Why We Invested in Intelligent City

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One of the hottest construction market segments myriad names — “pre-fabrication,” “off-site manufacturing,” or “manufactured construction”. Whatever one calls it, the modular construction space is an exciting investment opportunity to enable sustainable, low carbon construction in a vastly more efficient manner as compared to traditional onsite construction methods.

The modular market segment relies on the productization of pre-fabricated construction elements which can be transferred with relative ease to a particular site and assembled on-the-spot. Components can come in everything from two-dimensional horizontal and vertical panels, to volumetric, three-dimensional enclosures with roughed-in connections to building systems (i.e. plumbing, electrical, HVAC, etc). For years, startups in the category were very early stage and highly capital intensive. But all that’s been changing lately and affecting the way we look at this space.

Key factors that now make this investment segment attractive:

  1. Construction is one of the largest drivers of economic activity in markets around the world, yet it is the only major industry vertical that has actually lost productivity over the last 50 years.

  2. Addresses labor shortages and inflation — current and forecasted: Modular construction will be pivotal in the delivery of housing in the future as skilled laborers retire and construction costs continue to increase.

  3. Addresses evolving regulatory landscape: Green building regulations are rapidly increasing. The real estate industry is a leading contributor to carbon pollution, and, depending on the format and materials used, modular construction has the potential to lower greenhouse gas emissions and costs.

  4. Enables broader and faster technology adoption: Greater adoption and acceptance of artificial intelligence, machine learning, robotics and digitized manufacturing are boosting the performance and execution of modular construction.

  5. More VCs are entering the modular construction space and backing early-stage companies.

Our Approach

Modular construction companies vary widely based on how much they use sustainable materials; whether they develop proprietary design and fabrication software; what geography they focus on; and the firms’ product approach to the segment (e.g. panelized vs. 3D volumetric/system vs. components/vertically integrated vs. fully distributed options). As a result, we decided that we will make several, initially smaller early-stage investments in companies that address this market segment differently, while focusing on different geographies. What we call a basket approach. As the market grows, our investments and knowledge of the space evolves, and we will consider making bigger follow-on investments.

One firm that has stood out for its PropTech industry disruption is Vancouver-based Intelligent City. Its uniqueness and ability to radically expedite construction and dramatically reduce carbon emissions, are reflected in a number of the firm’s value propositions:

  • Combining zero carbon buildings with proprietary technological advancements into a consistent product, platform and process

  • Comparable construction costs relative to concrete and steel structures, while reducing operating expenses over the life of the building

  • Vertical integration — from proprietary design and fabrication software to on-site construction assembly, Intelligent City covers the complete design-to-build value chain on an integrated basis

  • Software — an end-to-end parametric design software that speeds the design modification process, enabling a high level of fabrication automation, robotics and AI and has the potential to enable longer term licensing with partners in other markets

  • Emissions reductions — Intelligent City’s results show the platform can achieve a 93% reduction in annual greenhouse gas emissions compared with existing concrete-based buildings. The most direct and immediate benefits of modular construction come from avoiding emissions. That’s because concrete and steel are replaced with mass timber, a renewable material that sequesters atmospheric carbon.

  • Stellar leadership. As with all start-ups and early stage companies, leadership is key. Intelligent City’s CEO and leadership team have multiple years of relevant experience (design, engineering, business, software, advanced wood construction). Intelligent City’s Co-Founder and CEO, Oliver Lang, is an award-winning entrepreneur, developer and architect with over 25 years of experience.

Addressable Market

Intelligent City’s integrated building solution, “Platform for Life” (P4L), is combining architectural, advanced design engineering and cutting-edge Industry 4.0 robotics and automation technology. The firm manufactures mass timber for four- to 18-story buildings that provide owners and tenants great livability, abundant daylight, natural cross ventilation, flexibility and low operating costs. The company strives to automate the design-to-build process, providing a one-stop shop for customers, while reducing the time and costs for building projects.

Intelligent City is focused on mid-rise residential buildings, where urban planning mandates coincide with adopted mass timber high-rise building codes. Mass timber construction is expected to grow 13% annually until 2025. Though the sector still represents only a small portion of new construction, mass timber is expected to account for $1.4 billion (USD) of the global construction industry, representing 0.5% of all new urban buildings by 2050. Meanwhile, the global modular and prefabricated construction market is expected to grow to $173.44 billion in 2027 from $101.7 billion in 2020, including a 6.9% compound annual growth rate from 2021 to 2028, the research firm Fior Markets estimates.

Adding Value as an Investor

What drives us to make investments is our ability to contribute our domain expertise and valuable introductions to real estate groups — we have a unique LP engagement model that includes real estate owners and developers. We leverage these relationships to assess the technology’s relevance and value proposition, and after we invest, we help our portfolio companies to scale by introducing them to our network of investors.

But perhaps the most exciting opportunity for us to add value to Intelligent City will come from introductions of other Greensoil portfolio companies such as Oxygen8 (energy-efficient ventilation technologies), Miru (smart electrochromic windows) and Electriq Power (smart-home battery systems).

We are excited to welcome Intelligent City to our growing family and look forward to accelerating a transition to mass-timber modular constructed buildings.

Jamie James is a Managing Partner and Dana Goldman Szekely is a Senior Principal at Toronto-based Greensoil PropTech Ventures, a $100 million target proptech venture capital fund that recently anchored with a syndicate of investors a $22 million (CAD) Series A fundraising round for Intelligent City, bringing the total capital invested in the company to $30 million (CAD).

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