Suffolk’s Technologies, a leading corporate innovation arm in the AEC startup ecosystem, officially announced the closing of its inaugural $110M venture capital fund on July 11th. Unlike the traditional corporate venture capital (CVC) strategy of investing strategically for a single investor or LP (aka the parent company), Suffolk Technologies has opted to take on outside capital to expand its reach and maximize the scalability of future resources as the built world’s startup ecosystem approaches a digital inflection point (25%+ industry adoption).
Suffolk Technologies’ co-founders Wan Li Zhu and Jit Kee Chin had been investing off Suffolk’s balance sheet since 2019, providing financial and strategic support to more than 30 different startups in the built environment either directly or through its Boost Accelerator program – a 6-week program that offers early-stage founders a network of industry guiding leaders, direct access to jobsites, and a $100,000 SAFE.
This new $110M fund will have autonomy from its parent corporation, Suffolk Construction, but will now have to answer to a group of new LPs, which could create a host of novel challenges if expectations aren’t managed in this tenuous market.
The launch of Suffolk Technologies Fund I and its diverse LP base has officially lifted this CVC to pure-play VC status. The fund continues to leverage the strategic pull that the Suffolk brand, an innovative leader in US construction, brings to the table (not to negate the real strategic value that this partnership provides built world founders).
CVC Turned VC
The rollout of a traditional VC from a single LP CVC arm is a rarity but it is not the first time this has occurred. Swisscom Ventures began as a CVC when this leading Swiss telecom and ICT provider originally launched its innovation-supporting investment vehicle in 2007. Swisscom Ventures’ initial early-stage investments came from the corporate parent until its Digital Transformation Fund opened up its coffers to external investors in 2018 after having proven more than a decade of quantifiable strategic value creation – this VC rollout fund was received with oversubscribed interest.
Swisscom Ventures, a rare VC spin-out from its CVC roots, now manages more than $650M with just 25% of the capital raised in its most recent funds, as it continues to prove its ability to deliver reliable returns.
Here is what Dominique Mégret, who started Swisscom Ventures in 2007 had to say about taking on external funding in 2018:
“When we first started 10 years ago, it was all about strategic value creation, but with time, financial performance becomes more tangible. That is when you need to deliver financial value to remain credible. It then becomes a balancing act between the financial and strategic dimensions, between more or less mature businesses, and between core business areas like telecoms and IT and longer-term adjacent ones.”
Suffolk Technologies is rolling out from its parent company as a pure-play construction VC only 4 years after its initial CVC launch. This $110M inaugural 'Fund I' saw investments from both strategic and financially motivated players (including Moog & Holcim along with traditional institutional investors), unlike Swisscom Ventures whose investments originated primarily from institutional investors targeting financial gain.
Why Take On External Investors As A CVC
With $5B in annual revenue, you may be wondering why Suffolk Construction would even bother raising outside capital to support Suffolk Technologies for a mere $110M VC fund (just 2% of what the parent brings in annually, barely a drop in the bucket).
Suffolk Technologies' new VC fund is more than just an outsourced R&D department like so many other CVCs in this space but a doorway between the nascent world of construction innovation and the capital-juiced players in high finance which will be necessary for this industry to experience true digital maturation. The success of 'Fund I' will (hopefully) lead to the exposure of the high-growth opportunities this sector has to offer investors, which should lead to much larger funds down the road (for Suffolk Technologies and others in the space).
Corporate venture capital in the construction tech ecosystem is still in its adolescence, but with new CVCs and Accelerator programs popping up in this sector monthly (if not more often), this innovative ecosystem is developing quickly.
This is what Suffolk Construction's CEO, John Fisher, had to say about the opportunity that Suffolk Technologies' new fund had to offer external investors:
“The time is ripe for disruption and Suffolk is committed to playing a leadership role in our industry’s transformation.”
Below is a look at the funds launched in the built startup ecosystem since the beginning of 2022 totaling more than $5.4B in deployable capital following Suffolk Technologies Fund I announcement.