Caution key to investing in construction tech startups this year, Cemex says

MEXICO CITY (Reuters) - Investors in construction technology startups are going to be cautious in the first half of the year as geopolitical factors, market demand and U.S. elections weigh, said the head of Mexican cement maker Cemex's venture capital arm.

"We're going to keep being cautious," Gonzalo Galindo, who leads Cemex Ventures, told Reuters ahead of the publication of its annual report on Tuesday. "We're going to keep trying to see how all these variables play out or diminish in the future."

Cemex Ventures expects investment in construction technology startups to remain stable from 2023, with valuations potentially decreasing slightly. Total investment last year topped $3 billion across 236 deals, its report showed.

From 2020 to 2022, "everything was rosy" for startup founders, Galindo said in an interview. "An entrepreneur could show up with just a PowerPoint and be able to raise money."

But now, investors are "being tougher," he said. "They're asking more questions, double-checking things."

Galindo pointed to factors such as wars in Gaza and Ukraine, contracting demand for new construction in Germany and the UK and elections in the United States as giving investors pause.

"But the money is there," Galindo said. "The funds that raised money, raised money - they aren't going to keep that locked up in the bank forever."

In its report, Cemex Ventures sees startups operating in "enhanced productivity" - such as document management or project visualization and modeling - as dominating construction technology deals this year.

Galindo said it was this sector where a number of similar firms were already operating, likely leading to mergers or acquisitions through the year.

The U.S. is also likely to be a hotspot for investment, with Europe close behind, Galindo said. However, those operating in sustainability or who had looked to benefit from the U.S. Inflation Reduction Act are in "wait and see" mode, he added.

"If, somehow (former U.S. President Donald) Trump takes power, people are going to ask, 'Well what do I do about these environmental decisions?'"

Trump, who has repeatedly denied the science of climate change, has made attacking the Biden administration's investment in renewable energy a cornerstone of his election campaign.

(Reporting by Kylie Madry; Editing by Christopher Cushing)

By Kylie Madry