Modern software, data access, and AI for the construction supply chain: our investment in Parspec
We’re witnessing a once-in-a-century moment for American industry. The last 50 years have been defined by the globalization of supply chains, manufacturing, and commerce, but in the last few years, we have begun to see that tide shift. The Inflation Reduction Act and geopolitical conflict — combined with a heightened focus on industrial independence and security — have reignited mass onshoring and friendshoring. What better time to revitalize the technology that allows us to build?
Bloomberg 2023
At the foundation of our industrial economy is the construction industry, and much has been said about its stagnancy over the last few decades. Construction productivity has flat-lined over the last 70 years, which is a massive concern if new infrastructure, housing, and transportation are a priority. Part of what is most vexing about this lack of innovation is that over the same time period, the products that make up our buildings have seen tremendous improvements. Over the past two decades, lighting has come down in cost by over 20 times, while quality measured in terms of luminous flux has improved by 40 times. Not only has this created huge savings, but it has also delivered massive carbon reduction. Lighting’s share of global emissions has been reduced by more than half since the start of the 21st century. For example, the Indian LED market has grown 130-fold in five years, resulting in 30 terawatt hours of annual energy savings, enough to power the whole of Denmark for a year. Similarly, in plumbing, novel polymer and pipe materials are dramatically reducing costs while increasing durability and longevity. Awareness of greywater systems — which can protect against overuse and drought — is surging. Despite this progress, the construction industry has a long way to go if we’re to hit our collective building performance and net-zero goals in the near future.
We all want a modern, beautiful, and efficient built environment, and as products improve rapidly, it’s critical that contractors have awareness of and access to these new capabilities. To get there, we need to dig into the inner workings of the construction industry. Perhaps one of the most telling signs of friction is the cost-of-sale for construction products (think lighting, mechanical, electrical, plumbing, doors, windows, etc.). The average cost-of-sale of construction products from manufacturer to builder is 21% of the final sale price — more than twice that of comparable industries like auto or electronics. The procurement process in construction relies on siloed and unstructured information and utilizes decades-old software, which not only results in painfully manual workflows and untapped enterprise value, but prevents builders from having access to the incredible variety and scope of new products.
Parspec is changing that. Utilizing advanced vector matching, LLMs, multimodal models, and NLP, they are transforming processes for the construction supply chain, including construction product sales agents and distributors. Distributors and sales agents sell and deliver over one trillion dollars of construction products annually in the US and are a distinctly underserved player in the ecosystem. The burden of the 21% cost-of-sale is felt most acutely by the distributors and reps, who are required to win business utilizing labor-intensive lead generation (e.g., lunch & learns), quoting, and submittal workflows. Like many industries that have seen huge productivity gains with Configure-Price-Quote (CPQ) software, Parspec is building software tools to allow distributors and reps to be radically better and more efficient at what they do. Parspecs’s platform enables these customers to instantly identify products from their preferred manufacturers that are compliant with project design specifications, reducing time to quote by 50–80% and enabling these businesses to bid more and win more projects.
Forest Flager, Parspec’s CEO, comes from a unique background to solve these kinds of problems. After studying engineering at MIT, he worked as a structural engineer for Ove Arup and Partners in London and later pursued a PhD in computational and optimization design at Stanford University before joining the faculty at Stanford’s Center for Integrated Facility Engineering (CIFE) in 2013. He went on to lead software and design automation at Katerra, a technology-driven off-site construction company, before co-founding Parspec in 2021. His almost two decades of experience in construction have given him remarkable insight into the relationship between designers, builders, and the supply chain. This appreciation for the construction value chain has allowed Forest to build a win-win technology platform that serves 1) manufacturers — who get more customer visibility into their new products, 2) distributors — who can win substantially more work and improve profitability with automated and streamlined processes, and 3) contractors — who will have a superior selection of products and more convenient connection to distribution. Parspec’s platform is serving the lighting industry today and will expand into numerous large categories of construction products like mechanical, electrical, and plumbing.
Joining us in this financing are two funds that are remarkably well-suited to support Parspec’s growth. The team at Building Ventures brings decades of construction experience, both as operators and investors, and Heartland Ventures works intimately with Parpsec’s customers, given many of the limited partners in their funds are construction distributors.
We began our journey with Forest during the earliest days of Parspec’s company formation, and we’re thrilled to be continuing our partnership in this fundraise. By creating a dynamic and intelligent CPQ and data platform, Parspec will allow manufacturers, distributors, and contractors to meet the moment with modern software. It’s clear that this new, digital connective tissue is needed to accelerate building the next generation of infrastructure. We’re thrilled to be supporting this team and their vision for a built environment that inspires.
