Tech builds apps for construction workers

Technology has transformed nearly every industry. One glaring exception is the construction business. While white-collar professionals have made huge strides in productivity over the past several decades, construction workers have largely been left behind.

“Construction is an industry stuck in the 1960s in terms of productivity,” said Yves Frinault, co-founder and chief executive of Fieldwire, a mobile and Web platform designed to make construction projects more efficient. “To collaborate, people still rely heavily on paper, whiteboards and physically tracking down a person on-site.”

But investors say the industry is ready to leap into the 21st century, largely thanks to the mass adoption of mobile devices by workers in the construction business. In fact, funding for construction-related startups quintupled to $254 million in 2015 from $51 million in 2010, according to CB Insights.

San Francisco-based Fieldwire nailed down $6.6 million in financing led by Formation 8 in 2015. The company says its collaboration platform can help reduce the billions of dollars wasted every year on construction sites due to poor execution.

Another well-funded construction tech startup is Plangrid, which has raised about $60 million from Tenaya Capital, Sequoia Capital, Founders Fund and others. The San Francisco company digitizes cumbersome, constantly changing blueprints. Construction teams can use the Plangrid platform to access and mark up these blueprints on their mobile devices, enabling them to keep pace with changes in real time.

VCs have good reason to build bridges to the construction industry: It’s a massive sector. After a prolonged period of sluggishness in the wake of the financial crisis, the industry grew to $8.5 trillion globally in 2015 from $7.5 trillion in 2010, research firm Construction Intelligence Center says.

But construction is also cyclical. Investors must be wary of the fact that when the economy weakens, the construction industry is usually first to come crashing down.

“Construction is one of the few industries that is very large and has substantial growth, but technology just hasn’t touched it yet,” says Neil Chheda, a general partner at Romulus Capital. “We believe there is a lot of low-hanging fruit in construction.”

Romulus recently led a $5.5 million round in EquipmentShare, a peer-to-peer marketplace for construction equipment. Chheda says many small-to-midsized contractors can’t afford to accept business that falls in their lap because they can’t easily access the equipment they need to do the job.

That’s where EquipmentShare comes in. The Columbia, Missouri, company, which has been dubbed the Airbnb for construction, applies the principles of the sharing economy to heavy machinery. It makes it easy for contractors to rent equipment from other contractors. It’s equipment that would otherwise sit idle.

The founders of EquipmentShare, brothers William and Jabbok Schlacks, were themselves former contractors. They knew how challenging it was to track down the right machines for various jobs.

Whenever they purchased a new piece of equipment for their construction business, they devised a paper-based system that allowed them to share the machine with other contractors in the area when they weren’t using it. They soon realized this sharing system was more profitable than their actual construction business.

“The traditional equipment-rental business today is about a $35 billion market,” Chheda says. “And in the part of the market where EquipmentShare operates, they have the ability to replace about 25 to 35 percent of that rental business. So this is a fairly large opportunity.”

The company is growing about 7 percent to 10 percent every week since the platform launched in 2015, and now has annual revenue of more than $10 million, Chheda adds.

Of course, like all businesses, there are challenges.

“This is a geographically focused business, so you can’t flip a switch and go live across the country,” he says. “Each region is different in terms of the type of work it does and the equipment it needs. So you can’t scale the company like you could a consumer tech product.”

Amy Rae, a principal at Vanedge Capital, sees another challenge.

“You might have great tech, but if the industry is not ready to adopt it, then it doesn’t really matter,” she says. “That has long been a problem with the construction industry.”

But Rae is convinced that those days are in the past, especially now that everybody in construction has smartphones in their pockets.

“That fact alone has really brought the construction industry up to speed,” says Rae, who notes that a lot of the firm’s LPs are high-net worth individuals who come from the construction industry. “This is a very mobile industry where people are not anchored behind a desk. They are constantly moving from site to site, so mobile technology makes complete sense.”

Vanedge recently invested in Bridgit, which raised a $1.7 million seed round. The Ontario company’s Web and mobile platform acts as a digital “punch list,” the traditionally paper-based document for tracking incomplete or incorrect tasks on a construction project.

In the past, Rae says that general contractors had trouble keeping track of these punch lists for big projects. For a typical project, thousands of items have to be fixed or addressed, and managing them all and figuring out which were completed and which were not was not easy.

“Contractors would have a bunch of sticky notes all over the place, or they would try to juggle different spreadsheets and emails,” she says. “They had a hard time coordinating it all.”

Before they launched the company, Bridgit’s founders visited construction sites, asking workers what gave them headaches. Punch lists were consistently at the top of the list. Contractors were spending a lot of time and manual effort just to make their punch lists as manageable as possible.

“Even worse, money does not exchange hands until the items on the punch list are completed,” Rae adds. “So it’s a big problem to fall behind.”

Bridgit’s punch-list software gives contractors the ability to see what items are still outstanding and who is responsible for what. Contractors can use their mobile devices to record issues, assign work to the responsible subcontractors, and better manage the entire punch-list process.

The Bridgit software costs an average of about $1,000 per month.

For some, that might be too high a price to pay. That’s why Crosslink Capital recently led an $8.5 million investment in Buildingconnected, a San Francisco developer of a platform that helps construction professionals procure project bids.

“Many businesses in the construction industry are small and they don’t want to pay extra for technology,” says Omar El-Ayat, vice president at Crosslink. “The whole thesis at BuildingConnected is to create a simple, free product that can capture a large chunk of the market.”

In the past, contractors would have to maintain their own databases of contacts for requesting project bids. The problem is people move from company to company all the time. So when contractors go out to bid on a construction project, they quickly realize their old contacts no longer work there.

BuildingConnected aims to help contractors build an up-to-date bid list, complete with such data as proposals and drawings. It also enables them to communicate with subcontractors on a project and make changes within the platform.

“Trying to sell traditional software to a contractor or a subcontractor, that model has never really worked,” El-Ayat says. He adds that the key insight for him is that BuildingConnected is the first company to go after the construction space with a free, LinkedIn-type network.

“We are not going to charge Joe the Plumber $200 a month to use that software because that is not very interesting to Joe,” he says. “But if you tell Joe it’s free, and he’ll be able to find and win more business if he uses the product, then that’s a winner.”

Perhaps the biggest concern for investors is that there are no tech giants in the construction space that can serve as natural acquirers for these startups. But that doesn’t dissuade VCs like Chheda.

“It’s hard to find such a large market where the innovation barrier is so low,” he says. “Construction really is a great opportunity for venture investors.”

Now, they just have to, well, nail it.

Tom Stein is a Palo Alto, California-based contributor. He can be reached at tom.stein@yahoo.com.

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