By Daniela Raffel, Jimena Nowack & Owen Brooks
Software, famously, is eating the world. Yet, much of the Blue-Collar economy has remained stubbornly hard to swallow.
Much has been made of the power of AI and vertical software in recent months. Europe is already home to fantastic successes in the space including Mews (hospitality), Doctolib (health) and DataSnipper (finance), to name but a few. Yet these outcomes are overwhelmingly focused on White-Collar industries, despite the fact that Europe’s 80 million Blue-Collar workers represent more than a quarter of European GDP and a third of all employment on the continent.
The US has already seen several iconic companies built in the Blue-Collar space, including Procore ($10.6BMkt Cap), ServiceTitan ($9.5B Series G, recently filed S-1 for IPO, handling $62B transaction volumes and $685m revenue), and Aurora ($4B Series D). But although Europe has twice the number of Blue-Collar workers as the US, we don’t have a recognisable Blue-Collar behemoth — yet¹. At Dawn, we firmly believe that a combination of the current generational shift in talent, the tailwinds of AI, and increasing regulatory pressures mean this is about to change.
‘Blue-Collar’ encompasses a range of industries and whilst there are many similarities, it would be a mistake to try to address everything in one go. We’ve already written a love letter to next-generation manufacturing software; this time we’re focusing on software for the construction firms and skilled tradespeople who build the spaces we call home and the buildings we use as offices, and make the repairs for our DIY disasters. These are industries where the IP sits in human hands and the link between software and increased or improved output isn’t as direct. But that doesn’t mean it is any less impactful. In fact, it will be more tangible to millions of working people.
Below we share our ‘why now’ — along with what we can learn from adjacent industries in scaling across Europe’s SMBs, and lessons from the founders innovating on the ground that we’ve been lucky enough to interview.
We don’t often get to see a truly zero-to-one software moment these days, but this is one of them — and we believe that Europe’s Blue-Collar sectors are ready for it.
Why the Blue-Collar industry, why Europe, why now
A massive and underserved market
There are more than 1 million construction companies in Europe, with similar numbers in trades such as Field Services and Systems Installers². These companies have been some of the last to digitise. According to Gartner³, these sectors have the lowest spend on IT, coming in at just 1% of revenue. By comparison, the median spend across all industries is 3%, and manufacturing spends more with a 2% average IT spend. The result: productivity growth in Construction has averaged 0.4% per year versus 2% for the economy overall⁴.
Why now?
- New regulations and the green transition are fuelling growth in the sector
→ Europe invests just under €2 trillion in construction annually, of which 30 percent is spent on renovations⁵
Spending has grown in retrofitting and installation use-cases driven by legislation including the NextGenerationEU and decarbonisation initiatives. McKinsey expects installed European solar capacity to triple this decade and industrial heat pump investment to quadruple leading to surging renovation spend⁶.
→ The Net Zero transition is increasing reporting requirements and creating new trade business models
Increasingly stringent ESG, data transparency and accountability demands⁷ are increasing the reporting burden creating a clear opportunity for software to enable data collection, analysis, and reporting in a way that was not as urgent before. New businesses are also being established to meet the demand generated by the move to Net Zero, such as installing three million new heat pumps installed in Europe every year⁸. These businesses are often new or standalone and, as a result, can leapfrog legacy players and embed software from the beginning.
- Generational shifts and post-pandemic behaviours are driving increasing digital adoption and demand
→ Digital natives are increasingly the decision-makers in construction companies, increasing their propensity to buy technology. COVID was also a turning point in digital adoption to communicate across sites, with HQ, and with third parties. Now, 90% of workers have mobile devices on construction sites and hardware adoption is no longer a hurdle⁹.
- Increasingly urgent labour shortages are making productivity a central priority for construction and Trades companies
→ Generational change is driving a severe Blue-Collar labour shortage across Europe. Skilled tradespeople represented the most common labour shortage in Europe in 2022¹⁰. Carpenters, plumbers, electricians and bricklayers now dominate the top ten of most in-demand jobs, and business owners consistently report labour shortages as their most pressing priority¹¹. Solutions are needed to give those in employment the leverage to keep up with demand.
- New GenAI tools can help construction firms in ways never previously possible
→ GenAI developments mean the potential of vast amounts of data collected by Blue-Collar enterprises can finally be realised. Unstructured data in handwritten invoices, scribbles on invoices, voice notes, pictures and pdf printouts form the backbone of these industries, but this high variability previously made it impossible for data to be ingested and understood accurately at scale. GenAI has changed the game. Automation through GenAI will improve scheduling, resource allocation, and real-time decision-making support going forward.
Why Dawn believes winning the Blue-Collar European market will be hard, but possible
A common refrain we hear is that individual markets in Europe just aren’t deep enough for a vertical player, and are not worth tackling due to the huge variety of languages, cultures and regulations. This is particularly the case when SMBs are the focus customer. We disagree. Difficult challenges are worth tackling, especially when citizens’ businesses and livelihoods depend on tech innovation.
Through our portfolio companies — particularly with payments companies iZettle and Flatpay — we’ve seen evidence that although Europe is often a harder market for vertical solutions than the US, top companies can and do make it. They have won over time-poor, owner-led, and otherwise largely manual businesses, and we believe the lessons of their success can be applied to Blue-Collar solutions.
Winning over European SMBs in a vertical: a case study
Denmark-based Flatpay has created a game-changing solution simplifying payments and financial management for small and medium-sized merchants. We believe the company’s highly successful strategy for selling payment terminals to small founder-owned businesses would be equally effective in Blue-Collar industries.
The company uses field sales to find and install services for customers where they are. This enables agents to educate customers in person — a crucial factor in signing up ‘mom and pop shops’ who are unsure they need a new solution and are not familiar with the technology — and deliver the product smoothly. iZettle also knew where to find their customers who were, in the early days, first-time or part-time merchants experimenting with a payments solution. They used educational leaflets in markets to great success to build initial interest in the product.
We asked Flatpay executives what they would recommend to Blue-Collar software innovators, and they stressed that for this approach to be successful, efficiency and execution are key. Philip Aandahl, Flatpay VP of Expansion, said:
“Don’t do too much to begin with. Start with a large city and win it, then move to other parts… The greater your proximity to customers the better. It’s cheaper if you have the field person all in one place, and it makes the network effects more significant.”
An exciting and fast-developing space: Lessons from innovators cracking this market on the ground
We’re not the only ones seeing this opportunity. There are a number of exciting Blue-Collar vertical software players emerging on the scene to ride these tailwinds, and they have a clear chance to seize the market.
