Valuable VC Viewpoints | Construction Tech Unicorns Are Just Beginning

March 28, 2025

Construction SaaS provider BuildOps raises $127M in Series C and achieves unicorn status at $1B valuation. Patric gives insider view on why it works—and predicts more construction unicorns on the horizon.

Patric Hellermann

Valuable VC Viewpoints | Construction Tech Unicorns Are Just Beginning

tl;dr

BuildOps raises $127M Series C funding, achieving unicorn status at $1B valuation

SaaS business model enables higher valuations through recurring revenue and low incremental acquisition costs

ServiceTitan and BuildOps target similar markets for commercial trade contractors (HVAC, plumbing, electrical)

European construction tech lags US by 5-10 years in software adoption

Software modularity is key for construction businesses—nobody wants five different systems

Venture capital dynamics differ by geography, with US being paradoxically the worst-performing VC market

This is just the beginning of a wave of new unicorns over the next three to four years in construction tech.

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BuildOps raises $127M Series C funding, achieving unicorn status at $1B valuation

The construction technology space is heating up with BuildOps securing an impressive $127 million in Series C funding and reaching unicorn status with a $1 billion valuation. This achievement marks a significant milestone for the construction technology sector, with BuildOps becoming approximately the 17th construction tech unicorn according to Patric's tracking.

BuildOps was founded in 2018 and has now raised a total of $225.8 million. While the valuation might seem high to those outside the tech investment world, it makes more sense when viewed through the lens of SaaS business models. According to external data mentioned in the podcast, BuildOps may have approximately $52 million in Annual Recurring Revenue (ARR), which would put the valuation at around 20x ARR.

For construction companies and industry watchers, this investment signals increased credibility for the entire sector. As Patric notes: "It helps all of us because it gives more and more credibility to our sector. And I have a feeling it's only the beginning of a wave of new unicorns over the next three to four years in construction tech."

The substantial funding will likely be used to scale operations, though at this stage the company is probably not yet profitable on a net cash flow basis—which is typical for high-growth SaaS businesses at similar stages.

SaaS business model enables higher valuations through recurring revenue and low incremental acquisition costs

Why do SaaS companies like BuildOps command such high valuations relative to traditional construction businesses? Patric provides a masterclass in business fundamentals to explain this phenomenon.

Traditional construction services businesses typically get valued at 3-6x revenue, while tech companies can see valuations of 20x ARR or higher. This disparity comes down to the fundamental business model differences.

Patric uses Warren Buffett's insurance business as an analogy: insurance is prepaid, has automatic renewals at low cost, and creates float (cash that can be invested before claims need to be paid). Similarly, SaaS businesses benefit from:

Low-cost renewals - Once you've acquired a customer, the cost to renew them is minimal
Predictable revenue - Subscription models create reliable, recurring revenue streams
Upfront payments - Customers often pay in advance for software services
Net dollar retention - Successful SaaS companies don't just retain customers; they expand within existing accounts

As Patric explains: "Not only do your customers not churn out, they actually purchase more from you compared to the very first time they signed a contract." A good SaaS business might have net dollar retention of 130% or higher, meaning the revenue from existing customers grows by 30% annually without additional acquisition costs.

This business model creates a compounding effect that traditional service businesses can't match, which justifies the premium valuations. For construction companies looking to build or acquire technology, understanding this valuation framework is crucial.

ServiceTitan and BuildOps target similar markets for commercial trade contractors (HVAC, plumbing, electrical)

BuildOps is essentially competing in the same space as ServiceTitan, which recently went public after delaying its IPO plans from 2022. ServiceTitan has built a comprehensive suite of software modules for commercial contractors in trades like HVAC, plumbing, electrical, mechanical, and landscaping.

These platforms help contractors manage various workflows:

Quote-to-cash processes (creating quotes, invoices, collecting payment)
Field operations (assigning tickets to workers, quality assurance, capturing work notes)
Scheduling and dispatch
Financial monitoring
Inventory management

From a customer perspective, BuildOps and ServiceTitan offer similar value propositions, with contractors often choosing between the two platforms. While the founders might point to specific differentiators, Patric notes that at a high level, they're addressing essentially the same market needs.

This positioning creates an interesting dynamic for future construction tech startups. Is there room for more players targeting the same contractor software space? Or should new entrants look for adjacent, less crowded markets? The success of both companies suggests the market is large enough to support multiple winners.

European construction tech lags US by 5-10 years in software adoption

When asked about similar platforms in Europe, Patric highlights two critical structural differences that have limited the development of European equivalents to ServiceTitan or BuildOps:

Scale difference: "In the United States, you tend to have even the smallest specialized subcontractors tend to be larger than the equivalent in Europe. So you will actually have subcontractors in the United States that dedicate to electrical that have 100, 200, 300 million of revenue, and you will have several of them. In Europe, that hardly exists."
Adoption lag: "European contractors have historically lagged behind software adoption from the United States... I would say it's probably five to 10 years behind the adoption experience that American contractors have in software."

This adoption lag isn't because European contractors can't use software, but rather because adopting new technology requires building organizational capabilities, changing processes, and establishing purchasing governance. All of this takes time in any industry.

For European construction tech entrepreneurs, this suggests both challenges and opportunities. While the market may not be ready for direct ServiceTitan/BuildOps equivalents, there's potential to build solutions tailored to European market conditions.

Interestingly, Patric notes that European investors are taking a different approach: "The most likely path that we're currently seeing is actually roll-up plays where I'm seeing multiple private equity players, as well as venture-backed, larger contractor software that tries to purchase together different kinds of softwares."

This roll-up strategy aims to achieve modularity while potentially securing more efficient customer acquisition—a distinctly European approach to building construction tech platforms.

Software modularity is key for construction businesses—nobody wants five different systems

One of the most important insights for construction tech developers is the critical importance of modularity. As Patric emphasizes, contractors don't want to use five different software systems to manage different aspects of their business.

"The worst solution that I absolutely do not want to do as a contractor is to have five different specialized softwares for each of these workflows. Contractors don't want that," Patric explains.

Instead, contractors prefer a single platform that can handle multiple workflows through modular components. This approach is similar to Procore's strategy, though Procore started with larger projects and field operations while ServiceTitan and BuildOps began with back-office functions for smaller, specialized contractors.

The real purchasing decision for contractors isn't between BuildOps and five specialized software solutions—it's between BuildOps and spreadsheets. This insight explains why modular platforms like BuildOps can command such large valuations; they're replacing manual processes across multiple business functions.

For construction tech developers, this suggests that narrow point solutions may struggle unless they can integrate seamlessly with larger platforms or expand to cover additional workflows. The winning strategy appears to be comprehensive platforms that can address multiple contractor needs within a single system.

Venture capital dynamics differ by geography, with US being paradoxically the worst-performing VC market

In a surprising revelation, Patric shares that despite its reputation as the global center of venture capital, "the US VC market is the worst performing of all VC markets across the world in terms of the financial performance of the VC asset class."

This counterintuitive fact helps explain some key dynamics in construction tech funding:

Fund size matters: Because the US market produces worse average returns, US venture funds tend to be larger to compensate through management fees.
High outlier potential: While average returns are lower, the US market produces the highest outliers (like potential trillion-dollar IPOs), which drives the power law economics of venture capital.
Investment preferences: Larger funds need to make bigger bets, even in categories with established leaders, while smaller funds typically prefer less obvious, less competitive spaces.

These dynamics affected BuildOps' funding journey. As Patric notes, when BuildOps was founded, ServiceTitan was already six years old and establishing category leadership. This competitive landscape would make BuildOps less appealing to smaller VC funds but potentially attractive to larger funds looking for big outcomes.

For construction tech founders, understanding these dynamics is crucial when raising capital. The right investor fit depends not just on sector expertise but on fund size, strategy, and geographic focus. A company like BuildOps might find better reception from larger US funds, while a European construction tech startup might need a different approach.

Patric also shares his fund's investment philosophy, preferring opportunities that are "obvious to buyers but non-obvious to generic founders and investors." This approach helps avoid crowded categories while ensuring customer demand exists.