Why We Invested In Buildup
As venture capitalists, we search for a variety of key themes while evaluating potential investments. One such theme is markets in dire need of a technological face-lift. But it is not enough for an industry’s processes to be “outdated”, rather the opportunity to create a large, long-standing businesses must exist as well. Our previous investments in Next Insurance (insurance) and Aidoc (healthcare) are good examples of this. For the past year, we have been looking closely at an industry that fits the above criteria: Construction.
The current state of the construction industry
A multi-trillion-dollar industry, the construction industry represents the backbone of our infrastructure and one of the largest industries in the world. Unfortunately, the size of the market has not translated into a requisite amount of technological innovation and adoption.
Noting the above, the introduction of technological advancements alone is not enough. The heartbeat of every construction site lies within the boots on the ground: the builders, subcontractors and superintendents. These individuals need to be empowered through technology in order to do their jobs better and increase the overall efficiency of a given project. As it currently stands however, construction lags far behind in the overall productivity of its workers. As can be seen in the chart below, construction workers’ productivity in the United States ranks at the very bottom when compared to other labor intensive industries.
The dynamics of a construction site
To truly understand the root-cause of this issue, it is necessary to describe the dynamics of a construction project. In short, there are three levels of parties involved in the construction of a commercial building or apartment block. The first is the developer who finances the project and whose interest is to ensure the buildings’ quality and timely completion. The developer has little day-to-day contact with the site itself, but rather relies on reports from the General Contractor (GC) and its quality assurance department who complete regular checkups. The next party to the project is the GC. His job is to facilitate the construction of the site. He reports directly to the developer and often manages a large team of supervisors who supervise the subcontractors (SC) on a day-to-day basis to ensure they complete their agreed to roles. The third party to the project are the SCs. They are companies who specialize in particular aspects of the building process. For example, there is one subcontractor for framing while there is another for welding and so on and so forth. In a large commercial building project, there can be hundreds of subcontractors working in the same site. Taking all this into account, it’s not hard to see why construction workers appear at the bottom of labor productivity.
Buildup: An on-site construction app promoting collaboration
Due to these findings, last year we took it upon ourselves to research the market more thoroughly and speak to startups and experts in the field. Through our conversations we came across an interesting phenomenon. We learned that while the construction technology sector has indeed been growing over the last couple of years, many of the products in the market today are too complicated and thus GCs and SCs alike have opted to continue using excel, or in some cases, even pen and paper to manage on site communication and collaboration. It seemed to us that a comprehensive yet simple solution was necessary to solve this problem. And that is exactly where Buildup comes in. Buildup is a mobile collaboration platform enabling all stakeholders of a construction site to communicate and work together in harmony. And as mentioned above, the key is to empower the on-site workers as opposed to attempting to replace or circumvent them.
Beyond the clear market need and high quality of the product, there were two additional factors that led to our eventual investment in the company. First and foremost is the team. We had actually met Oren and Yael over a year ago. While we were impressed from the outset, the company was still in its early days and we told them that we would like to revisit the opportunity at a later date. As many investors and entrepreneurs know, this is not an uncommon conclusion to a VC interaction, and more often than not, whenever the opportunity is in fact “revisited” little to no progress has been made by the entrepreneurs. Oren and Yael completely bucked that trend however, and will now serve as a paradigm for exceeding expectations. When we re-engaged with the company earlier this year, not only had the product improved, and not only did the team have a further sense of confidence and market knowledge, but they had signed some of the largest GCs in the United States as paying customers. This is exactly the type of execution and drive that we look for in our entrepreneurs and we’re excited to join Oren, Yael and the entire Buildup team on this journey.
The second factor that led to our investment was the feedback we received during our customer due diligence. At TLV Partners, one of the most important parts of the due diligence process is our interactions with a startup’s customers (both paying and pilot). These conversations not only help us understand if there is a true pain that needs solving and how well a startup manages to solve that pain, but they also shed an incredible amount of light on the team’s ability and whether there is or isn’t product-market-fit. Typically when conducting customer due diligence, we receive a mixed bag of feedback: some customers are more willing to share than others, some are more enthusiastic than others and some even take the opportunity to voice concerns that they have with the product. With Buildup however, every single call that we conducted was enthusiastically positive. We often throw around terms like “product-market-fit” and “customer satisfaction” lightly, but our conversations gave those terms a new understanding.
We’re thrilled to team up with Buildup and look forward to revolutionizing the construction industry together!