Report shows built environment venture activity strong though normalizing
By BuiltWorlds
BuiltWorlds recently released 2024 Venture & Investments Report showed a year-over-year increase in venture capital (VC) deals in the built environment, despite a decrease in inflows. This activity is indicative of movement in the space across both technology categories and the globe.
“The built environment venture capital markets rebounded after two consecutive quarters of repressed activity,” the report reads. “This unique phenomenon was driven by a normalization in the average venture capital round.”
The average VC round in 2023 was $34.5 million, compared to $25.2 million in 2024.
In the report, BuiltWorlds Venture & Investments Analyst Cameron Mabley explains this discrepancy, writing, “The decline in capital inflows from 2023 to 2024 can be attributed to $4.6 billion of capital invested in five deals in Q3 2023, and $1.2 billion in Q4 2023.”
BuiltWorlds Senior Director of Research Tyler Sewall goes on to explain that the "normalization" of VC round sizes in 2024 may also be the result of the waning influence of macroeconomic factors.
“It is possible that for the first time since 2019, investment decisions were not significantly driven in some way by macroeconomic impacts,” he says. “2020-2022 investment activity was influenced heavily by a remote workforce and digital community, and following that the domestic public infrastructure funding colored VC activity.”
In 2024, Sewall explains, rather than a reaction to macroeconomics, investment activities were “driven by private-sector technological advancements and a ‘return to quality’ investor mentality.”
Built Environment Venture Activity Up Around the World
Venture activity remained strong around the world in 2024, with several areas seeing major jumps in VC funding year over year, including significant jumps in central Europe, the Nordic region, Australia, India, and Singapore, among others.
The DACH region in particular (ie, Germany, Switzerland, and Austria) saw an impressive 109.8% year-over-year increase in funding, building on momentum gained in 2023, when the region saw a 97.1% year-over-year increase in funding. The report’s author attributes the growth to building interest in specific construction subsects.
“The region is becoming a hotbed for climate tech and modular construction startups,” the report reads, “aimed at providing a sustainable solution to address the housing crisis.”
One country that saw a significant drop—though, VC funding in the area remained high relative to the rest of the world—was the UK, where activity fell 86% year over year as the result of local investors facing multiple, significant headwinds.
“Similar to the US, UK markets have faced economic pressures by way of rising interest rates and economic uncertainties, agitated by geopolitical tensions in neighboring countries,” says Sewall, who adds that regulatory changes have also posed challenges. “Over the last year, new compliance requirements have increased administrative costs for investors, negatively impacting particularly smaller investment groups.”
Similarly, increases in capital gains taxes have further restricted liquidity opportunities for successful founders.
Building Tech and Infrastructure Tech Driving VC Funding as Construction Tech Gains Steam
After VC inflows in infrastructure and building tech dropped from dramatic spikes in Q3 2023, BuiltWorlds recorded rebounds in those categories in the latter half of 2024. The two sectors continue to account for the majority VC inflows going to built environment technology, despite construction tech being the only category to record positive year-over-year inflow growth.
In infrastructure tech, despite a dip in inflows from $11.9 billion in 2023 to $7.9 billion in 2024, much like VC activity overall, the space saw a slight growth in the VC funding round volume, from 215 to 217. The report links the increased deal count to infrastructure-focused legislation in the U.S.
“Capital has flooded into the infrastructure tech space on the heels of the Bipartisan Infrastructure Law (BIL) and the Inflation Reduction Act (IRA) in the U.S.,” Mabley writes. “Grid-scale energy transition startups have attracted the most infrastructure tech capital. Tech-enabled utilities startups have also experienced strong traction, specifically in the broadband and telecom space.”
While U.S. President Donald Trump has reportedly issued a broad memo promising to pause funding to certain portions of BIL and IRA, prompting Congress members to speak out again the freeze, Sewall says that it’s too early to tell what the true impact of the president’s actions will be.
“It’s too early to tell what, if any, impact the new administration’s activities will have on infrastructure investment,” says Sewall, noting that the public markets have not shown signs of waning investor confidence. “A larger factor that is always at play is interest rates, which remain high as inflation numbers remain elevated. This will ultimately play a key role into 2025 and beyond.”
On the building tech side, inflows fell 15.6% year over year, from $5.6 billion in 2023 to $4.8 billion in 2024, while the number of funding rounds jumped from 196 to 247.
“Building tech venture activity has accelerated over the past year,” the report reads, “as architects and engineers look to capitalize on operation efficiencies offered by generative AI solutions, asset owners seek to optimize space utilization amid low levels of commercial real estate occupancy, and materials suppliers invest in procurement improvements and aid the development of sustainable and high-performance building products and materials.”
The increase in funding rounds, Mabley explains in the report, has specifically been fueled by rising interest in panelized prefabrication and volumetric modular construction as well as building energy alternatives and tech-enabled HVAC systems.
Learn more about these findings at BuiltWorlds upcoming Venture West event in San Francisco, taking place April 8-10.
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