Investing in the Built World: A Venture Capitalist's View on AEC Innovation

A Welcome to Practice Disrupted, a podcast where we find ways to create new solutions to current challenges while elevating the value of architects. I'm your host, Evelyn Lee, an architect who spans tech as an angel investor, startup advisor and founder of Practice of Architecture. Whether you're a seasoned architect or just starting in the field, this podcast is your gateway to think differently about the role architects play within our global community. Hello disruptors. Welcome to this week's episode of Practice Disrupted. I am joined by Jesse Devitt, co founder and general partner of Building Ventures, a firm investing in the future of how we design, build and operate our world. Jesse's career has spanned more than three decades at the intersection of architecture, construction and technology. He began as a pioneer in AEC software development, helping launch softdesk, the company that laid the groundwork for Autodesk AEC Market Group, and later became one of the first venture capitalists dedicated to this industry.

A Today, through Building Ventures, Jessie supports entrepreneurs who are transforming the built environment from early stage innovators in design, tech and preconstruction to those advancing sustainability and industrialized construction. In our conversation, we explore the evolution of venture investment in auc, the cultural and business shifts architecture firms must embrace to keep pace, and what it takes to build companies that truly move the industry forward. If you've ever wondered how capital, innovation and design intersect, or what the next generation of AEC startups look like, this episode will open your eyes to where opportunity lives. Hello Jesse, welcome to Practice Disrupted.

B Hi Evelyn, thanks, it's great to be here. Look forward to a conversation in our.

A Show notes and in the intro. We're saying a little bit about your bio, but I'd love to hear in your own words how you describe your overarching career arc and more particularly what you're doing now.

B Well, 30 years in architecture, engineering, construction, technology, I've tried to escape multiple times but but always found myself slipping back into it and really began like a lot of things do, in an accidental form of the Journey launch, which was the beginning of a little company called Softdesk in the early 90s where we raised venture capital and really became the first professional software company making solutions specifically to enhance AutoCAD. In our case, it was for architects and engineers. Our strong suit was really civil engineering software. In fact, the roots of that and many of the people involved in that still are involved today in Autodesk Civil 3D as an example. So it was really foundational. We had the idea to build software for the entire process, both how we design and how we build and construct. And so that was sort of the notion to it. But we were really enhancing AutoCAD as early as AutoCAD 2.17 F I think was the version which contained AutoLisp, which allowed us to add additions to AutoCAD that became a real company.

B As sometimes happens, we raised venture capital, ended up fortunately going public on the NASDAQ Stock Exchange. And shortly after that, Autodesk acquired us when they decided to really make a decision to go deeper into AEC as a sector. At that time in the mid-90s, Autodesk was a general design tool, not just for, not not known for what it's known for today in terms of depth in manufacturing or architecture. Was just beginning that journey and part of that was acquiring our company to create the AEC Market Group. So I joined Carol Bartz's executive team and we organized 50 to 60 people inside the company and 250 plus we brought to the business into the AEC Market Group and launch products like Architectural Desktop and continue to advance the civil products. And when that was all settled inside of Autodesk, it was my time to exit, which was part of the deal which was come in, help us build this new organization, settle all your people. Let's make decisions on how to go forward and then you're welcome to stay or go. And my choice was to go really.

B I wanted to go back to the roots of building companies. That's what I felt like I had learned at the Soft Desk Journey. And I met some people up at Dartmouth College not far from where I lived. They wanted to start a venture capital firm. And they recruited me as a entrepreneur to co found the firm with the person teaching venture capital at the time, Phil Ferneau. And Phil and I co founded Borealis Ventures with Dartmouth College as our first investor. They obviously wanted a firm, if you will, on campus. So a lot of our investment activity was to support those initiatives.

B But in a year or two into the journey of starting a venture capital career to build companies, I got a call from Brad Schell, who had founded something called SketchUp and he said, could you just come out and help me for a week? I'm trying to figure out how to build a company. I remember telling my friend, my co founder, Phil Freneau, listen, I'm just going to go out and help this guy. He's a friend. I knew him from my Autodesk days. Don't worry, he won't be investing in aec. I called him after a week and I said, you know, we might want to do this sketchup investment and I say that's the beginning of my investment career, never escaping AEC frankly. And then we did New Forma and Veeqo and the investments went on from there, probably about one a year in my early investing career. There really wasn't much venture capital around design and construction at that point in time.

B But it began to change in the mid 2010s and 2014. 15 I had met a person earlier at Investment, Travis Connors, who's my co founder today at Building Ventures. And that was in the window of time when Katera Was funded and WeWork were both funded by SoftBank. And I remember telling Travis one day, I think Masa at SoftBank has lit the industry on fire on both ends. You know, by funding Katera and funding WeWork, he's not only sort of proposing these vertically integrated technology based companies, he's threatening the business models of these industries. And so for me that was a moment when I also realized there was more technology coming available that could help us broaden the application use of technology and how we design and build the ubiquity of the Internet. The cloud was real, mobile devices were everywhere. And so the combination of all those things encourage us to reach out a little bit.

B I did a diagram which I still have, people still will occasionally ask me for it. It's sort of a map of the all the point solutions in AEC and there's just a sea of point solutions. Because it's an industry that's fought so long with so much pain, people were essentially inventing simple software. Again what we might call point solutions but what might be thought of as band aids really versus companies to solve immediate problems and just a whole sea of solutions. And we thought this might be the time where new platforms emerge to change that. And again inspired a little bit by that, we went around the country and started talking to people about it. And it turns out that the people who raised their hands were some of the very large multi generational construction families. This is the Gilbanes, the Mortensens, the Dunn's in Kansas City.

B The others raised their hands and said, you know, we see what could be happening. Were trying to understand our own innovation path and essentially they at that point became our founding investors to launch building ventures.

A As you made your tour, did you also visit all the large architecture firms?

B We did and none of them were really up for investing in venture capital funds. And venture capital was a new concept to the builders as well. To be fair to a lot of people in the industry, it was New was different. But of course, as you would be familiar, the practices in terms of how they're organized from a partnership level, don't lend themselves to have capital necessarily to invest in long term pursuits. Right. Whereas the construction companies are a different animal. Right. They're fundamentally a business animal in many ways.

B And so their business model is different, enables them to think, put a little bit more capital to work. We actually started the firm with an additional purpose with that in mind, which was to create a network, not just a venture capital firm that writes checks. But so the way we solve for that, to your point about architecture and engineering firms and others was we created a network. So we invited in leading voices in architecture and engineering and construction. So even today, the majority of our capital that we invest might be coming from the largest builders and their families, in many cases in this country and somewhat outside. But we still have work hard to maintain the voices through something we call the Building Ventures Innovators network. And that's the way we can bring the voices of the full industry together. Because the purpose of the firm was to support entrepreneurs who can hopefully make a meaningful change and improve how we design and build our physical world for a better built world.

B That's the outcome that we're seeking at the end of the day. And so to do that requires more than just capital and more than just focused on companies. It requires a lot of voices to, if at some point help maybe move the industry agenda forward too, in terms of understanding how to invest in technology and innovation, how to make it work, how to make it transform businesses. And so we are, we have a couple of life cycle folks, as I would say that maybe jumping ahead, but define a little bit about where we are, but also why we began the business building ventures is we're full life cycle committed both in terms of how the world is designed, built and operated. We invest across all those sectors. Most companies, even in the, even if they're focused on one of these sectors, will focus on one like property tech or construction tech. We do the whole thing because to us it's supposed to all be connected anyway, isn't it? That's kind of the idea. And then for us, we're early stage venture capital investors, so we get involved perhaps at the beginning or right after the beginning as a company is introducing products into the marketplace.

B But our goal is to reserve enough capital to follow the company all the way through its journey. And there's a saying that, that I've learned at venture capital, which is the last check is never written. So you Always have to be ready because a lot of things can happen. We had that little pandemic just as a real quick example. Right. You just never know what's coming around the corner when it comes to entrepreneurship and investing in that combination. And so we're full life cycle in both those ways. And that's the.

B The vision, the reason we created Building Ventures was there really wasn't a venture capital firm committed to the space that really understood it.

A So obviously the business model of the architecture firms haven't necessarily evolved. So, you know, the additional capital isn't necessarily there. But are you seeing greater interest from the architecture firms and kind of what Building Ventures is doing and what it means to have a VC fund to. To either be a part of or even be a collective voice in.

B I think so. I mean, I think it's. It's only increasing. In fact, we're in the midst of maybe another wave. There's maybe a handful or more of these BIM 2.0 startup companies which were invested in one called Hypar, which you would know. But there's this new generation of companies being born around this segment. We have the onset of the opportunity around generative design companies in that space. You know, I read a recent article online from Alistair Lewis which talked about it's the combination of those that's going to make the big difference.

B And that might be the case too, but we're in another new wave of investments around design, I think is the way I think about it. It's a very exciting time. And so I think we've seen a lot of participation in our network activities, which is these meetings we hold every six months where try to get all the stakeholders in the room from the industry, including the owners and operators and those who experience a built environment too. So at the end of the day, I think all of us are on the journey to improve outcomes. It's a matter of how we contribute to that in our various roles outside.

A Of the business model. Is there a mindset shift that you think may need to happen culturally? Maybe more on the ACE and E side of things, rather than aec that would help us find these or seek opportunities more?

B Sure, I'd agree with that, but I don't think it's. We know it's not easy. Every spring or every other spring or so, Phil Bernstein invites me to his class at Yale. I get to hear the next generation of architectural leaders in many ways focus on what they're working on. And a lot of it's about the business model and how to Rethink it. So there's so much effort going into that. It's an interesting industry, right? Because it's the most hyper local industry in the world. It's going through a lot of its own transformation.

B By that I mean the broader version of construction that includes design. We have this march to the industrialization of construction that's underway, depending on how you look at it. And so there's an opportunity somewhere in there to improve the business model, but it's not for free, if you will. It will take leadership to assume more responsibility, to share more in the outcome. And I think that's the tricky part of this. Right. We all know that that's a bit of a challenge, but I think regardless of choice, it's happening enabled by technology anyway. There's more opportunity for this intersection of design and construction.

B And the decisions that go into that area are becoming more practical to make them there, more informed there. And that may be the beginning of new business models on all sides of the AEC sector.

A You mentioned in your intro in the kind of the evolution of building ventures that there wasn't a ton of investment going VC into the AEC industry. Talk about the growth and the interests from outside sectors and what you see as kind of the uptick in investments and where most of that focus has been going.

B Well, it's interesting. I'm biased, of course, because for many years I just thought that this should be the biggest investment space, the built environment, because it's kind of like our world, right? It just makes sense that this is where the money should be going. That's not how it's turned out, but that's where it's headed. And you might say, unfortunately, it's because of the continued pressure on our world that is going to drive more investment. When we were out creating building ventures, I had a relatively, let's say financial oriented hedge fund manager in New York. Say to me what you should be out saying is that the world's a disaster and you're here to solve it. He used different words that I wouldn't use in a presentation, but he was trying to encourage me to say you need to, you need to be out there saying this is a huge problem versus an opportunity and maybe you'll get more support for that. For better or worse, that's happening.

B Right? And we've always sort of viewed it's kind of a unique mix of drivers of change that will ultimately enable, you know, this industry to grow in terms of investment from where we were to where we are. But it's amazing to me, when we would go out and talk about the built environment, people just didn't really know, frankly, what it was or what to think about it, which is sort of surprising since we all live in it. But the reality of it is if you asked anybody about their experience with the built environment, they would instantly say, oh, I know how that can be improved. But it was a matter, I think, of more technology and more advanced technology come on the line over time to where people began to feel more like this could be an investment sector. As I said, I think, you know, the onset of Katera and wework really changed the game in many ways. And until that, there was no sector, there was no construction tech sector, no prop tech sector. So the investment world, as you know, needs to have buckets it can put things into. And now it's a legitimate, on a global basis too.

B Right. This is the other thing. I think maybe this really began to get a head start in North America. But really this is when we see our deal flow of building ventures, which is the people reach out to us for support. It's global, it's increasingly global. And so that, I think again, is a sign that this has spread to a whole other dimension in terms of capital and support for innovation and how we design and build our world.

A How many of those people reaching out to you are people that are entrenched in the AEC space already? And then how many are actually outsiders seeing the opportunity of the AEC space coming in, wanting to break in?

B That's a great question. Because increasingly there's always been people from the inside who feel the pain and see it and experience it. But also there's more people now from the outside. And so the onset of the AI era that we're in right now, this version of AI is really also bringing more eyes to this because people are looking for industries that they might see as slower moving, as ways they could disrupt leveraging with artificial intelligence. And there's a certain element of truth to that. Of course there is, but it's bringing more eyes to this, to the space. And post Sketchup, which was acquired by Google, somebody reached out to me inside of Google, and they were launching a project codenamed Genie. And they needed somebody who they thought was sort of like a historian, I guess, at the time, that was what they called me anyway, that would understand the history of aec, because Google wanted to look at aec.

B Organizing the world's information was part of their mission at the time, I guess still is, of course, but, you know, they looked at this world of design and construction and thought, well, this should be organized. And so they launched a project inside of Google X, which I joined sort of as a volunteer. And then eventually we spun a company out of that, which ended up its life called Helix. Before that it was Flux, before that it was Vanavar Technologies. There's a tip in there. Anytime a company has to change its name three times, it may not be the best outcome. But the reality was it was a very bold outreach that maybe, maybe never move beyond the project stage because it really had big ideas. And the reality of it is this business, the business of design and construction will grind you down if you try to move too fast.

B I don't want to sound negative on that, but just more practical in terms of how I look at our startups we invest in when I talk to people in the industry because it's not only the most hyper local, like I mentioned earlier, but also these projects are increasingly complicated and they're long running projects and there's real things that come out of them at the end. So it's not like you're selling a piece of software to someone to use casually. You know, the solutions here are being used to deliver meaningful results that find themselves in physical assets in the world. And so, you know, it raises the bar for how you think about that. And so I actually think though that things like that Flux project was a good example of pushing the boundary. So you always need some of that, even if it doesn't play all the way through the way you expect. It's been a combination of all of these things that together cumulatively open more the doors for people's minds on innovation and more acceptance to try things?

A Do you think there's any fear or should there be any fear of architects finding themselves in a position where they are no longer running firms, but being a part of the organizations that are, that are looking at more vertically, you know, vertical integration, where we find ourselves less in the driver's seat of what we're doing and more kind of on, on the bus that's being pulled along.

B I think perhaps, but I think the solution for that is to lean in in advance, to seize the moment. And for example, the industrialization of construction, you could make a case, right, may minimize the need for that design front end, but actually the design through fabrication is an area that's really underserved right now. And if you lean in and start with that at the very front end, you drive more your influence throughout the process, I think. And so that's Just I think a simple example of how architects could lean in to have more influence going forward. I do think I've said to someone recently, may or not be right on this, but it does feel sometimes like design is on the move. You know, when I go to construction companies, I hear about them hiring architects, but really I hear about them more closely collaborating with them. Right. And so that integration is already naturally happening.

B I mean, you asked me about my career. Again, I've been witnessed or been part of, or I guess I'm culpable for being part of the band who's, you know, been pushing technology for the last couple decades. And it's been a little bit of a grind in terms of adoption, but the value of it over time, even if it's been messy, even if you don't like all the products or they don't meet all your needs, it actually is increasing transparency in the industry, which is the basis for a more integrated activity. Because this is maybe my philosophy, but I think it's probably well thought of by others too, which is that if we could make bigger decisions earlier in the process with more stakeholders, we get better outcomes. But the key to that is the ability that transparency. When I was early in my career, I had an architect tell me once I asked a silly question, which was, how do you know the progress of any project or a building building? And he said, well, it's a little bit like driving down the street in a rainstorm with no windshield wipers. And I was like, that doesn't sound good. And he's like, that's kind of how it is, you know, and the reality of it is that's changing.

B This rising tide of just basic technology adoption is beginning to sort of maybe bring down some of those traditional silos that separate these processes, where something used to be designed or engineered and then thrown over to be built and then thrown over to be operated going forward. Those are naturally coming together with technology and data, which is the key now. And so I. I'm hopeful that over the coming years, more of that natural integration and data sharing will happen. And so that's more of a continuous loop in the process. Right. Because we're always improving our world. And why should we be restarting anything? Why should we be starting drawings from.

A We love restarting everything, Right?

B Well, that's. Maybe that's part of the business model, but I think the idea is continuum.

A I don't know if it's intentionally part of the business model, but I mean, I even find myself some old habits redrafting Things and wanting to design things from scratch and literally having to ask myself, why am I redesigning this from scratch? I've done this 20 times already. It's been interesting to hear about your growth as building ventures. I also want to talk about other large anchors and one of them who acquired one of your companies, Autodesk and Bentley. I think they're often criticized because they are such a large player, especially when it comes to Revit and BIM software for Autodesk. Could you share more about your perspective on their importance within the industry? And I hear you have a great story to tell us about a CFO who reached out to you unexpectedly.

B Well, I think without them we wouldn't have the technology adoption we have today. Because technology adoption is not a one off exercise or experience. Right. It's something that needs support, it needs to be enhanced, it needs to be served up a certain way and advanced and improved a certain way. And so you're naturally never going to please all the people all the time. But the birth of auto, autocad, I was there again in the late 80s, early 90s, was the ability to enable people to do their job at the next level in a really efficient, effective, you know, if you will, cost effective way. So continuing down that, I think you need these large companies. We, the industry needs these large companies.

B In fact, we need them continuing to invest in innovation. Right? And I think that's a really important part of it. And to this point, several years ago I got a call from the chief financial officer, one of the largest companies in the world in ac and he said to me, I think I might be the largest or the second largest customer for both Autodesk and Bentley. And someone told me I should call you because I'd like to replace them. And I said, I said, I thought, think I appreciate the call, but that's not what we're doing here. I thought you were creating startups that could just replace these companies. And I'm like, no, it's not that simple. I know you may feel the financial pressure and so forth, but the reality of it is we are creating companies that in some cases may threaten some of the incumbents, but really to help them advance what they're doing.

B And maybe some of their trajectory is to become part of these companies. We don't know that we're not, we're not building companies to do that. But oftentimes that's a natural trajectory where it makes sense. I said, but I would love to just tell you that we could just replace these companies, but that's not how this works. You're going to have to continue, but the best investment you could make is by investing on your relationship with them and invest on behalf of the industry. Invest in more startups. Give pilots a real chance. You know, look for people who could help change.

B Bring them into your businesses. That's the best way we can all advance technology. It's not just us, it's not just you, it's not just these large vendors. It's that combination essentially creating the competitive.

A Marketplace for innovation within aec.

B Right. Including the pressure, you know, leveraging your strength to request improvements and to press for more innovation. That's the key. The key is all this working together, not working against each other.

A How did the CFO leave that conversation?

B I would say he was slightly dissatisfied in the sense that I was. I think he said to me something like, I was hoping for a better answer, but I guess I should have known the answer. And I said, well, I think it's a deeper than me just saying no, reality wise. I hope that part about leaning into invest in the industry and helping the industry move forward is a really big part of what you can benefit from too, because your size and scale, you can do that, you can make a real difference. That's the way to make a difference. Adopting the technology of our startups is great, but it's part of the solution.

A Yeah, I feel like it's interesting because architects want such a quick return on those type of investments themselves. Yet if we look at the lifecycle of a building and the return on that investment is like we're demanding more out of our software and out of our own innovation than we do out of our clients and the projects that we deliver.

B Yeah, interesting. Can't disagree with that for sure.

A And I know we kind of went around this question already, but why do you think that is? I mean, it'd be interesting to know whether or not that CFO had an architectural background, but is there anything inherent in the mindset that we need to change to kind of shift what it means to invest and bring these innovations, not only invest money, but invest the resources and the time and energy to bring more innovation into this space?

B Well, that CFO clearly had a financial background more than an architectural background, to be frank, which was quite clear in the call, if I can say that. But I think one of the things I have seen a lot happen in the design side of the phase and in construction too, is more hiring younger talent, which obviously is closer to these technologies and knows how to really make them work in many ways, but the key is to be able to get that spread across firms so it gets truly deployed and you get the full benefit of it. Still in a lot of cases, I think, and I've heard this directly from being in user groups and hearing young, particular professionals who came in and they're not empowered. They're. They're an architectural professional, but now they're the tech person on the floor. Right. And that's. We have to move past that to where the firm is deploying technology to make a difference, not just relying on the nice new young person they hired who's really fluent in it.

B Right, yeah.

A Plus they're not really empowered. Right. Because they're also the young person who doesn't have the project experience. So do what we say, not, you know, give you a voice in the process type of thing.

B Right, right, right. But, but I, I think that these technologies are becoming so ubiquitous now, you know, that there is no avoiding it. And we're always at some stage of generational change, you know, in every. In our world. And so we're at an important one, I think, right now with the, with the arrival of artificial intelligence. So there's many more questions from leadership in all these organizations across the industry that never has been really driven in some cases recently, particularly in the last year, by the arrival of artificial intelligence. Everyone wants to know, how does it affect us negatively? How does it affect us positively? So to me, this is a sort of a new open field where there's more open minds towards it. It's beyond tools.

B It's really beyond how do we begin to leverage and understand the value of data and improve our business that way and maybe find new business opportunities at the same time?

A Do you see architects as having the right entrepreneur mindset to find these new business opportunities? So you mentioned, we've spoken and alluded to obviously, generative design, AI and data as a whole within the built environment. I struggle with leaders who are so, you know, heads down, just trying to make payroll at the end of every month or every other week. You know, how do they create space to be entrepreneurial?

B Well, it's. I think it's. Everyone has their own style, of course, and one of the value. One of the unique aspects of being an architect is obviously being creative. And if you can sort of apply that to think more about the business process that way. I listened to the episode with the founder of fifteen, the Philadelphia firm. Right. In terms of how they've leaned into involving people from outside the normal stream of influence into this collaborative Environment.

B Well, I think, again, I think that that approach is one that again, technology enables that to be much more effective and that may provide a broader footprint for business opportunity. But that just, that is a quick example of an approach. So I think continuing to experiment with new approaches that are enabled by technology could be the basis for new business models.

A What do you say if you encounter these firm leaders who look at AI, but they are really invested in sustainability and they're worried about the AI footprint on energy and energy demand?

B Well, that's a deep think. I mean, that is a real issue, right? In terms of the end of the day, the real impact of the, essentially the, the dirty little secret or the real cost of AI is not for free. Right. The impacts of IT are more broad, but it's so far down, it's, it feels so far out of reach. It's within mine's reach. But practical influence is hard to deal with. Right. For an individual.

B But I would say, you know, I presented a few years ago to the Large Firm Roundtable and we were having a conversation about some topics of this before the AI wave hit. And afterwards someone said to me, what did you think the room was like? And I was like, half the room was in and half the room was out, basically. And I think that's kind of how it still feels. Right. And the question is, which side of that are you going to be on? Are you sort of running out the clock in some ways, are you leaning in to redefine how you think about time and technology and how the combination of those could change your business? And that's just a lot into firm management, as you said. And I think that's an endless opportunity for new firms to get out there and apply it. So I think we see that in some of the startups we have, we have a company, Joist AI, which is about winning new business. And I can see through, I can see through the customer lens of our startups, sort of who's doing what, and I'm privileged to sort of see that because.

B But I can see the younger, earlier companies are always on the edge, right. And occasionally a larger company will be there as a customer and it may be a person or narrow support team inside of that company versus the full company being behind it. So I think it's an industry that leans towards not just innovation opportunities, but new firms too, with new approaches.

A Yeah, you talked at the beginning. It's interesting to me that of course you invest in the entire life cycle, but you obviously have this value, you have values towards sustainability. And climate tech. What do you think is the impact of sustainable innovation that you see happening over time that can deliver both good financial results and environmental impact?

B What's interesting, when we began building ventures, our first, most common investor in our first dozen or so investments was the Bill Gates Climate Tech Fund, Breakthrough Energy Ventures. We didn't see that coming. We didn't know them, but they knew energy, they knew sustainability, they knew climate change, but they didn't know buildings, which is sort of why they came to us. And at one point I realized, wait a minute, we're. This AEC business is a, we're a crossover into climate tech in many ways. Now unfortunately, right now we're going through a bit of, I guess what I might call a hiccup in climate tech on the investment side. Right. We lost some policy momentum to support these initiatives in many ways.

B And so, you know, it's a challenging time in some ways. But it will come back, you might say, unfortunately, because it will. It's going to have to. If we just believe the science, we know that the opportunity will be there because the challenge is only going to get larger. And it's just like a project where I mentioned earlier, if you can make bigger, better decisions earlier, you get better outcomes. It's the same thing in a broad sense for how we design and build our world. Right. If we understand the implications of we can all make better decisions collaboratively earlier if we can just get ourselves around to doing that.

B And so we still believe in it and we continue to invest in it because we know that the outcome is meaningful. You know, I mentioned earlier this concept of drivers of change around technology. But one of the things that is also a driver of change is something we call belief systems, which is, you know, a broader concept back to the industrialization and construction, the importance of sustainability. Those are bigger, broader ideas that are adopted by society in many ways. And so those take time, they will develop over time in a very natural fashion, but they'll also support more technology and decisions of businesses that target that. And so it's a bit of a challenging time right now. But we're not stopping because we know that the outcome for a better built world is one that's more sustainable when it comes to things like equitable and so forth. You also have hopes and dreams, but those are more challenging in some ways too.

B Right. That directly influence with technology. But when it comes to sustainability, it's really important that we design and build a world that can sustain itself into the future.

A Absolutely. Well, I mean, I agree with you 100%. You know, a lot of our listeners don't necessarily understand the differences between vc, pe. And then you even mentioned the Gates foundation and how they work our initial investors into building ventures. Can you maybe help our audience unpack kind of the world of investments and their place in all of it?

B Sure. Well, to be clear, the Gates foundation started something called Breakthrough Energy Ventures or Bill Gates did himself. And that is a venture capital firm actually backed by 20 or 30 of the largest families in the world with wealth to put the work to believe in their mission. And then they're a very common co investor with us. So most of the time when we invest, most of the time when investors invest in companies where they purchase equity, you do it with other firms versus just one. The private equity is different. That's a later stage. And that is where somebody might buy a company, if you will, in some ways, and then develop it or change it.

B So as venture capitalists, our goal is to identify the most promising entrepreneurs that we can provide some additional fuel to that they can grow their business and achieve their dreams and goals and make progress on their mission. And so we buy, generally speaking, venture capitalists buy a minority stake in these companies. You don't control these companies. Certainly there's some protections that you have when you make an investment as a venture capitalist in the companies that just can't sell the company without your permission as an example. That's just a very logical things which we would call good governance. Right? Because when we invest in these companies and when any venture capitalist invest in these companies, sort of the gold standard is can it become a public company? That's increasingly become harder, by the way, as the demands requirements to be a public company have gone up. Unfortunately, that's just the nature of how that goes. But still the mission is that because that actually brings the best decision making and as I said earlier, governance into the mix because you have to have that to be a public company.

B You have to have numbers and policies that people can believe in. It can be sustainable and predictable over time. And so but early on it's a little wild, to be honest, because entrepreneurship is, we've all done part of it and there's nothing like it. I mean, one of the reasons I started out building companies was because I felt as an entrepreneur kind of very lonely. You know, like at the end of the day, everyone goes home and you know, you're the person who signed in front of the checks, but you're carrying a lot of burden because you don't know what the next month will bring, you know, what the next year will bring. And whether it's believable or not, if people have been an entrepreneur, they get it, you know, that it's, it's a unique spot to be in. So one of the things I like about the work we do and the approach we take is that we try to be the first call, we try to be the support system. You know, we're not directive in how we work.

B We're more supportive. As you go on in your life cycle as a company and you raise venture capital, let's say later stage venture capital and perhaps later private equity, they are more directive because they're driving a business to a very direct end. In the early stages, we're partners in creation. And I often find myself recommending, I wouldn't say to the astonishment or sometimes surprise of entrepreneurs in our first board meeting when we all make an investment and get together, which as I often. First thing I often say is let's take our time. We get this moment once, this discovery you're in when you're early stage building a company, you don't get it a second time, and certainly not for free. Maybe if you make the pivot, you go back. It's very costly.

B Right. So let's make sure we kind of go through this stage of company creation once and learn everything that we can be as open as possible and then make sure we're tuned into the market, which is really what we're supporting. Entrepreneurs who see a big enough opportunity and if you will, a problem and challenge all in one, that they can make a major difference in advancing. And we invest in those people to accomplish that mission and we support them is our view of how we do that. But that's generally a. That's not unusual for venture capitalists, I would say. People might have their own impression of them, but most of them that work in our space, which is early, sort of have that mindset.

A What are characteristics of an entrepreneur that get you really excited about their potential to, to be a great business person and to, you know, as you're looking at a startup and whether or not you want to invest?

B It's a great question. We've, we've, we've tried to put some words or definitions around it more tightly at building ventures for entrepreneurs to understand too. We call it an earned secret. So this is again, our particular view of entrepreneurs that we back. We want them to really not just sort of pitch us on a solution for their problem. I know it's going to sound kind of strange we want them to be in love with the problem, right? We really want them to be embracing it and understanding why they're on the mission and believing in it. And if they've got a background or smart. PM is project controls.

B And Mike Pink spent years dealing with project delays, trying to understand why he has an earned secret beyond the software they built. He knows why that is an issue in construction projects. As an example, you know Cameron Page at Clear Story, which is change orders, which nobody likes to deal with change orders. But he did it for 10 years as a project manager, right, for a big GC. And he thought, there's gotta be a better way to do this. That's an earned secret to us that someone has that they can apply, that makes them really unique. And the question for us a lot of times is can we support them or surround them with additional talent, capital and perspectives? Because the most, the strongest teams are not those that just come from the industry where they're in secret, they're those also with some perspective from the outside. I mentioned the Google project earlier.

B One of the exciting things about it was at one point with the first 20 people, I was the only person that had done anything in ac. And it was both haunting and also different at the time because I thought, wait a minute, you need professionals in this room. They're like, no, we don't want to have the room be too influenced. I'm like, well, I think this is the time when you need to have the influence. But their idea, there's power to that, right? So there's a kind of a naivete. That's a uniquely enabling thing. That's a broader entrepreneurial concept. I had lunch with Bill Gates one time in the mid-90s when I was running soft desk with some other entrepreneurs.

B And I'll never forget there was maybe five or six of us around this table in Atlanta at this computer show. And somebody asked him, at that time, Microsoft was already successful, what would you do different, Bill? And he said, I don't know if I would do this. And everybody was like, wait a minute, what do you mean you wouldn't do this? He's like, this is really hard, as you all know. He's like, if I had known how hard this was, I'm not sure. And then I remember sitting there feeling like walking away, feeling like, yeah, sometimes it feels that way. Like one of the benefits is that, you know, you're kind of have the ability to go into the unknown and take, take that risk. Right? That's a sort of secret benefit kind of the strength and naivete or whatever, if you will. So when we invest in someone, back to the original part of the question is we're not looking for someone with all the answers.

B We're looking for someone who has this unique earned secret, has an idea how to attack it and is open to learn more and bring in other voices and perspectives to really go after it and deliver on it over time. And also whether, you know, frankly, the pain, the disappointment, the highs, the lows. When we're building these companies early, it's as much as maybe we don't like to admit it, it's almost like a week to week adventure. Oh yeah, you can have good weeks and not good weeks and things happen. Right. I think especially in AEC because real things are being done with the technology. Things are really being designed and built. Again, it's not like a consumer product where people are playing or they're looking at cats.

A There's no VaporW when it comes to the AEC industry.

B There's no room for it. It gets discovered really early. Right. And it's not a good scene. So this is why also we emphasize it's about building a company because a company is more inclusive and it's designed to support the customer in many ways versus just selling people software. So I'm excited that the last five years has seen the rise of a lot more customer success invested in some of these companies. Companies. So really helping the customers deploy it to improve what they do versus just trying to push it on them if you will.

A Well, I feel like technology, I mean even on the technology side with the SaaS delivery versus the CD that you get once a year, you really need to beef up customer success just to ensure that they are keeping up with everything that you're delivering too.

B Right. It's a two sided proposition that way for sure. Customers and company.

A So I have an idea and I am listening to you describe what you look for in an entrepreneur. How do I come and pitch building ventures?

B Well, there's a connect page on our website that allows you to send your ideas. But usually, I mean I will, I'll be honest and say that we get a lot of inbound. Obviously every single morning there's new proposals in the the email box. But the most effective way to get anybody's attention building ventures or otherwise is to be connected to someone that knows somebody. Just so there's some early context, you know, because personally as an example, people send me decks, if you will, presentation decks endlessly. But I actually don't really look at Those, when they send those to me, I want to know the people behind this, why they're doing this. What do they know? What are they trying to accomplish? At some point, sir, will take a presentation deck, but I really want to know why you're doing this and what it's about. We sort of have this analog of sort of an early.

B Maybe I'll use the word screen, although that might be perceived as negative, but in terms of trying to understand something, you know, I lived across from the ocean for about a decade, and somehow between myself and my Dartmouth co founder, Borealis, we came up with this idea of a surfer, a surfboard and a wave to try to define the elements of what we're sizing up when we're trying to understand potential for success. Given that the surfer is the team. In this analogy, the surfboard is a product or service and the. And the wave is the marketplace, right? And so it's not just about your product and it's actually not just about you. It's about that combination. But the most effective thing to understand beyond the team is and the surfer, if you will. This analogy is what's happening in the market. What's the nature of it.

B Just like waves go up and down, you know, what's the ability for people to. How big is the problem? What's the ability for people to pay for it? Does it really make a difference? All those things sort of factor into it. And it's that combination of things that in my mind, I'm always thinking, you know, you're asking me that question. When I first meet somebody, I'm thinking, I'm sizing them up, trying to understand their idea and trying to understand the market dynamic because it needs to succeed in each of those areas to. To, I think, come together and be a productive outcome.

A Has anyone ever successfully reached out to you cold and you're like, I need.

B To talk to that person for sure, 100%. I think the difference now is that we have the social networks like LinkedIn and so forth, right? Where essentially, frankly, I'm on there following people, right? As they talk about things logically, right? So probably people may not be aware investors, not just us, but us in particular. We do a lot more search than people probably realize in terms of trying to follow people, right? Because we sort of know what we're looking for. In some cases, we're always ready to learn. For example, we know that pre construction is the action zone for the next five years. We feel deeply about that, right? Because that integration of how we design and Build is increasingly coming together and it needs to those decisions can be made more upstream. So somebody, an entrepreneur reached out to me yesterday and she said, I reached out to you because you're the most active investor in pre construction initiatives. Between Adaptis and Joint Build and all these other companies.

B I'm like, that's, that is, we're focused in that zone, but at the same time we are focused on fabrication and prefabrication and modular as well. Right. The industrialization and construction. So we run at any one time kind of three or four initiatives that somehow all connect, if you will. But we sort of market map the various players out there and we look for influencers that are driving that. I think if a person's trying to get the attention of an investor, not just us, but being out there, if you will, as a industry influencer, not us necessarily a social influencer, being out there as an industry influencer, voicing what you're thinking about and trying to push the industry forward is one of the ways to, I think, be identified by quality potential investors out there with your vision as to how you would improve a certain area of how we design and build our world.

A Looking ahead, what do you hope will be your lasting legacy of the work and building ventures footprint on shaping or reshaping or rebuilding or reporting the foundation of the future of the industry?

B I mean, for me, I think what we look for at the end of the day, obviously we're investors, so there's a financial return component. But really if you build good companies and they have great missions, that takes care of itself is the view. But for us, the real difference is will something last and live on? Like, I'm still proud of Autodesk Civil 3D. I feel like we were there when it was born, we were part of it. I'm proud of Sketchup. I look at that all the time and think, yeah, that was an important thing. But I think for us, hopefully entrepreneurs will say, hey, they were supportive when I really needed help. And we've made this major difference in how we design and build for a better built world.

B That's our, that's our measure is, you know, can the work we're doing and the entrepreneurs in particular we support, can the solutions they deliver to the market, can the teams they develop over time really make a difference in terms of how we design a build for a better built world? That's the challenge for us. And even if it's just mentioned in slight, we were happy to have their support. That's good enough for us. And if we hear that and they've made a difference. We know we will have done well for our investors at the same time. Time.

A Hi Disruptors. Thank you for joining us today on an episode of Practice Disrupted. If you like the content for today's show, you can find all of our past episodes over on practiceofarchitecture.com podcast. Be a part of the conversation by joining me, our speakers, and other disruptors in our community@practiceofarchitecture.com community. Our social media handle is practiceofarch. That's practice of ARCH. We'd love to hear from you, so feel free to drop us a DM and say hello. Tune in next week for a new conversation on change in the profession.