Blackhorn Ventures is proud to announce our latest investment in Voice AI startup Datch, with participation from existing investors Blue Bear Capital and Stage Venture Partners and joining existing investors Boeing HorizonX, Predictive Venture Partners, Lorimer Ventures, Forum Ventures, Rannapo Partners, Icehouse Ventures, Right Side Capital Management, and Plug and Play Tech Center. Using a highly adaptable artificial intelligence (AI) and natural language processing (NLP) engine to allow field employees to complete workflows and capture field observations in real-time using voice, Datch offers on-the-fly data collection for industrial workers across utilities, energy, manufacturing, mining and aviation.

With this investment, Blackhorn further deepens our commitment to companies making groundbreaking developments in resource optimization and efficiency. Datch allows frontline workers to speed up their processes by 90%, and is adaptive across an array of workflows, from maintenance management through to safety, quality, operations, and business intelligence. Using simple integrations to connect to existing in-house systems, Datch identifies and obtains high-quality, structured knowledge data, driving higher uptime, increased productivity and top line revenue for an industrial workforce under increasing pressure.

The Problem

In today’s industrial environment, deskless workers use outdated technology (pen and paper for most & laptop terminals for the lucky few) to collect data – and as a result, the quality of data captured by frontline workers can be low-quality, inaccurate, quickly outdated and unactionable. Companies are faced with day-to-day challenges related to the lack of structured data (Accenture estimates that ~80% of enterprise data is unstructured) which inherently limit broader AI adoption. In an attempt to solve for this, frontline workforces are being asked to become digital workers, but they lack the requisite time and skills to keep up with these demands. Deskless workers make up 80% of the world’s workforce, and need digital solutions that enhance data collection without disrupting their hands-on, day-to-day work.

Credit: The Deskless Workforce, presented by Emergence Capital

The Solution

Datch has built an AI voice interface that allows workers to talk through their jobs conversationally and in real-time, while structuring and routing that information to their system records. The Datch platform is powered by a highly adaptable natural language processing (NLP) engine. This provides frontline workers with a digital workspace that allows them to capture and transmit information securely and syndicate it appropriately for the highest and best use case. Using Datch’s platform, deskless workers who typically spend 1-2 hours per day on digital processes can reduce that time spent by 75-90%. Teams using Datch’s optimized voice user experience (VUX) are able to capture 180-400% more data, meaning more detail and clarity in reports.

Credit: Datch Website

The Market Opportunity

Datch is targeting a $6.2B market in Work Management Processes. Most industrial organizations have begun investing heavily into digital transformation. However, lack of operational efficiency and poor data quality impede their ability to gain the insights they need to improve on overall equipment effectiveness (OEE), asset life extension, and the upskilling of their workforces. Their goal is to provide industrial enterprise customers with the toolkit to map their unique processes and connect Datch to their systems-of-record with ease. Datch is initially focusing on utilities, manufacturing, aviation and mining as their beachhead markets; Datch counts ConEd, Singapore Airlines, ABB Robotics and the New York Power Authority among its clients. Down the road, management’s plan is to expand into other sectors such as transportation and construction.

The Market Traction

Since Datch’s last funding round in mid-2020, the company has made significant progress in securing deals and revenue. They’ve acquired 10 enterprise customers, seen a 1000% growth in revenue, and continued construction of a pipeline that will allow them to reach significant year-over-year revenue in the coming years. As a capital-efficient software play, Datch is able to capture high margins and has a broad market to grow into. They are ready to scale and are in a strong position to ramp up sales growth. Series A funding will be used to expand Datch’s platform capabilities, introduce new integration tools, and scale enterprise operations and support.

The Impact Opportunity

Datch addresses UN Sustainable Development Goal 8 which seeks to achieve higher levels of economic productivity through diversification, technological upgrading and innovation, including through a focus on high-value added and labor-intensive sectors. Datch connects the workforce with broader company systems, improving the data capture process for deskless workers and creating structured data to improve the overall efficiency of the business. They provide a core enhancement for frontline workers to improve their output without disrupting their hands-on, day-to-day work.

The Team

With previous experience in aircraft, submarine, and national scale energy projects, the team has extensive boots-on-the-ground exposure to field work, and the technical know-how to bring a new product to market that leverages data integrations and product-led growth.

CEO Mark Fosdike has a masters degree in Aerospace Vehicle Design from Cranfield University and work experience at CAV Aerospace and ASC. CTO Ben Purcell and CPO Aric Thorn both studied electrical engineering at the University of Canterbury, where they graduated with honors, then worked together at Siemens and Transpower. The current team of 20 is poised for growth. If you’re interested in  redefining the technology landscape through voice technology to improve how we live and work, check out careers at Datch here.

CPO – Aric Thorn

Blackhorn Ventures is excited to share that we have invested in Berlin-based energy retrofit startup Ecoworks alongside our friends at JLL Spark Global Venture, Zacua Ventures, PropTech1, Warema Group, and Motu Ventures.  Ecoworks’ approach benefits from software-defined digital planning and hardware-driven, contract-manufactured kits of prefabricated building envelopes, roofing and electrical building mechanical systems, and is fully-aligned with Blackhorn’s investment thesis of capital-efficient, prefabricated modular construction. 

As the first German-based company we’re funding out of Industrial Impact Fund II, we see this investment as a signal of things to come and a reflection of the vibrancy of the European climatetech startup ecosystem and the new energy reality on the continent.  Europe is several years ahead of the US in their decarbonization journey, and we’re excited to leverage our networks and insights for speed and scale in accelerating transition solutions from Europe for deployment into the US.

The Solution

Ecoworks searches through public building databases and satellite imagery to find and rate the best candidate buildings to renovate using a proprietary algorithm based on >100 criteria. Once a portfolio of buildings with uniform typology has been identified, the team designs and installs a custom kit-of-parts over and within the buildings.  

This approach accomplishes three critical goals simultaneously: it helps standardize and serialize retrofits so that multiple buildings with the same typology can meet their carbon-neutrality goals more quickly;  it allows landlords who own old-building stock to meet new energy efficiency requirements (and earn an additional €0.5-€2.0/sq-meter after renovations); and it provides multi-family residential tenants a path to reducing their energy bills without having to vacate their units for weeks or months on end while their building is being retrofitted.  

The Market Opportunity

The risk of ‘stranded assets’ is driving urgent action in real estate, particularly in the EU: 16% of German housing stock, 3.4 million units, is classified as efficiency grade G. Due to recent EU climate regulation, any of these buildings that do not improve to a higher efficiency class by 2030 will be removed from the housing market. Government subsidies of 40-60% of project costs are available and reduce sales friction. 

There are approximately 119 million residential buildings across the EU. 38% of these, 45 million units, were built pre-1970, before there was any regulation on thermal insulation. Only 12% of residential buildings have been renovated to meet climate change targets. 15% of the residential building stock across the EU, 18 million units, falls into efficiency standard G and must be immediately renovated to remain rentable. Another 20% fall into categories D, E, and F which will have to be renovated in the near-future as well. While the team is starting with public housing and small commercial buildings today, there is a €57B market for middle market (>5,000 unit) housing companies. According to the Royal Institute of Chartered Surveyors, “…the data indicate a significant opportunity exists for energy efficiency retrofits to both residential and non-residential buildings throughout the EU.”

The Impact Opportunity

Old, energy-wasting residential and commercial buildings have been estimated to contribute as much as 40% of all CO2 emissions. So, accelerating the speed and scale of energy efficiency retrofits is a massive global opportunity, and a national priority in Europe, where building renovation is a €770B market and 95% of building renovations are currently being done manually on-site.  

In the wake of the ongoing Russian invasion of Ukraine, reducing the use of oil and gas for heating buildings has become an even higher priority for Germany and several other European governments, as they attempt to wean themselves from their current overdependence on Russian oil and gas.

The Traction

Ecoworks’ first pilot project was a resounding success. They completed their first building renovation projects in two-thirds the cycle time of industry incumbents, and did not require tenants to vacate. They completed on-site work in under 3 weeks, compared to incumbents who take 4-6 months and must vacate tenants during construction. 

With several portfolios of projects in-process and a strong pipeline of multifamily developments across Germany, we’re excited to see how quickly the team is acquiring customers with no outbound marketing spend. Ecoworks is able to reduce project cycles by standardizing business cases with data, using data and AI-assisted planning, developing & simplifying pre-fabricated components, and simplifying installation. Given the urgent need for carbon-neutral renovation in Germany, and across the EU, increasing capacity and delivery is constrained only by supply chain and workforce.

The Team

CEO Emanuel Heisenberg is a serial entrepreneur who served as a Senior Advisor to Energiesprong Deutschland, the German arm of an EU-wide regulatory movement for serial energy renovations and related funding schemes.  Emanuel benefits from unique insights and relationships that are difficult to replicate. COO Gregor Loukidis has spent a decade in the photovoltaics and residential solar industry and demonstrated expertise in scaling complex operations. CPO Dr. Nadir Abdessemed has over twenty years of energy and planning experience. He received his PhD from Imperial College London and is a lecturer at Harvard University’s Graduate School of Design.

Emanuel, Gregor, and Nadir have assembled an all-star team of experts in product design and real estate sales. The team has 7 patents pending, 12 more in development, and a pipeline of €100M+.  We believe that their combined industry expertise makes them the perfect fit to tackle the pressing problems of automation and prefabrication, and we look forward to working with them to secure the entire value chain to secure capacity and delivery, and unlock the potential of carbon-neutral housing at scale.

Dan Blank’s passion for designing and building large-scale projects has early roots. He grew up playing with Legos, always aspiring to build the next biggest thing– be it a Monorail, a ship, or even a model city. In the years since, he has charted his own course designing and manufacturing infrastructure. Today, he is the CEO and Co-founder of Toggle Industries where his mission is to make large scale civil and urban infrastructure projects more accessible to the communities that need them most. Toggle develops robotics and digital fabrication for the construction industry – starting with rebar for reinforced concrete – and aspires to reinvent the way we build our world. We caught up with Dan to learn more about his path to rebar and robots, and the challenges of innovating in the construction industry.

What life experiences brought you here today, and specifically when did you decide to become an entrepreneur?

I grew up in Western Massachusetts, I lived there my entire life in a college town. My mother is from the Philippines. My father grew up on Long Island in a New York Jewish community, and they met working in the medical profession.

Growing up, I was always into building things; problem solving with physical context. I was also into design, like graphic design, industrial design, architectural design, fashion. I definitely was attuned to the way things were made, and why they looked a certain way. And the entrepreneurial part… I was one of those kids who grew up selling whatever I could sell:mowing lawns, shoveling driveways, selling lemonade, all of that stuff.

Fast forward 25 years, and I’m at a graphic design agency working with an energy company that built and operated power plants. I got the opportunity to visit their construction sites, and one of them was for a wind farm. I saw workers building foundations for wind turbines out of reinforced concrete. That was really where I first got to see this process of what building with rebar and concrete entails, and how labor intensive this work is. And this is the way it’s always been done. It was a classic, “there’s got to be a better way to do this” type of moment. Seeing steel bars being put in place one at a time by hand 5000 times, over and over again, just for a single wind turbine foundation got my gears spinning.

Why rebar?

It seems like such a random and mundane thing. But it really is the basic building block of the whole built environment because reinforced concrete is by far the most consumed construction material. And it’s the material that all our structures and infrastructure systems depend upon to get built. So it’s the raw material for our whole built world.

Could you describe the problem you’re tackling with your work?

The problem is really simple supply and demand. I would say that the demand for construction is larger than it’s ever been before, and it’s accelerating. Because the world is urbanizing¹, we’re building larger and more complex cities. And so we need infrastructure to support that: power, water, housing, institutional buildings, resiliency on coastlines, etc. We have all of this construction to do, not to mention all of the existing infrastructure that needs to be rehabilitated.

Source

And on the flip side of that, we have a construction industry that has really not adopted a lot of technology or innovation to increase productivity. Certainly not in the way that you see in manufacturing or in really any of the other major industry segments like agriculture or the medical field. And not only has it not kept pace with the productivity gains, you have fewer and fewer people that are actually joining the construction industry.

That creates the problems that we associate with construction all the time: big projects take too long, they go over timeline, they go over budget, they’re fraught with problems and delays and challenges. It’s just getting worse. The last couple of years have exacerbated those problems because COVID has made it more difficult to have a lot of people on a worksite doing their work together. There are labor shortages, supply chain disruptions, and materials cost more. So you need solutions in the construction industry to improve efficiency, to enable us to do more with less.

Source

What is it about the construction industry and specifically reinforced concrete that makes the industry so slow to change?

The reason that the construction industry has difficulty changing is because of the risks involved with changing. If you’re a construction company, and you’re doing a certain number of jobs every year, each one of those jobs is really a make or break financial transaction for your company. There is a very high incentive to stick with what works, what has served you well in the past and not take the risk to try something new, which may or may not work.

There’s also the complexity of the way the construction industry is organized. You have different coordinating and contributing parties and stakeholders, different trades, like, concrete companies and rebar companies and carpenters and plumbers and electricians, and, people doing finishing work, and millwork and, all of these different trades that all have to work together in concert and have to align with each other in terms of space, time, and the sequencing of work.

Is there a specific customer case study you could share about the integration process?

There was a project we did in the Philadelphia Navy Yard where they’re basically adding battery storage to the microgrid there. They have renewable energy generation and storage, they have solar, where they’re generating power and then they have battery storage where they can save that power for use, when the sun’s not shining, essentially. And so, we partnered with the EPC that was responsible for designing and building that system and by pre-assembling all the rebar for them so that they didn’t have to do that work on a jobsite. We’re able to save them a really significant amount of labor and time in the build out of that project. And so it’s a very straightforward type of project where our work just immediately accelerates the whole job from start to finish because you’re just not waiting for that rebar to happen.

On a personal note, could you tell us about your work at the Museum of Chinese in Americas?

I live in Chinatown in New York City, and MOCA is down the block. I started volunteering, getting young professionals involved with the museum and doing events for people interested in different career tracks. At the end of the day, these community institutions are also a form of infrastructure; they are a part of living in a community or a city or a neighborhood, in the same way that the subway system is or the hospital is or the university is. Everyone who lives in these areas, and the people who come to visit these areas, depend on these institutions. It’s exciting to engage and contribute to building this cultural infrastructure, in the same way that it is to help develop our physical infrastructure. It’s personally important because my wife is also Chinese, and my kids are half Chinese. It’s a part of my family’s heritage and part of the heritage of the neighborhood that I live in.

¹ https://www.iied.org/urbanising-world

Prefabrication Case Study: A Potential Solution to the Construction Industry’s Productivity Problem

The following case study provides insight into Blackhorn’s strategy for addressing prefabrication’s sustainability challenges so it can be successfully integrated into the construction industry.

Although construction is the largest industrial sector in emerging market economies and second in size only to the healthcare sector in OECD (The Organization for Economic Co-operation and Development) countries,
its productivity gains have lagged behind other industrial sectors since the 1960s. Modular construction through prefabrication is considered a solution to this productivity challenge, but there are three factors restricting its growth: market cyclicality; demand for customization; and market fragmentation.

Learning from Operation Breakthrough in the 1970s and Katerra’s
recent failure, Blackhorn is backing a new generation of firms in prefabricated or modular construction that take one of two differentiated approaches. The first approach leverages new technology, such as machine intelligence, computer vision, and robotics, to automate part of the work of a single trade using a capital-light and agile business model. The second combines physical and digital technologies, acting as a supply chain orchestrator, to outsource production while using software to generate fully engineered, costed and code-compliant housing schemes in real-time.

Download the complete case study by clicking on this link or on the image above.

(Make sure to click the fullscreen button on the viewer below to have the best experience. It is in the tool panel on the top of the viewer and just to the right of the zoom slider; it looks like a square made of just the corners.)

Background

The Built Environment (BE) sector is highly cyclical, fluctuating with an amplitude several times the extent of variations in the Gross Domestic Product of the individual metropolitan or regional markets that most firms address. After the 2007-2008 financial market collapse, commercial construction in the San Francisco Bay Area fell by 80%. During the current Coronavirus-triggered recession, demand will certainly fall steeply in the BE and other sectors again. Because of that very nature, Blackhorn Ventures has maintained a highly disciplined approach to selecting companies and opportunities for investment that had common features of downturn resistance.

Blackhorn’s Investment Criteria

Knowing that a recession would likely occur at some point over the life of our funds, Blackhorn developed criteria to select companies in the Built Environment sector whose solutions and marketing focus included the following attributes to make them as resilient as possible against a downturn:

A Solution that Dramatically Enhances Resource Efficiency

First, Blackhorn’s overarching investment thesis, across our target sectors, is to look for companies whose solutions enable their users to generate significant resource efficiency gains. This makes their customers more price-competitive relative to others in both good and bad times. In a recession, this allows them to win business in tight markets where there will be more bidders on each project and more sellers per customer for any products or services.

An example of this capability to generate resource efficiencies is Drawboard, which extracts information from multiple file types and converts the data into a special PDF file format that can be simultaneously edited remotely by multiple people in different colored “virtual ink”. This radically improves the efficiency of preconstruction work where the architects, engineers and contractors are often widely dispersed across cities and even countries. Notably, in the current coronavirus pandemic, Drawboard is already experiencing a 20x spike in inbound requests so that housebound project teams, worldwide, can work remotely to enforce social distance, yet continue to collaborate efficiently and effectively.

Another of Blackhorn’s portfolio companies, Briq, uses its data integration and analytics capability to help companies identify operational efficiencies by applying machine learning to the unified data about their past and present projects, for example identifying subcontractors from across all of their past and ongoing projects that routinely: show up and/or complete their work late, file multiple change orders, have poor safety performance, fail to clean up behind them, causing delays for other crews, etc.

A third Blackhorn company, Dwellsy, helps users find rental apartment listings extremely efficiently and at low cost. This should be extremely valuable to people who have to relocate for job changes or who choose to relocate during this downturn.

A final example, Rhumbix, is improving productivity by helping mitigate the spread of Coronavirus on job sites by digitizing paper-based processes, specifically, time cards and time and materials (T&M) tags. It is estimated that the Coronavirus can remain viable for days on paper. By digitizing these processes customers can reduce person-person and person-paper-person interactions and hopefully reduce the spread of diseases in an industry that has been deemed critical by state and federal governments.

Solution is “Sticky” by Integrating with Core Legacy Systems

If a company in the BE sector produces a point solution addressing a specific workflow, its product roadmap should include integrating that data with its customers’ back-office systems. For example, Rhumbix, gathers timecard information on mobile phones and integrates the timecard data with the contractor’s ERP system to generate payroll runs and to create needed cost and financial accounting reports. It takes time to develop integrations with all of the legacy ERP and PM systems that contractors use, and which typically lack APIs for easy data sharing. However, once the integrations are ready and the portfolio firm’s software has been installed and integrated, their solution becomes extremely “sticky” –i.e., very difficult for a customer to abandon even in a deep downturn. So, Rhumbix has had virtually zero customer churn for its core timecard app, compared to typical SaaS app customer churn rates of 10% or higher. Additionally, Briq is experiencing similar “stickiness” during these uncertain times.

Solution Supports Significantly Enhanced Revenue Capture

A third criterion we use in selecting companies to invest in is to look for companies whose solutions can help customers generate additional revenue. For example, Pype uses AI Natural Language Processing (NLP) methods to automate the extraction of project requirements for submissions, approvals, inspections, etc. from thousands of pages of PDF files that lay out the specifications for a project. They do this in minutes instead of person-weeks, and with an accuracy comparable or better than human estimators. This capability allows Pype’s customers to bid on projects significantly faster and the enhanced accuracy Pype provides, in understanding and capturing project requirements, means that they can reduce the magnitude of their contingencies for missed requirements and can thus bid more competitively. Similarly, Briq integrates the data from the multiple point solutions and legacy applications that a customer uses into a unified data pool. Then, the Briq solution applies Machine Learning (ML) analytics to identify the most attractive projects for the customer to bid on from among all of the available bid opportunities in the customer’s unified data pool and lays them out on a map of the region in which the company operates.

Solution is Cloud-Based with Licenses Priced by Number of Users

Most of our portfolio software companies have a cloud-based SaaS subscription-based solution and generally have a per-user pricing model that allows users to scale their usage and cost up and down as needed. This makes their solutions easy to adopt, avoids the barrier and cost of installing on-premises, behind-the-firewall software, and makes it easier to update the software for users. It also allows users to scale their subscription license costs downwards if they reduce the number of users so they do not need to drop their subscription if it is time for a renewal during an industry slowdown, thereby reducing churn.

Customer Base is Diversified Across Countercyclical Industry Sub-Sectors

When we invest in companies in this sector, we remind them that the demand for some types of construction tends to move counter-cyclically to overall economic trends. First, interest rates typically fall during economic recessions, spurring demand for housing, such that economists have referred to the industry as the “balance wheel of the economy”¹. Second, governments will often try to launch infrastructure projects during recessions to generate jobs and demand for materials. Several of our portfolio companies had started diversifying across sectors of the built environment well before the current recession and are now aggressively marketing their solutions to companies that build housing and especially infrastructure, with some initial success almost immediately.

The Bottom Line

The companies in our Built Environment portfolio all possess one or more of these solution attributes, and are thus positioned to weather even severe downturns relatively well and to emerge from recessions very strongly positioned for rapid growth.

¹ Lange, J. E., & Mills, D. Q. (Eds.). (1979). The construction industry: Balance wheel of the economy. Free press.

Rhumbix, a new firm focused on helping make construction sites smarter, was one of the first companies in which Blackhorn invested. Managing Partner, Trevor Zimmerman, stated “We look for companies that are coupling engineering breakthroughs with the infrastructure of the information revolution to improve resource productivity. Rhumbix is a perfect example of that.” Dr. Raymond Levitt, Operating Partner at Blackhorn Ventures and Kumagai Professor of Engineering at Stanford University, further noted that Rhumbix’ cloud software, with its intuitive mobile interfaces for all users, takes resource productivity in the construction industry to a new level.

Rhumbix is currently being used by 7 of the top 20 builders in the United States and the platform has delivered ROIs ranging from 500-800%.

Link to Global News Wire Announcement: link

Blackhorn Ventures joined Creative Ventures in a $3.9 million CAD seed funding round led by Brick & Mortar Ventures for built environment startup VEERUM. VEERUM has developed a platform that allows for the creation of a digital twin of construction job sites that can be utilized to save significant costs with both engineering and travel to sites. Dr. Raymond Levitt, a Blackhorn Operating Partner with extensive experience with the built environment noted Blackhorn Ventures is pleased to invest in VEERUM. The company brings a unique combination of world-class, technical expertise in data organization and analysis, along with its principals’ deep industry experience managing capital projects to solve an important problem for the construction industry. As part of our due diligence, we learned VEERUM’s clients report millions of dollars of savings on each project from eliminated or greatly reduced on-site rework by using their Digital Twin platform and services.

Link to PE Hub Network Article: link