Why we invested: StructionSite
D20 Capital leads StructionSite’s $7M Series A financing
There are many aspects of life for which we wonder how we used to get by before technology completely changed the way we do things. Paper maps are a prime example. Even in college, I was driving with a paper map in one hand, steering wheel in the other, trying to figure out at 70 miles per hour which exit to get off of. We’d also sit there and debate which route would be the fastest based on pure instinct of traffic patterns. Mobile and location technologies, coupled with large scale data aggregation, has solved that for us in the form of Google Maps and Waze. StructionSite is providing that level of impact in the construction world. Five years from now, the industry will wonder, ‘Remember those days when we didn’t have StructionSite…?’
StructionSite’s software allows construction companies to easily capture images of the construction site to create a Google Street View type experience that is time stamped and automatically mapped to the layout for efficient progress tracking and actionable insights.
Fax vs. iPads
Over the past three decades, labor productivity growth in the construction industry has been the worst among all major sectors.
And this is in an industry with razor thin margins. A clear potential driver in increasing productivity, and therefore boosting margins, is to increase the adoption of technology. The construction industry has historically lagged other industries in the use of tech. The use of paper record keeping and fax for communication is still common — a result of the difficulties of pushing technology onto the construction site and the corresponding lack of cutting edge technology offerings. For those of us digging into the construction tech industry, we’ve all seen the famed McKinsey research piece about the potential that technology presents. Fortunately, the tide is shifting and there is a heightened sense of excitement surrounding technology in the construction industry.
Site Digitization 1.0
The historical difficulty with broad adoption of technology in construction sites has been twofold: 1) The lack of digital tools being used at the construction site, and 2) Individual construction sites effectively acting as independent projects with their own P&L and own IT budget — in other words, a small business that automatically churns when the construction is done. However, now is an extremely exciting time for the construction technology industry, as pioneers such as Procore, Plangrid, and Fieldwire have truly pushed the envelope in technology adoption at the construction site. Site Digitization 1.0! As a result, large construction companies have started to adapt and have invested in centralized efforts to evaluate, test, and adopt new technologies. I spoke to the VP of Innovation of a large U.S. General Contracting firm, who after >20 years in various construction operations roles, spearheaded the creation of a new innovation office in 2018. He mentioned that all large General Contractors have similar innovation teams, most of which were set up in the last 2–3 years. The great news for the construction technology industry is that these innovation offices serve as the sounding board for technology adoption among different projects, and in some cases even have a standalone budget to initially fund (or subsidize) the use of technology on job sites.
A key industry pain point is that in a typical construction project, many (often dozens) stakeholders are involved in getting a building up and running. Each stakeholder, whether the owner, the lender, the general contractor, or any of the subcontractors, has their own interests and throughout the course of the project, has to make decisions that are in the best interests of their respective companies. Mistakes and conflicts can be extremely costly, and as a result, heavy documentation and repetitive approval processes have become standard. This is why the widespread adoption of Site Digitization 1.0 is an important step towards increasing efficiency in the construction industry, as digital documents can be shared, edited, and submitted in real time and can be better managed as a ‘source of truth’ of complex information.
Site Digitization 2.0
The industry wide momentum of technology adoption from Site Digitization 1.0 opens the floodgates for Site Digitization 2.0. Now that the use of technology on construction sites is widespread, many companies are working on technologies to further the progress from passive solutions (i.e., basic digitization and management of documents) to active solutions (i.e., technologies that assist in capturing data and in providing insights). We’ve met entrepreneurs working on important problems like accelerating payments, making project management smarter, and ensuring worker safety. In order to maximize the potential of these solutions, we believe that the most important problem to be solved today is data capture. Increasing the efficacy of data capture mechanisms builds on the Site Digitization 1.0 momentum of construction companies’ increasing access to digital tools. Once data is captured efficiently and intelligently, the opportunities to leverage that data will be endless. StructionSite’s more eloquent term for Site Digitization 2.0, is ‘Intelligent Reality.’
Data, Data, Data
StructionSite has been working to solve the problem of robust data capture and organization. Traditionally, construction workers walk the construction site on a regular basis to inspect progress and take pictures using their phones or digital cameras. They then save those pictures on computers and when an issue arises, they need to sift through thousands of files to find a picture of a specific location from a specific point in time. Now, using StructionSite, a site supervisor can simply walk the site as they always do, but this time with a 360 degree camera that takes continuous images of the site and automatically maps the images to building layouts. Multiple stakeholders can easily check the progress of specific locations, and in the event of a conflict, can easily pinpoint images associated with the conflict.
The need for robust data in construction is a clear problem. In Procore’s S1 filing, opportunities presented by robust data are highlighted countless times with statements such as:
- The 2018 FMI Report estimates that employees at construction companies spend 35% of their time on “non-optimal” tasks. Time spent on non-optimal activities such as dealing with mistakes and rework, looking for project data, and handling conflict resolution cost the U.S. construction industry an estimated $177.5 billion in labor costs in 2018.
- “Simultaneously, additional drivers such as labor shortages and general shifts in the labor market, mounting technical and regulatory complexity of construction projects, and the growing importance of data to aid in decision-making are increasingly compelling stakeholders to change their historic practices.”
Access to robust and up-to-date data will become table stakes in increasing productivity in construction projects. StructionSite has truly figured out how to efficiently capture data and to present the data to various stakeholders in the most effective formats.
Love vs. Like
Today, StructionSite is a trusted partner for 75% of the 20 largest North American General Contractors (the ENR Top 20) — placing the company in a league of its own for a company at this stage. In our discussions with construction companies, the recurring feedback was “StructionSite knows exactly what we need. We like some of the other solutions, but we love StructionSite.” As a result, StructionSite has been able to secure enterprise-wide contracts with several massive General Contractors. The accepted wisdom in the construction tech industry is that only the largest platforms, like Procore and Oracle, can secure enterprise-wide contracts. Startups are generally tackling contracts project by project. StructionSite’s ability to sign enterprise-wide contracts is a clear indicator of a product whose value resonates throughout large organizations.
The Right Team for the Job
Building a product that customers love is a testament to the StructionSite team. StructionSite’s founders have a unique mix of experience at construction technology companies, a major general contractor, and leading Silicon Valley tech companies. The intimate knowledge of the construction industry has proven to be extremely important in creating a product that construction companies want to use today. We’re excited to be along for the ride.