In the construction business, time is money.
But with so many moving parts, it can be extremely challenging for construction companies to manage the administrative aspects of their finances.
Adaptive, an 11-month-old startup that has set out to give construction teams better tools to manage their back offices, has raised $6.5 million in a seed round led by Andreessen Horowitz (a16z). This adds to the $750,000 the company raised in pre-seed funding last August.
Notably, founders and executives from companies such as Airbase, Brex and Ramp — which ironically all compete with one another — also put money in the round along with 3KVC, BoxGroup, Exponent and Definition. Also among Adaptive’s backers is an unnamed construction accounting firm with 100 customers across the country.
Adaptive’s offering is targeted toward general contractors, but not giant ones — think more SMBs, many of which might not have the resources to hire accounting staff. It’s being built on the premise that current methods for GCs to stay on top of spending are “time consuming, error prone, and yield very limited visibility into project performance,” which can cause disputes between parties. There are many transactions conducted in any given project, and each requires multiple steps for approval and reconciliation.
“I would say that the primary difference between the status quo process and what we’re working on is that we’re taking a very focused approach on automating the workflows and reconciliation with our software,” said co-founder and CEO Matthew Calvano in an interview with TechCrunch. “That gives contractors more visibility, and also fewer delays in payment times.”
For example, he said that invoices that are arriving at an office either in the mail or via email are processed via an “offline ad hoc process” that can involve a combination of Excel, email, legacy accounting software and shared files.
Co-founder and CTO Henry Bradlow had previously written algorithms to power rocket ships at SpaceX, so the trio —Calvano, Francisco Enriquez and Bradlow — was determined to find a way for artificial intelligence to streamline the construction back office.
By using Adaptive, said co-founder Francisco Enriquez in an interview, GCs can take a picture of an invoice and send it to the software, which then uses OCR (optical character recognition) to read the invoice “with pretty high accuracy,” pull out the cost code and the job associated with the invoice and start to route the approval process through an office.
“It’s a combination of using machine learning to read the invoice plus collaboration to automate a lot of the approval workflows,” Enriquez added. “And then of course at the end, we’ll let them pay.”
Put simply, Adaptive’s goal is to automate spend management, and thus save its customers time and money while delivering real-time reporting and insights. In other words, it wants to take care of all construction financial administration for smaller GCs. Long-term, the startup has even more ambitious plans.
“In the not too distant future, we’ll be the one stop shop for all financial workflows and products in the industry — from bidding out suppliers to purchasing insurance to banking and working capital,” the company said in a blog post announcing the raise.
Interestingly, as many startups are, Adaptive was born out of its founders attempting to solve another problem.
The trio was working with a series of homebuilders in Austin, Texas, who were in the process of acquiring land or lots on a different product. Through that experience, the developers guided them to what was more of a pain point for them: bookkeeping.
“We started charging people monthly to manage their books in the back office and got trained up on QuickBooks to just manage the day to day,” Calvano said.
Today, he says Adaptive is “working closely” with numerous customers who are “actively” using its product, and is aiming for a broad release later this year.
A16z general partner David Haber told TechCrunch via email that the firm has “spent a lot of time at the intersection of construction software and fintech” and were “uniquely impressed with the Adaptive team and the hard-earned product and distribution insights they had developed.”
In particular, he praised the team’s spending months running a white-glove accounting service prior to starting the company.
“This gave them an intimate understanding of general contractor workflows and helped tailor their product to meet the industry’s unique needs and requirements,” Haber added. “We also love it when founders have a unique distribution insight and it was clear the Adaptive team had been very thoughtful about their GTM (go-to-market) approach and had already developed strong relationships with key industry groups and service providers.”
This headline was updated post-publication to more accurately reflect the investors who participated.
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Image and article originally from techcrunch.com. Read the original article here.