This week:
Vertiv - the "shovel seller" powering the AI data center boom
Looking beyond the obvious for construction's hidden opportunities
The power of "tooling" to enable the broader AEC industry
Uncovering the "hidden champions" in the construction tech space
Constructing relevant advice for founders in this industry
Vertiv - The "Shovel Seller" Powering the AI Data Center Boom
Vertiv, a large publicly-listed company, is quietly emerging as a critical provider of power, cooling, and infrastructure solutions for the booming AI and data center industry. Shub explains, "Vertiv very much fits this description of a company which has somehow out of the blue, started selling showers in a gold rush." Despite its traditional roots in electrical and HVAC products, Vertiv has morphed into a specialized supplier of end-to-end data center systems.
Patric notes the company's unique position, saying "Vertiv almost as much as it needs Nvidia. Artificial intelligence requires more than chips. It's need data centers equipped by manufacturers." Vertiv's stock has soared 600% in the past year as investors recognize its vital role. As Shub observes, "this could really go some distance."
Vertiv offers a "one-stop shop" for data center operators, providing cooling solutions, rack systems, project services, and more. Shub explains, "Think of them as like an all-in-one contractor which provides products and services to get you up and running with the data center." While AI and machine learning grab the headlines, Vertiv understands that the physical underpinnings - the "shovels" - are just as vital.
Looking Beyond the Obvious: Finding Construction's "Second/Third Order" Solutions
Too many entrepreneurs and investors in the construction tech space focus solely on the most visible, first-order problems and opportunities. Patric cautions, "If that's your thing, go for it. That's also a pretty cool vertical in construction, but the point is you have a million of these subverticals for which you can build tooling and build very substantial companies."
By taking a more holistic, systems-level view, builders of construction technology can uncover compelling niches that others have overlooked. Shub explains, "Quite often when new trends emerge, there are still physical manifestations of those that need to happen to actually bring these mega shifts into existence." These "second" and "third order" solutions may not be as obvious, but can create durable competitive advantages.
Patric elaborates, "We're observing the same thing. I would not agree with everyone's conclusion necessarily, but yes, I'm observing the same thing." The Vertiv example illustrates this principle - its focus on the often-overlooked power and cooling infrastructure enabled it to ride the wave of the AI data center boom.
The Power of "Tooling" to Enable the AEC Industry
A key theme is the power of "tooling" - building technology products and services that empower and enable the broader construction and AEC ecosystem. Patric explains, "The tooling portion. What does it actually mean to build tooling using this example?" Shub responds, "The tooling, what they provide is, think of it like a one-stop solution... an all-in-one contractor which provides products and services to get you up and running with the data center."
Rather than compete directly with construction firms, these "tooling" companies provide the infrastructure, workflows, and capabilities that make the entire industry more efficient and productive. Patric notes the structural advantages, saying "Tooling companies often enjoy outsized market share, higher margins, and more durable competitive positions compared to firms closer to the end customer."
Shub elaborates on the flywheel effect, "By deeply understanding the unique needs and pain points of the construction industry, tooling startups can develop specialized solutions that are difficult to replicate. This dynamic creates a powerful flywheel effect, as the success of these tooling businesses further empowers and enables their AEC customers."
"Hidden Champions" in Construction Tech: Untapped Riches
The conversation highlights the prevalence of "hidden champions" - niche, specialized construction technology companies that have achieved dominant market positions but remain under the radar. Patric shares an example, "I know of a company from my country... that are a global hidden champion doing 2 billion of revenue a year just designing and manufacturing the what's the English term for like grappling mechanisms for robots."
These hidden champions often thrive in fragmented, underserved segments of the construction industry. Shub notes, "I feel like there's so many examples of these beautiful business models serving niche opportunities that are just waiting for some love from founders." Patric adds, "They are there at volume, at scale, and so construction is the biggest sector that actually has all of that, but it requires you to dedicate to wanting to find those."
For investors and founders, uncovering these hidden gems requires specialized expertise. As Patric explains, "It's you can really when you dedicate to the construction sector and spend enough time discovering alongside any mega shifts that are happening, what are these big underserved markets for which I can sell again tooling to allow someone else achieve their goal."
Constructing Relevant Advice for Founders
The discussion highlights a critical disconnect between the generic advice often given to founders by VCs, versus the realities of building successful businesses in the construction technology sector. Patric notes, "Traditional VC wisdom around pursuing large total addressable markets or focusing on quick early customer validation can be actively detrimental when applied to the AEC industry."
Construction is a highly specialized, relationship-driven space where track record, reliability, and outcome-based selling are paramount. Patric shares his perspective, saying "In construction, you're an outcome business. They are used to procuring services and outcomes. Look for the P&L line item and offer it as a service." Shub agrees, "I feel like there's so many opportunities where if you just go to the second, third order thinking, it allows you the luxury of little to no competition simply because not enough people or maybe even no one is looking into this space."
Experienced construction tech investors recognize the importance of guiding founders accordingly. As Patric explains, "I told him, If you're gonna go with their advice, sell the robot and then prove yourself that way, it's gonna take you 10 years to get to track record. The fastest way to track record is doing it yourself."
Grid, Robotics, and Digitizing Manufacturing: Emerging Construction Tech Opportunities
The panelists identify several promising areas of emerging opportunity in the construction technology landscape. Shub notes the potential in grid modernization, saying "the more data centers come up in places where they were not expected to, they have very different kinds of energy demands, which also creates a different kind of demand for upgrade or change in grids."
Patric highlights the need for construction automation and robotics, particularly for repetitive, high-volume tasks. He explains, "I'm also looking for tooling and usually that will be in the form of either robotics or some kind of automated tooling when it comes to trades that have characteristics like large surface areas, relatively few edges at corner areas. Think paving, think roofing, bricklaying."
Beyond these visible trends, the conversation also points to the potential in digitizing and streamlining traditional manufacturing processes within the AEC supply chain. Patric describes a company providing "ERP-style tooling to smaller, less tech-savvy factories producing construction materials like tiles, bricks, and steel" to unlock efficiency gains.
Across these diverse areas, the common thread is the ability to identify meaningful problems, develop tailored solutions, and empower the broader construction ecosystem. As Shub concludes, "Founders and investors who can apply this strategic lens to uncover the next generation of 'hidden champions' in construction tech stand to capture significant value."
Find more analysis on the Practical Nerds podcast
Subscribe to the NEWSLETTER here
Keywords: construction technology, AEC technology, construction tech, construction tech opportunities, construction tech trends, construction robotics, construction automation, construction manufacturing digitization, grid modernization, construction tech investment, hidden champions in construction, construction tech startups, construction tech founders, construction tech advice