Reconstructing construction: our investment in YardLink
It’s hard to believe that in our lifetimes, we used to pay a fee to own software that would arrive on physical media and was ours to own forever. Then the internet came along and broke the chain of ownership. Today, most of us use software as a service, paying as much or as little for it depending on what we need and how much we use.
Now what if I told you a similar dynamic is starting to play out in an industry very far removed from technology? In the construction business, it’s estimated that as much as 95 per cent of transactions are still offline, and this creates an enormous amount of issues that technology has the potential to smooth over.
Consumption manner shift
One of the largest of these for a construction or engineering company is equipment costs, which can make up a large portion of the project budget. The very largest players have the scale to buy plant and machinery outright, but for smaller players it often doesn’t make financial sense to do likewise. Ownership comes with a high cost: you have to get the equipment to the site where it’s needed, store it securely overnight, maintain it while it’s there, and carry out any repairs. And if the machinery is idling but not being used, then it’s also eating into the project profits.
So, many of the smaller building companies hire instead. It’s equipment as a service, so to speak.
But it’s not as simple as that description suggests. Construction work varies widely; no two projects are the same. So, companies often encounter challenges like having to source equipment on short notice, organise deliveries from different suppliers, keep track of rentals across multiple sites, and organise repairs quickly if needed.
Trillion $ opportunity
Size of the construction equipment and heavy equipment market in Europe is valued at $32,9bn in 2021 and expected to reach $40,4bn by 2026. In the UK only there are over 230,000 micro and over 55,000 SME construction companies, spending billions on equipment rental. From supply side, the plant and tool hire is as well a highly fragmented market, with around 4,000 suppliers by some estimates. That creates a huge level of complexity for an industry that still relies heavily on paper records.
It’s clear there are opportunities to streamline how equipment hire happens today. Equipment-related problems, which vary from getting them to the site on time to unplanned downtime, can lead to projects getting delayed or going over budget. This helps to explain why construction — an industry that’s historically underinvested in tech — is now becoming a magnet for digital innovators and entrepreneurs.
Disruption of obsolete procurement
Into this space comes YardLink, a B2B marketplace for construction equipment rental. It’s aiming to disrupt the classic complex procurement model with a faster and simpler process. Construction and engineering companies use the platform to compile a detailed spec to send to clients, describing either a specific machine like a bulldozer, backhoe, digger, dumper, or tower crane — or else the work that the machine needs to do. Buyers can also use it to source tools for drilling and lifting, or for powered access.
Since it was founded in 2016, YardLink has built up a supplier network of more than 250 vetted suppliers at over 1,350 locations across the UK. (That’s important because the closer a supplier is to the project site, the lower the cost of transporting the equipment to where it needs to be — savings that can be passed on to buyers.)
Once it has the spec, YardLink requests pricing and availability options from its network and the matching algorithm then uses several data points such as order and customer insights to choose the most suitable supplier. The pricing is transparent through the platform. The process of confirming an order usually takes less than 20 minutes — often it’s faster than that — and the equipment is delivered to the site the following day.
This combination of simplicity and a large addressable market is one reason why Sova VC is investing £2 million in YardLink as part of the company’s current funding round. Not only is YardLink a B2B marketplace — a model we at Sova VC really believe in — it also provides value-added services like workflow management tools and dashboards. As well as connecting buyers and suppliers, it supports them with issues like contract execution and payments. The platform is, in effect, a one-stop shop for procurement, helping both sides to manage their projects more easily.
YardLink started by targeting micro-enterprises. They’re the largest segment of the UK market with 233,804 companies that earn under £2 million in revenue per year, and many of them are often subcontractors on larger projects anyway. YardLink has since gained traction with SMEs, which are fewer in number but earn upwards of £2–10 million in revenue every year and have an aggregate spend of £19.4 billion, and also entered a segment of larger enterprise clients. As well as broadening its customer base, this move has also naturally benefited to the customer retention rates and unit-economics.
The business is continuing to scale in the UK and has plans to expand to other European countries in a couple of years. With a support of great investors and a large addressable market to go after, we’re very confident in YardLink’s prospects to build on its success so far.
We’re looking forward to supporting YardLink and its exceptional team on their exciting journey!