Why we invested in Document Crunch
Last week, we announced our Series A investment in Document Crunch, an AI-powered contract risk and intelligence platform for the $14T+ global construction industry. Here’s the why:
Construction contracts and risk
There’s something very curious about construction. It’s one of the largest industries in the world — 12% of global GDP, more than $1T in the US, employs more than 10 million people domestically. But even though on the surface, it’s a business focused on moving dirt, pouring concrete, and building the homes, offices, stadiums, and infrastructure around us, construction is really a business about managing risk.
The primary firms that make up the industry —contractors— have an incredibly challenging job. They must deliver on the project and the scope they have agreed to in their contracts, for the cost that they have agreed to, and on the timeline that they have agreed to, even if they have to eat massive losses in doing so. And they must sign those contracts to win the work, even though they may have no visibility into the cost of materials or labor at the time they are signing, even though they have no control over weather or supply chain delays or other timeline issues which might be years away, and even though documentation, drawings and other critical information they need may be woefully incomplete. They must manage all these issues, taking on these millions or billions of dollars of risk, all for some of the thinnest profit margins of all businesses and the highest likelihood of going out of business out of any economic sector (except tech start-ups).
The contract lies at the center. It’s no accident that the major players in the construction industry are called “general contractors” and “sub-contractors” or “trade contractors”. Ultimately, the contract is the agreement they’re held to, so the contract becomes both a chess match and a bible. Before the contract is signed, it’s where parties can try to shift risk around to optimize their own economics; After signing, it’s the reference the entire project team should be adhering to.
Key words: can, and should. Surprisingly, contractors are often able to do only a cursory review of their contracts before signing, and project teams frequently start work without understanding the requirements for submitting notices, as an example, until it’s too late. Even the best organizations can struggle to get compliance across their teams. The reality is, contract language is difficult, full of jargon, difficult to parse through and lengthy to boot. It’s expensive to hire lawyers, and it’s human nature to avoid the boring compliance stuff. (How many of us actually read terms and conditions?)
The opportunity for “intelligent Saas”
The good thing is, contract risk management is a perfect candidate for artificial intelligence and automation. If you haven’t read our piece about iSaaS (intelligent Saas), head over there now for an overview of our perspective on generative AI and the opportunity to power the next evolution of vertical SaaS.
Just as vertical SaaS like Procore evolved from enterprise software and helped industries like construction begin to digitize through customized industry workflows and out-of-the-box integrations, we believe in the power of iSaaS to unlock even more industry digitization and automation. By incorporating genAI in purposeful ways tailored to industry documents, language, data and processes, iSaaS can further reduce barriers to implementation and automate new workflows that humans never did themselves (like reading contracts).
When automating these workflows reduces risk in an industry whose economics hinge on that risk, there’s a golden opportunity to create something big.
Crunch, Crunch, Crunch
Josh Levy, co-founder and CEO of Document Crunch, has acute awareness of the risk problem in the construction industry. He spent the first half of his career in construction law, at an industry-focused legal firm and as in-house counsel at one of the top 25 general contractors in the country. When he would look out of his office to see people lining up to ask questions about construction contracts, he knew there had to be a better way.
He and a few colleagues began working on Document Crunch on the side in 2018, and began to pursue it full-time in 2021. Document Crunch started with a risk review product, which allowed back office teams to quickly review contracts. But the company really caught the attention of the industry (and of the Navitas team) in 2023, when it announced a major partnership with Procore on the main stage at Groundbreak, Procore’s annual user conference in front of 4,000 attendees. Not only was Document Crunch integrating with Procore, but it was bringing contract risk into the Procore platform, allowing Procore and Document Crunch users to see key insights about their contracts at exactly the moment those users needed to see it. For example — summarizing provisions around weather delays when project managers shift schedules, and highlighting when teams need to give notice or in what conditions extensions are granted.
No more parsing through lengthy documents and legal jargon — just simple prompts and information to help project teams stay compliant. The result: fewer billed legal hours, fewer costly errors, and fewer disputes. Translation — more profit.
Since the Procore announcement, the momentum has only snowballed. Other industry platforms want to add Document Crunch’s capabilities as well, and while we aren’t at liberty to announce anything yet, major news is still to come on that front. Document Crunch tripled their recurring revenue last year and has the pipeline to repeat that success again. Product development has also accelerated, with “Chat with your contract” functionality and negotiation workflows picking up steam.
Ultimately, early stage investing is about investing in the best teams. Josh, a self-described legal dork, has some of the most energy and grit we’ve ever seen, and the culture at Document Crunch where the team calls themselves “Crunchers” is a special one to witness. It’s not often that we get multiple Navitas portfolio company founders calling us to emphatically vouch for another founder. When they do, we listen.
Welcome to the Navitas family!
To read Josh’s post on why he raised the Series A, see his piece here.
