The private markets are constantly evolving, and new spaces rise—then sometimes fall—in the span of a few years. Given this fluidity, it can be challenging to identify and track the most promising spaces of tomorrow. That’s why our analysts have developed a methodology to define and categorize these emerging spaces. In this post, we look at modular construction—just one example of a space that is quickly taking off.
What is modular construction?
Modular construction is a process in which partial or whole components of residential and commercial buildings are produced offsite, and then assembled onsite. Prefabricated structures, or “volumetric modules,” cover a range of forms including schools, affordable housing and even full-scale office buildings.
Although the practice originated in the 1930s with the 3,000 units built for the Manhattan Project, it’s experiencing a major comeback fueled by advances in technology, design capabilities and delivery logistics.
The main advantage of the modular approach comes from operating in a factory-controlled environment with specialized equipment and skilled craftsmen. Working in a regulated facility allows for greater quality assurance throughout the build’s lifecycle. It also requires less storage and fewer materials, lowering overall construction time and costs.
A recent report by McKinsey & Company suggested that modular construction could cut timelines in half while reducing costs by 20%. McKinsey estimated that this manufacturing style could acquire as much as $130 billion from US and European construction markets by 2030, delivering approximately $22 billion in savings.
Embracing the reemergence of prefab architecture could have a transformative impact on one of the largest sectors in the world. By scaling sustainable housing, top investors and CEOs are betting on its potential to disrupt the real estate ecosystem and solve the housing and homelessness crisis.
Leading full-stack startup companies in this sector are focused on doing just that. In employing the latest automation technology, they aim to increase access to sustainable and affordable homes and produce even more elements off-site. This involves shipping readymade or “off-the-shelf” units with little to no modification.
Modern applications for prefabricated structures
As prefabrication is best suited for structures with repeating, standardized elements, large-scale commercial buildings are uniquely primed to reshape and scale manufacturing. Adopting new building modeling software will enable developers to mass-produce wall panels, volumetric bathrooms, and kitchens—all offsite.
Residential accessory dwelling units (ADUs) or vacation homes have also become viable with the advent of smart construction. Particularly favorable for this emerging space are the evolving government regulations, such as California’s recent move to relax approvals for ADUs in order to combat the housing crisis.
Leading modular construction company activity
68
182
$1.80B
246
Key modular construction growth metrics
$528.46M
$20.00M
$99.00M
Trending modular construction companies
Mighty Buildings
- HQ: Oakland, CA
- Leadership: Vyacheslav Solonitsyn, Co-founder, CEO and board member
- Latest funding: $22M, early-stage VC (July 13, 2021)
Mighty Buildings’ patented 3D-printing technology and automation platform is designed to make housing more affordable. The company’s patented technology and use of robotics automation enable the construction industry to build high-quality smart housing structures at an affordable price.
Boxabl
- HQ: Las Vegas, NV
- Leadership: Greg Ehlers, Chief Operating Officer
- Latest funding: $50M, Crowdfunding (November 26, 2021)
Boxabl is a manufacturer of modular factory-built houses designed to lower the cost of homeownership. The company specializes in building customized rooms in a precision factory environment while reducing the cost of construction, enabling consumers to own houses at cost-effective prices.
Plant Prefab
- HQ: Rialto, CA
- Leadership: Steve Glenn Founder, CEO and chairman
- Latest funding: $30.0M, later-stage VC (August 3, 2021)
Plant Prefab is a provider of custom single and multifamily home services intended to build custom, quality and sustainable homes. Their patented prefabricated building system reduces build time and minimizes construction’s negative impact on energy, water and resources.
Most active investors in modular construction
Khosla Ventures
- HQ: Menlo Park, CA
- Modular construction investments: 11
- Last deal date: February 2022
Founded in 2004, Khosla Ventures is a venture capital firm based in Menlo Park, California. The firm seeks investments in early-stage companies operating in financial services, health, big data, agriculture and food, sustainable energy, robotics, internet and clean technology sectors.
Y Combinator
- HQ: Mountain View, CA
- Modular construction investments: 6
- Last deal date: February 2022
Founded in 2005, Y Combinator is an accelerator firm based in Mountain View, California. The firm prefers to invest in B2B software and services, education, consumer, healthcare, real estate and construction, financial technology, industrials and government sectors.
Alumni Ventures
- HQ: Manchester, NH
- Modular construction investments: 5
- Last deal date: February 2022
Founded in 2014, Alumni Ventures is a venture capital firm based in Manchester, New Hampshire. The firm manages fund families that invest in a portfolio of companies diversified across sector, stage, and region and are led by other established venture firms. They also have offices in Boston, New York City, Chicago, Austin and San Francisco.
Get to know some of PitchBook’s other emerging spaces
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- Election tech
- Ghost kitchens
- Insect-based foods
- Neurotechnology
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- eVTOLs and air taxis
- Smart clothing and smart jewelry
- Indoor farming
This article was created based on PitchBook’s Emerging Spaces feature. To check it out for yourself, log in or request a free trial.
