My Investment Takes: The future of building

My Investment Takes is a weekly dive into the startups I find the most innovative & interesting.

This week's dive is going to be a bit different. While I will name an interesting company, I will mostly talk about the space it's evolving in.

Have you ever imagined what the Empire State Building would look like if it was made out of wood?

Me neither.

Sure, we can all imagine a little cottage in the Swiss Alps made out of timber that is ridiculously expensive to rent, all cosy with a beautiful chimney, a book, a cup of tea and snow all around. Skyscrapers don’t really fit in the narrative.                    

Well, I’m here to tell you it’s possible.

Despite their omnipresence, traditional brick and mortar buildings are extremely energy voracious and are not the only way to go. 40% of the world’s energy consumption goes to the construction and operation of buildings, and around one-third of greenhouse emissions. The world needs more houses, and will continue to need more houses for the foreseeable future; however, we need a better way to do so.

And using CLT, or Cross-Laminated Timber is one good solution. In simple terms, it’s a type of engineered wood produced by gluing strips of wood to one another at 90-degree angles. They are then compressed under extreme pressure to create the final building material. However, the adhesive usually used is formaldehyde, which is toxic in high concentrations.


Enter Materialize.X!

Materialize.X is an early-stage UK-based startup created in 2016 which developed a scalable and non-toxic adhesive and optimization software for the engineered wood industry. They combined data science and chemistry to create sustainable, cheap, and efficient adhesives. They are also known as Leonx.ai

What’s the construction industry like?

Some numbers…

The construction industry is large, complex, and involves a dozen of stakeholders between clients, advisers, contractors, suppliers, manufacturers, public authorities, financial institutions, etc. I will therefore be as succinct as possible and use orders of magnitude whenever I can.

Oxford Economics estimates the global construction market to be worth $10.7 trillion in 2020, with more than half of this output coming from emerging markets and the residential sector leading the way. This valuation is expected to grow by $4.5 trillion by 2030.

And it’s not going to stop there. Some estimates point out that we’ll need to build more than 2 billion homes over the next 80 years, as the UN believes the global population is set to reach 11.2 billion by then. That’s a lot of houses, and an incredible challenge for the countries that will build most of those: emerging countries in Asia and in Africa.

The issue is, building houses is not exactly the most environmentally-friendly activity. Steel and concrete are the main culprits there.
The former is made by separating oxygen from iron and then adding a bit of carbon. To do so, you need to melt iron ore at 1,700 C° with oxygen and a type of coal that releases carbon. The carbon ratio is 1:1.8, in other words for every 1 kilo of steel produced, you release 1.8 kilos of carbon dioxide. As for the latter, concrete, you need to mix sand, water, gravel, and cement. And cement is a bit tricky: you need calcium, which you get by burning limestone at high temperatures and you guessed it, that creates carbon dioxide. In this case, the carbon ratio is 1:1.

Bottom line is, we’re not going to stop building houses and we need a way to mitigate the amount of carbon emissions that might get released as a result.

Engineering Wood

Carbon emissions have to be curved, but it won’t be at the cost of growth. Post-industrial countries simply can’t ask emerging economies to go for a more expensive option, albeit more environmentally friendly, at the cost of not being able to increase economic prosperity.

Therefore, a string of solutions around construction methods and operations has to be crafted; and engineered wood is one of them.

Wooden buildings (not houses, but more like apartment buildings) were first thought of in 2013 by the architect Michael Green. The largest hurdle then was the prohibitive cost of those types of buildings. However, with the introduction of competitors, increased interest in the solution, and economies of scale, the cost has been brought down.

It’s not yet competitive kilo-for-kilo with concrete, but it’s getting there thanks to decreasing construction costs tied with the ability to prefabricate wood – and therefore get a return on investment in fewer years.

How is it made though?

Managed forests are used to provide trees, from which fibres will be extracted before being dried in silos. The wood is then mixed with an adhesive – usually formaldehyde – and hot-pressed into a board shape plank. Then for the finishing touches, anti-moulding and fire retardants are applied, making the planks ready for use.

There are two main issues with this process: the use of formaldehyde – which is toxic – and a lack of manufacturing optimization which makes constructing buildings out of wood too expensive, and therefore not attractive.

And that’s where Materialize.X comes into play.

The Opinion of a Civil Engineer

I asked Bhragan Paramanantham for his insight

Hey Bhragan, thank you for taking the time to answer some questions.

• Could you describe your experience and interest in the construction industry?

Hi Hédi, I'm a civil engineer with a software/startup background currently in the industry. I am interested in ConTech startups and innovative new construction methods to improve productivity, sustainability and construction processes to ultimately deliver a better, greener world.

• How viable is engineered wood as a large-scale construction material?

Timber has always been used as a building material however only recently advances in fabrication methods and mass timber construction has made the material viable on large scale projects. It offers numerous benefits including reducing carbon emissions and producing less waste. The viability as a building material has been verified by its use in a number of timber buildings such as Mjøstårnet in Brumunddal, Norway (85m) and Ascent MKE (87m) in Wisconsin, USA which is currently being constructed. Further projects have been proposed such as C6 in Perth, Australia which would be the world’s tallest timber hybrid tower at 183m. Engineered wood definitely is here to stay.

• Do you think Materialize.X’s technology is a big deal?

Materialze.X's technology is interesting as they have two offerings which naturally build on each other. The first involves providing machine learning software to factories to optimize the manufacturing process for engineered wood and improve quality. Advising on manufacturing process improvements provides the company with the opportunity to sell their adhesive as an alternative for factories. Their patented adhesive offers a sustainable option to the currently used adhesives which are harmful to the environment and increasingly facing government regulation. Materialize.X's solution does appear to address a pain point in the industry and offers a non-toxic and sustainable adhesive alternative for mass manufacturing use. This is definitely a company that I'm eager to watch develop.

My Conviction

I believe we need to explore new solutions for our future, and the disruption of the construction industry is key to this future.
Engineered wood is starting to gain serious traction as a possible replacement for brick and mortar buildings, and I believe today is the right time to get behind the idea. One challenge is going to be price and public acceptance, but tremendous headway was already achieved, and I think more economies of scales are underway.

After all, it only took a couple of decades for solar panels to be affordable.

Materialize.X, or Leonx.AI is an interesting company, evolving in a promising landscape.
If you’re excited to check them out, take a look at their website http://www.materializex.com, and leave a comment on this post if you have any thoughts or comments!