As we survey the current technology landscape, blue-collar industries like manufacturing, agriculture, and construction, are ripe for innovation. The construction ecosystem has been one of the slowest to embrace automation and digitization. The fragmented nature of the construction industry – varying codes, unions, jurisdictions – makes modernization and technology adoption particularly challenging. The latency in accepting technology and digitization will only grow more glaring as other industries continue to innovate and progress.
A healthy and vibrant construction industry is essential to economic growth and vitality. According to our own Paul Holland, these factors make construction tech one of the top five investment areas, creating an industry primed for venture building and investing in blue-collar Tech. Venture capital can be the haven where the working-class venture has a home.
Mach49’s disciplined methodology anchors innovation in the needs of end users and related stakeholders whose jobs will be impacted the most by problem solving and innovation. During the Incubate phase, venture teams interview 150 to 300 end users to get to ground-truth and drive toward product-market fit. However, there are challenges getting in front of end users in the construction space.
You will not find them sitting behind a desk. Because blue-collar industries tend to be conservative and lag technology adoption that most other industries take for granted, it is difficult to reach the un-desked worker. Even some $200 million mechanical contracting businesses do not have websites or use LinkedIn, rendering today’s digital methods and techniques ineffective at reaching the target market. You need secret sauce to get in.
Jake Olsen, Co-founder and CEO of DADO, a B2B SaaS startup company serving the construction industry, shares the value of having a corporate investor to help get in front of end users. “Having a corporate partner like Stanley Black & Decker gave me credibility to go to a job site or a mechanical shop in the very early stage to validate our ideas. This is why a corporate partner can solve blue-collar challenges more uniquely than a typical ‘3-guys-in-a-garage startup’. We doubled down on this and had hundreds of conversations with people, the true end users of the technology. It changed the course of the problem we wanted to solve. It has changed people’s lives, frankly.”
DADO was created to address a huge pain point -- DADO digitizes documents received from multiple parties and sources into a searchable database. Through their hundreds of interviews, DADO learned that the end users are workers who reside on jobs sites in boots and hardhats, not people sitting behind desks. This changed their product design to include a voice-activated response feature using natural language searches, rather than a desktop app. They nailed the solution by listening to end users.
Hypertherm Ventures knows the benefit of staying close to end users, too. They have located their executive offices within their parent company's (Hypertherm) factory so that a constant flow of ideas can come from those working on the factory floor. This creates a collaborative lab environment where workers can contribute ideas and solutions, receive training and upskilling in real time, increase the comfort level with new technologies like robotics and AI, and fuel enthusiasm to pilot new ideas. A properly vetted product will not only solve real problems today; it will also stretch forward and continually evolve with customers and end users involved throughout multiple tiers of engagement. Nathan Pascarella, Director of Hypertherm Ventures, a next-generation industrial cutting company, shares that approaching innovation this way delivers “value beyond the investment dollars.”
Mach49 teaches the importance of looking beyond traditional growth metrics to build sustainable growth engines. DADO does this by understanding the growth of the industry, how this affects the venture, and identifying and capitalizing on very sticky products with low churn, and high lifetime value. Setting challenging yet realistic expectations for growth and scale, or “patient capital,” helps the leadership team align strategy with what the blue-collar venture needs, not measuring it by the same standards applied to other startups or legacy businesses.
It is critical to define the criteria for success for pilots and Proof of Concepts, be rigorous on analytics, and continually challenge your assumptions, otherwise you can get false signals of viability and success. It is equally important to define failure criteria, to know when something isn’t working and have the courage to pull the plug if the idea does not measure up to expectations. As Jake aptly stated, “No experiment is a failure; it’s a learning opportunity.”
Nathan relayed the importance of creating “healthy tension” with his production and operations teams to look beyond short-term objectives to where the market, the ecosystem, and the product will be in five years. He challenges his team to see “what can advance, what can disrupt that, and change,” to look through both the product and operational lenses, and get out of their comfort zone. Envision what technologies exist today like AI, machine learning, and robotics, where the applications have not yet been conceived but could shape where they can take the product in the future.
Across all blue-collar industries, digitization is becoming a huge category in B2B and SaaS investing and will only continue to grow in this global, digital age. On a good day, innovating within large corporations is hard, and industrial, blue-collar sectors pose even more challenges to new ventures and growth. Success requires a true understanding of customer pain, a disciplined and repeatable methodology, and a 100% commitment to execution. At Mach49, we teach Global 1000 companies how to build sustainable new growth engines, and blue-collar tech deserves some time in the spotlight. Get in touch with the Mach49 team to learn more.