Learning Lessons in Contech and Proptech

There’s an intrinsic tension between technology companies and the world. Tech wants to push forward through innovation and business opportunity and the world often interrupts to point out that sometimes solutions can incorporate significant problems. Navigating the spaces offers challenges, according to Christopher Yip, a partner at RET Ventures, a VC firm actively investing in technology in the commercial real estate space.

An example in 2021 was the bankruptcy of construction tech startup Katerra. At the time, Marc Liebman, Katerra’s chief transformation officer said in a filing, “In pursuit of a fully integrated business model, Katerra has acquired more than twenty companies that are leaders in their sector of the construction industry, including in general contractor business specializing in commercial, residential, and multi-family projects.” And that was a definite problem.

“We spent a lot of time thinking about that,” Yip, who says that he’s not an expert in the formerly high-flying Katerra, tells GlobeSt.com. “We have investments in the space. Everybody knows [bringing technology to construction] needs to happen. There needs to be productivity improvements on site and deeper integration of technology. I think Katerra was a lack of success in execution and scope. Having a startup as your general contractor as your full-source supply chain adds a lot of risk to what is already a risky activity.”

A potential issue in other words is the assumption that a relatively inexperienced startup can, through simple desire, own an entire integrated market without getting help from others.

“They were very ambitious in the scope of what they were taking on,” Yip says. “At one point, they were trying to insource drywall distribution, energy management.” Such an approach would be difficult at best for an experienced corporation. It speaks to the historical tension of businesses as they ride the pendulum between greater focus and a more expansive approach through conglomeration.

Even with the resources of a Fortune 100, managing a conglomerate is a difficult task. Executives become distracted, resources may be unevenly spread, and internal politics and poor overall optimization may result in entire sections being neglected or even mismanaged.

“Let’s do what we do best in technology but partner with the industry,” says Yip, who thinks that a better approach for construction tech companies is to find and work with like-minded partners. “Let them do what they do best.”