The smart building industry is fast becoming a world of unicorns and fairy tales as record levels of funding pour into the industry. A maturing consumer market and significant M&A activity are fueling confidence in the investment community. Given this backing, a multitude of startups are pursuing ambitious strategies to emulate the growing number of success stories in the wider technology space.
“2018 has proved to be a record year for investment in the global smart buildings sector, with over $2.4 billion invested in startups, showing increased confidence by investors in the sector and indicating the positive response companies are receiving for their products and services in the market,” states our latest report StartUps and their Impact on Smart Buildings 2019.
As we settle into 2019 this trend is expected to continue, possibly even eclipse last years impressive figures. It is all part of long-term capital trends for the sector as a whole, which has seen total capital investment increase more than 6 times since 2012, taking the total to $6.8 billion for the period.
It’s not just funding that has grown but the number of startups in the smart buildings sector too. Memoori has identified 482 startups - private companies founded between 2009 and 2018 - in the smart buildings sector. Furthermore, we have identified 109 startups that have been acquired and 13 firms that filed for an IPO since 2009, amounting to over 600 active new entrants in the smart commercial buildings sector alone, according to the detailed report.
The number of funding rounds has risen to 184 in 2018, more than 3 times the figure for 2012. North American startups accounted for more than half the total number of funding rounds in 2018, reflecting the comparative ease with which startups in the United States and Canada can gain funding. European companies, meanwhile, accounted for about a third of funding rounds in 2018, while Asian, Australasian and Middle Eastern firms added up to just over 10%.
The report also found that a noticeable proportion of startups who were originally founded in Europe, Middle East or Asia moved their headquarters location to the USA, “presumably to access the American market for their solutions and/or to access funding from US bases financiers.” This further reinforces North America’s position as the most welcoming and supportive region for startups, in the smart building sector and for many other industries.
The wider technology sector is built on the same core technologies as smart buildings - AI, cloud computing, big data analytics, and so on - and it has also seen increased funding in recent years. In cyber security, Cylance became a unicorn - a startup with a valuation of over $1 billion - with its machine learning based security offering. While in the construction sector, California-based Katerra raised $1.1 billion in funding, with its disruptive techniques for offsite and prefabricated construction.
In June 2017, the first smart building unicorn was born when California-based smart window start-up, View, announced a $1.1 billion investment from the SoftBank Vision Fund. In addition to the $900 million funding they had already raised, the SoftBank investment increased their total funding to $2 billion on a window offering that supports building occupant wellness. View has already installed its ‘Dynamic Glass’ in 50+ million square feet of buildings and continues to grow. The massive Softbank investment will help further expand production and deployment capabilities and accelerate product innovations.
Such is the increase of investment, that even when subtracting the View-SoftBank deal, 2018 still attracted total funding of over $1.3 billion in the commercial and industrial building’s space, a record level of investment to date. The opportunities are ripe for more smart building startups to emulate View and reach the ranks of Unicorn. In this fairy tale startup climate, ambitious young firms will battle for big funding through innovation and creativity that will drive the entire sector and the evolution of buildings themselves.