As anyone in the construction biz will tell you, materials aren’t cheap. In fact, the cost of acquiring materials can keep contractors from taking on bigger and more exciting projects.
Billd, a fintech startup headquartered in Austin, just raised a $60 million Series A to provide construction companies with working capital for materials.
“Generally, the time from when a contractor buys materials for a project until they actually get paid is about 100 days,” said CEO Chris Doyle. “That’s really tough to begin with, and once you start growing, it really compounds the problem.”
According to Doyle, material costs normally account for about 30 percent of a contract. So if you are an electrical contractor taking on a $700,000 project, you may end up spending about $200,000 on materials. And in the three months before payment for the first project comes in, a growing contractor may need to shell out for materials for three or four more gigs.
The idea of turning down a hard-earned next job is tragic.”
“You can easily find yourself in need of $1 million in working capital just for materials, on top of all the other stuff that goes into running the business,” Doyle said. “But every extra effort you put in — all the customer service, all the quality improvement — is all going to getting your next job and toward your reputation. The idea of turning down a hard-earned next job is tragic.”
A construction industry veteran with years of experience in the tech industry, Doyle said Billd has put a large emphasis on creating a tech product that suits the needs of construction professionals. Since users spend all day out on construction sites, that means creating a mobile experience that is as seamless as possible.
“We don’t ask the contractor 30 questions about a project when a lot of what we want to know exists within public data,” he said. “If we’re asking for six data points, we ask: ‘How do we make it five, or four?’ We’re always challenging ourselves.”
That domain expertise comes in handy in the underwriting as well.
According to Doyle, traditional credit data is a poor predictor for loans in the construction industry. For instance, if a contractor owes a lot of money to suppliers, that might actually be a sign that business is booming. So Billd turns to nontraditional metrics, based on industry trends and past loan performance, to determine whether a contractor qualifies for a loan.
Billd currently has just under 20 employees. Doyle said that number might double in the upcoming year, but that the company’s primary focus will be on fine-tuning its tech product and underwriting methodology.
“Our focus is on making sure we have the product right,” he said. “Once we feel comfortable with that, we’ll scale further.”
LL Funds, a Philadelphia-based firm that specializes in companies in the finance space, led Tuesday’s round. Shivraj Mundy, who is a partner with the firm, will join Billd as executive chairman.