With the close of its inaugural fund, announced Tuesday, Zacua Ventures said it will continue to focus on investing in early stage technology for the construction industry and built environment.
The driving thesis for the $56 million fund centers on the global need for technology that improves the construction industry’s productivity, sustainability and approach to urbanization. This includes a broad range of startups addressing all aspects of construction (e.g. planning and design, commercial, residential, AI, robotics), and an increasing focus on infrastructure (e.g. maintenance, smart cities, ‘intelligent’ buildings, data centers).
It’s a broad purview and competitive space – with other pure-play built world VCs and a host of CVCs/strategic investors driving investment – but Vivin Hegde, North America co-founder and partner at Zacua, said that its global outlook is a distinct competitive advantage. The team operates in Europe and Asia, as well as North America.
“First, it helps us identify best-in-breed – we’re not limited by region,” he noted. “Also markets grow in patterns, so what is happening in one market is likely to happen in another, though slightly differently,” and knowledge of multiple markets and their players is valuable when scaling globally.
Hegde has identified decarbonization and infrastructure as the fund’s long-term focuses. Not surprising as US public infrastructure spending is finding its way into startups and creating opportunities that investors like Zacua are eyeing.
“The construction/building sector is a massive culprit when it comes to greenhouse gas emissions, producing 40% of total emissions worldwide,” said Mauricio Tessi Weiss, EU and LatAm co-founder and partner at Zacua, in a press release. “A major portion of our efforts will focus on technologies that address decarbonization priorities, but we will also be focused heavily on backing companies that solve pressing issues like supply chain disruption, the affordable housing crisis, and improving the safety and efficiency of the built environment.”
Zacua invests at the pre-seed and seed stages with preferred check sizes between $1-2.5 million, Hegde shared. Follow-on investments are instrumental in Zacua’s overall strategy, already having participated in, and even led, follow-on rounds.
As for exit opportunities, in the current built world venture space they’re disparate, with the IPO market all but closed and depressed PE activity. That leaves M&A left as the preferred exit lever, and a challenging macroeconomic environment has resulted in light deal flow and few exit ramps.
Hedge cites the developing M&A market as beneficial to the exit strategy. The last five years have seen an uptick in built world M&A compared to the previous five years, especially outside the US. An increasing number of established industry players are participating in M&A activity; not just Procore and Autodesk, but companies like Hilti, Ambassador Supply (Rival Holdings), Saint-Gobain, Holcim, and others are now driving M&A opening up new exit opportunities for built world startups.
Now is the time to invest according to Hegde.
“In five years the exit space could be more conducive,” he said, as we’ve seen steadily improving exit opportunities over the last few years.
Along with the fund’s close, Zacua announced it recently served as the lead investor in digital infrastructure company Flexnode’s $9 million seed funding round, investing in the company alongside Yes VC, Arup, SHoP Architects, and JE Dunn.
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