variety of, you know, next generation PPE or wearables? Or are we just building? a product instead of a company. And there's nothing wrong with building a product, but it's likely not going to be a venture-backable model if that's, you know, a one-trick pony and it's too niche. But that could be a great outcome for a founder depending on how they capitalize the business and how much they can, like...

• Speaker #0

  That could be a lifestyle business. That could be their bitch head, you know? And then they will build on that.

• Speaker #1

  Yeah, well, and lifestyle business, a point solution, even something... you know, super nuanced, you could still potentially sell for $50 million. And if you own 40% of the company as the founder, that's a great lifestyle. Yeah, it's not a lifestyle business. That is a business. But if you're getting VCs in the mix that are managing hundreds of millions of dollars, like nobody is celebrating a $50 million exit, you know, enterprise value, because most VCs that are really trying to pursue venture returns are trying to figure out how to take. a dedicated fund, and let's arbitrarily say $100 million, and they're trying to turn that into $300 million or $400 million. You got to invest in a lot of businesses early that turn into $50 million exits to figure out how to 3x or 4x a $100 million fund. And it's statistically improbable, if not impossible. And so you're really hoping, every VC hopes that they make an investment that returns the fun. You know, you can make a lot of bonehead mistakes if you catch one of those. But, you know, most VCs are trying to look at opportunities where they think in a decent outcome, they're 10x-ing their money, you know, maybe 20x their money.

• Speaker #0

  So you're saying, the underlying suggestion that you're making is that in the construction sector, having like three funds of $300 million roughly, you need... to make like at least 10 or 20x that amount of money. So you're saying basically that you are able, you see the potential of this market in terms of exit around this, you know, 6 billion, right? Or like 5 to 6 billion. So my next question is like, where do you invest, you know, that 300 million to get that 20x? Because that's what you're looking for, right? Yeah,

• Speaker #1

  yeah, yeah. That, you know, Compared to other industries, the AEC sector, kind of construction tech sector.

• Speaker #0

  Maybe you could just say what AEC is.

• Speaker #1

  Yeah, AEC, Architecture, Engineering, and Construction, or AEC. Yeah, some of the acronyms that we use regularly. O&M is Operations and Maintenance. You hear some people talk about the AECo or AECom sector. AECom is also a company's name. So... Most people don't say it anymore, but AE Co would be architecture, engineering, construction and operations. I say construction tech and most people say construction tech kind of as like that catch all just because it's it's punchy. It's short. It seems and feels cool. It was not a term when we launched, but now it's it's really kind of gotten legs. But, you know, we when when we talk about the opportunities we invest in, you know, we're looking at solutions that help improve the way that the world designs. builds, operates, and maintains the built environment, you know, and ideally with kind of like a real closed loop or full asset life cycle kind of view. And that, you know, even in demolition, you know, as you're tearing something down and making way for whatever comes next, that should be a closed loop and kind of cradle to cradle so that before you demolish stuff or like, you know, as you're going through the planning. I'm pre-construction for your next project. You still have retained all of that rich information that was used during construction or the prior version of, you know, planning and development. That might be an overly rosy view, but it's, it's at least a worthy challenge for us to try to pursue. And so, you know, what are, what are going to be those, those companies? There's, there's plenty of opportunity for individual companies to build platforms that are worth. $10 billion plus, the decacorn. I think the early focus for most investors has been on project management. you know, kind of thinking, you know, I got to go upstream, you know, that the, this is the, the most influential out there is the project managers, the mega GCs, you know, maybe something for the owners. And we can kind of force a top down sale. Yes, it possibly, but, you know, we, we think kind of field first is a better approach and that the building the tools for like the subcontractors and self-performed contractors. There's an opportunity to really build that multi-billion dollar, $10 billion plus company, just given, you know, the value of the work, the, you know, the ability for, you know, from an efficiency standpoint, it's not just how do you, you know, do a job faster, but how do you allow a contractor to do more work, like grow their bottom line without having to grow their organization? You know, I think most people would be really excited about doing that, but like growth is limited. by being able to recruit more people and manage more work. And so that efficiency allows people to pursue and deliver more work, ideally in an efficient way, without having the whole magic break on them. And that would be to everyone's benefit, because right now there's more work than can be delivered, not to mention schedule slippage and cost overruns. Those cost overruns, everything's moving in the wrong direction, that things are just getting more expensive. And so we need to be able to figure out how to be more efficient, build with less waste, develop better materials, increase the usable life of the assets, because we need to figure out a way to kind of stop the bleeding first. And then ideally reverse course and make construction, the infrastructure and build structures more affordable. And so that's, that is a very ambitious goal based on how, you know, labor shortages are just getting worse. You know, construction materials are just getting more expensive. You know, regulation is increasing the complexity just from a reporting standpoint that, you know, you look in and things like the Empire State Building, you know, were constructed in a year, but that, you know, there wasn't a, like a compliance department. you know, there wasn't...

• Speaker #0

  None of our reports. Yeah, yeah,

• Speaker #1

  yeah. That like you just, your job was to build something and you figured out how to build it and you did it. And, you know, that the industry is safer as a result of a lot of that. But just from compliance and contract review and, you know, litigation and risk management, you know, that the requirements to be a contractor today have very much changed and there's entire departments that didn't exist before. And so, you know, I think as we, you know, hopefully are more efficient on the project. delivery side like you'll see the increased needs for investing in other you know resources or departments or teams that didn't exist before just similar to how vdc wasn't vdc yeah uh virtual design and construction you know mostly you know what a lot of people that are focused on bim modeling you know the next generation of cad you know that was the digital twins exactly exactly that you know the that is something that for those that want to maintain that in-house It's a whole new... team in many cases. And then with the kind of real ubiquity of AI solutions, you know, you're starting to see some contractors really build out their own internal, you know, sort of AI capabilities and start, you know, while they might be able to streamline some of those other operations, you're seeing people hire, you know, dozens, if not hundreds of AI experts so that they can start developing their own in-house tools.

• Speaker #0

  you know that that question of build versus buy do you have example like can you can you share can you share with us an example of a company that you see investing into ai or you know yeah in the construction sector yeah yeah that i mean most of like the the in our sort

• Speaker #1

  of top 20 have got um you know have made their first ai kind of like expert ai policy hires um some have started to really hire their own like internal software developers that are really focused on the AI tools. It's the very early stages, but, you know, even looking at, you know, LinkedIn, you can see the either the new job posts or you can see the new job positions and sort of titles that have popped up. And so, you know, it's definitely early people are making those moves right now. Some of it is more like expeditionary and just trying to figure it out. But, you know, this is you know, some of the startups that are building really custom tailored AI tools, because they're easy to build, they're going to start running up against homegrown solutions or somebody's like, well, right now. Thanks to, you know, AI code generation, you know, the developing of basic software is not as challenging anymore. Like that, it used to be a bad idea to try to have an in-house software developer. No,

• Speaker #0

  no,

• Speaker #1

  it's much more. You have to like continue to maintain it. But now, you know, if it's just being able to structure unstructured data, you know, if that's the real value prop, you know, there's a lot of different ways we can skin that cat. I don't know how much I'm going to pay for that. And so, you know, developing those internal capabilities, that question of build versus buy and what would be an appropriate amount for a startup to charge, you might, yeah, I think you'll see a bit of a race to the bottom on that price. And so that'll put some real margin pressure on startups that are trying to commercialize and might really be benefiting currently from, you know, kind of panic buying almost or tech tourism that there's you know, we are seeing a number of like large contractors that kind of have like an AI budget for experimentation right now to go and test out what's there, pick whatever they're going to be spending on. But, you know, that they're not going to be spending at that same level unless there's like a real, you know, material ROI. And so, you know, what's what we kind of chalk up to pilot revenue. I think there's some false assumptions around how much of that is going to convert into of real revenue and repeat. commercial business that's hopefully scaling instead of, you know, being like, you know, cloud storage, you know, that the, you know, being able to say this is just going to keep going, keep going versus like, you know, it's, it's a race to the bottom. It should be nearly free. Yeah. There'll be some question about that.

• Speaker #0

  Okay. So your approach is very pragmatic saying, no, let's, let's go to the bottom of the needs and then let's, you know, let's start by that. And then, you know... What is interesting is that you always see the impact in terms of how you can either change the behavior or increase the productivity. That's how you see, right? Yeah. That's what I understand when you're sharing what you're looking at right now.

• Speaker #1

  Yeah, because that needs-based approach, in many ways, translates to, is there an ROI? Because if there's not a need, this is not an industry that's going to spend any money. on a nice to have instead of a need to have.

• Speaker #0

  And this industry is not spending money on a nice to have just for the pleasure.

• Speaker #1

  No.

• Speaker #0

  I'm just going to ask you one last question and maybe a last, you know, a kind of message you want to send out to our audience. You know, our audience is mainly French. It's mainly right now, but, you know, you never know after this episode, maybe it will be wider. You know, any last message, you know, that you want to share as, you know, as... Darren Bechtel, you know, with all this experience and all this background, you know.

• Speaker #1

  Yeah.

• Speaker #0

  The floor is yours.

• Speaker #1

  Yeah. Yeah, yeah. I mean, I'd say, you know, I can never get away from my undergrad training, you know, as a product designer that, you know, beat into us was this idea of like user focused design that it's, you know, needs based design that, you know, founders are trying to develop solutions. You need to be obsessed with your customers. Spend as much time out in the field or in the, you know, the value chain as possible, really trying to get to know the people that are going to be using your product. Double check your intuition by talking to customers, like get out on job sites, get out into showrooms or get into distribution centers or, you know, whatever. But like, don't fall prey to making too many assumptions around like what's going on or what people need that, you know, you really want to get out there because like. It's an industry that can articulate its pain points. And there is a good process for making sure that people are talking about pain points instead of prescribing solutions. Because the Henry Ford quote of saying people are going to ask for a faster horse is definitely true that experts in construction likely are not experts in what's possible to build today from a technology standpoint. um but if you give them enough time and you know the the space they can tell you what's really annoying them or what's like a real priority. And taking that information and then trying to translate that into, you know, opportunities to develop solutions is a winning recipe. It's been proven time and time again. It's how we view investment opportunities and why we have our capital backings coming from corporate strategics that are looking. you know, ideally for financial returns, but they're looking for strategic value. Like we're helping them articulate their pain points, find solutions or recommend solutions that they'll benefit from. But all along that way of helping them out, you know, that continues to refine our judgment around like, what does the industry really need and what makes for a good investment opportunity? And those are related, but sometimes independent. Like what does the industry need? What's a good venture capital investment opportunity? Might not always be the same thing. And so they're kind of complimentary platforms or, or, you know, roles and responsibilities of our, but still the same thing, the advice to founders of get out, meet with, you know, customers and, and try to have them confide in you, like what's keeping them awake at night. That's the same advice to my team. That's, you know, same advice I keep reminding myself is that like, we got to get out there, get on the job sites, get out to some of the conferences, you know, go and meet with people that are really at the front lines. because even though the majority of my team... comes from construction and has the job site experience every day that we're a VC is another day since we've actually worked on a job site. And so we don't want to have stale information. And so, you know, we're, we're probably some of the few VCs out there that have our own like PPE and it's hanging in the office, but you know, that I, I eat the own, I eat my own dog food. Um, and I think that everyone really benefits from that.

• Speaker #0

  Okay. Thank you very much, Darren. So The message is clear, you know, get out, go on the job site. If you're listening, you know, keep doing that. Go outside and talk to people. Thank you very much, Darren. I hope you enjoyed it as much as I did.

• Speaker #1

  Time flies. Yeah.

• Speaker #0

  Thank you very much for our listeners to go up to this point in our podcast, this episode. Thank you very much if you're still listening. It's been a great pleasure to host this episode and to host this series with... built worlds and thank you very much to beat worlds thank you very much to contact france and i hope to see you soon again bye bye darren cheers thank you If you liked it, don't forget to rate it and comment on Apple Podcasts or Spotify and talk about it around you. This is what helps me to make it known and motivate new guests to share their vision. And to continue this conversation, find me on LinkedIn.