Menlo Ventures Archives - �� News

When New School Meets Old School, Fieldwire Nets $33.5M For Construction Tech

Mary Ann Azevedo — Mon, 16 Sep 2019 16:00:23 +0000

This morning, , which has developed a cloud-based software product designed for those working in the construction field, announced it has raised $33.5 million.

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led the financing, which also included participation from existing investor , , and . With the funding, which combines a previously undisclosed $8.5 million Series B and $25 million Series C, San Francisco-based Fieldwire has now since its inception in 2013. As part of the financing, Menlo Ventures Partner is joining Fieldwire’s board.

We’ve written extensively about how the sector has seen increased investor interest in recent years. It’s an industry that has been historically run with a more old-fashioned mindset when it comes to technology. But as new leaders emerge and its workforce becomes more mobile while demand has surged with a healthy economy, the industry has slowly become more open to new technologies. This has given startups such as Fieldwire the perfect opportunity to come in and help improve efficiencies and productivity in an industry rife with challenges in both areas.

Fieldwire’s aim is to allow everyone involved in a construction project—from the back office to the numerous subcontractors onsite—to access and share information in real time. By offering a mobile-first solution, the company’s goal is to “make it easy for construction crews to track, record, and share project updates, ensuring proactive responses to all things related to quality, safety, and scheduling.” Users are typically project managers, engineers, and craft workers with a focus on labor coordination in an effort to help fuel productivity.

What’s interesting to me in covering this funding is just how bullish Fieldwire’s investors are about the company’s prospects. Both Menlo’s Sosin and Brick & Mortar Ventures founding partner and managing director raved at length about the company and its potential. One characteristic about Fieldwire that was particularly appealing to both is the company’s ability to be cash flow positive in an era when deeply unprofitable companies are going public and raking in huge funding amounts.

Indeed, being cash flow positive is impressive. Over the years, Fieldwire has quietly already been used by more than 2,000 companies across over half a million projects globally. It’s managed to win company-wide agreements with huge construction companies including Australia’s , out of Canada, and U.S.-based .

By focusing on the craft workers and subcontractors, Fieldwire is winning over those in the field who are then taking their observations to company’s decision-makers, according to Bechtel.

Background

In a phone conversation Fieldwire CEOsaid that when he studied construction at , he observed that most technology was aimed at architecture and design firms. With parents who had remodeled houses as a hobby, Frinault had seen firsthand how behind the construction industry was when it came to utilizing technology to make projects go faster and more smoothly.

“You’d go from looking at a 3D model to going to a site where it was back to the Stone Age with paper and pencil,” he said. “Everybody was trying to plan the perfect project. But if you’ve spent any time on a [construction] site, you know it’s always different than what you plan. I recognized we needed better tools to organize teams and adapt to findings.”

This was around 2006-2007 and Frinault realized his ideas were a bit nascent for this technology-resistant industry.

“The cloud was not something construction companies were comfortable with at that time,” he said.

So Frinault left his idea on the backburner until about 2013 when he and co-founder both quit their jobs to make the concept behind Fieldwire a reality.

“I remember saying ‘Let’s give each other six months to see where we can get and if not far, we can look for another job,’” he recalled.

To their surprise, it wasn’t small companies that were initially interested in using the Fieldwire platform. “Really big companies” started showing interest.

“We were only five people at the time,” Frinault said. “It was a little scary. But we kept building, and selling the product.”

The startup raised in 2015 and continued to grow. It found that word of mouth was drawing more attention to its offering.

“Most companies in our space tend to distribute from the top down with sales people trying to convince people to use it,” he told me. “But we distributed a built product with foremen on site who downloaded our app and started sharing it with more and more people so that ultimately, the headquarters of a company would have everyone in that company using it.”

As the company started getting “some large deals,” it recognized the need for more capital, hence an $8.5 million undisclosed series B “insider round” and more recently, a $25 million Series C.

Fieldwire has been cash flow positive since December of 2018 and growing rapidly. Unlike other SaaS companies, Fieldwire said it is at an advantage because most construction companies pay for a year upfront as opposed to a month-to-month basis. As such, the company has seen its annual recurring revenue (ARR) increase two to three times every year, according to Frinault. Currently, Fieldwire has 65 employees, up from 35 at the beginning of this year, with plans to reach 150 by next summer.

“With this raise, we’re going to start hiring very, very aggressively so we might see that change,” Frinault said. “But every dollar we’re raising is not to finance heavy burn. We didn’t need to raise it and could have raised twice as much if we wanted. But the capital will allow us to build a better company.”

Looking ahead, Fieldwire plans to use the new funds to fuel research and development as well as to further global expansion. Besides its San Francisco headquarters, the company has offices in Phoenix, Arizona, and Paris, France. The company plans to open an additional office in Australia by year’s end.

“We already have very large customers in Australia,” Frinault said. “Our model allows us to not need to be physically present in every market until we have very large customers there. At that point, it’s good practice to be able to visit them once in a while.”

Investors Weigh In

For Menlo’s Sosin, the investment is in line with his firm’s ongoing thesis of looking for “really attractive vertical SaaS opportunities.”

“We were very familiar with the size of the construction space, and knew it was a Luddite category in terms of adopting technology,” he said. “At the same time, as the guard in construction seemed to be changing with the older people who were resistant to technology retiring to younger people with smartphones in their hands, there were suddenly higher expectations of doing things in a more digitally native way.”

Menlo recognized that construction was going to be one of the last big industries to use mobile and cloud-native software so the firm spent time in the sector looking for opportunities.

One of the things that gets Sosin excited about Fieldwire is that it has managed to “build out a huge amount of functionality” around task management.

This gives field workers a “digital Bible” of sorts to be able to see what’s been done and what’s been done correctly, he said.

Menlo is also impressed with the startup’s distribution model, which has helped with its capital efficiency.

“It’s easy enough for people to download and use and because it’s designed so well it’s spread virally,” he said. “One person on a project uses it and then suddenly the entire project adopts it and then the GC began using it in a couple of projects and then they’ll get an enterprise license to use on all their projects. It’s a very powerful model that not a lot of companies have been able to achieve.”

Brick & Mortar Ventures’ Bechtel, who first invested in the company in 2016, agrees.

Fieldwire, he said, went from an era of only construction-minded VCs really seeing its value to getting “term sheets from great tier 1 VCs.”

“It’s exciting to see that play out as we’d hoped,” Bechtel said.

Photos courtesy of Fieldwire; Blog Roll Illustration:

Note: This article was updated to reflect that this was not Menlo Ventures’ first investment in construction tech, and to break down the stages of the investment.

See Where Austin Ranks In Average Round Size & Decent’s $8M Menlo-led Seed Raise

Mary Ann Azevedo — Wed, 04 Sep 2019 12:00:18 +0000

Hello, and welcome to the fourth edition of our Texas-focused column, a monthly roundup of deals that went down in the Lone Star State over the previous month. This is brought to you from hot and unusually humid Austin.

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There’s been a lot of hype around Austin’s startup scene as of late. Companies big and small are relocating, or opening up offices, in the Texas capital left and right, as we covered back in April.

Funding has increased in recent years, too. And while we’ve covered that extensively, we haven’t really looked at that funding activity in the context of how it compares to other markets.

So I asked our senior data reporter, Jason Rowley, to pull some numbers looking at average round size in various stages. There’s good and bad in what he turned up. For one, Austin ranks in the top 10 at least among major U.S. cities in terms of average amount raised at the seed, early and late stage. But unsurprisingly, considering that firms here are mostly focused on this stage, the city is stronger at the early stage and (significantly) weaker at the later when it comes to average round size.

As you can see in the chart below, Austin ranks sixth when it comes to seed-stage round size with an average of $1.46 million across 228 rounds struck between 2017 and late August 2019.

Meanwhile, Austin ranks ninth when it comes to early-stage round size with an average of $9.24 million during the same timeframe across 216 rounds, topping only Chicago among major funding-rich cities.

Its weakest performance lies at the late stage. It ranks No. 10 with an average late-stage round of $35.19 million across 46 rounds.

That Austin lacks late-stage investors on the ground has been a common refrain. And many of us believe that until that changes, we’re not going to see the needle move much in the way of big deals in the city. Increasingly, we’re seeing investors from other markets participate in rounds. But as we reported back in July, Texas-based VCs are still the primary backers of Texas-based startups.

Recap

Speaking of late stage, Austin was home to at least one significant round during the month. Fintech startup raised $60 million from a bevy of investors (many of whom were notably from out of state) in its third funding round in 13 months after notching 700 percent (!) ARR growth in 2018. Read more about that here.

Over in San Antonio, , a firm that offers a non-traditional form of capital and debt for SaaS companies, acquired e-commerce search shop for an undisclosed amount in its second acquisition out of its recently closed second fund. This piece on the deal also gives some background and context to the firm’s approach.

We also gave readers the scoop on Austin-based , a SaaS digital marketing company focused on SMBs, raising $14.3 million in venture and debt financing.

And last week, I reported on San Francisco-based digital life insurance startup announcing plans to open an office, and build out an engineering team, in Austin after raising $60 million in a Series C led by .

News We Didn’t Get To

As always, there’s more happening in Texas than we simply have time to cover. I’ll summarize a few of those deals next.

First off, there were a couple of notable acquisitions by, and of, Austin-based companies. AustinInno that , 13-year-old Austin-based “marketplace that connects the IT industry to help tech buyers and sellers get their jobs done,” was being acquired by New York-based , a global marketing giant “that operates brands including IGN, Mashable, Humble Bundle, Speedtest, PCMag and Offers.com.” As part of that deal, though, AustinInno reported that there would be some layoffs. The publication cited a state filing indicating that Spiceworks would be “laying off 59 employees, as of Aug. 19.”

Also, late in the month, Austin-based , a provider of product reviews and user-generated content (UGC) “solutions” New York-based and venture-backed , a product discovery and reviews platform with nearly six million “community members.”

Terms of the deals were not disclosed.

In organizational news, the Austin Business Journal reported that had as executive director of the “to pursue something new.” No word yet on a replacement.

Meanwhile, announced it was outside of San Francisco in downtown Dallas, according to the Dallas Morning News. The move has the potential to bring 3,000 jobs to that area.

And lastly, to our above point regarding funding, there were a number of seed and early-stage rounds that caught our attention. One in particular included big-name investors located outside of Texas.

Over in Houston, , a company aiming to “enable the bulk commodity shipping market to operate in a unified and digital environment,” announced the completion of a $1.5 million seed funding round co-led by , , , and . Voyager said its new capital would be used to expand its Software-as-a-Service (SaaS) network’s offerings, further acquire and expand its customer base, and grow its engineering, development, marketing and sales teams. The company notes that while there’s a ton of funding in the container shipping sector (think , , and for example), the $360 billion global bulk commodities industry (including crude, oils, gas, grain and metals) is actually “four times” larger by volume and drives the global container traffic.

According to Voyager, that space has been largely ignored by technology and is also losing billions a year. Via email, the company told me: “Unlike the relatively modern container industry, 99% of bulk shipments are still managed by phone, email, fax and text. A single shipment generates thousands of emails and documents. Teams are overloaded, mistakes are frequent and costly, and, most notably, 95%+ of a company’s data is sitting in folders, spreadsheets, PDFs and inboxes, inaccessible to the company and users at scale. Voyager is the antidote, modernizing the entire chain.”

And last but not least. The funding of a startup that comes with a touching history.

was inspired to start Austin-based , which offers affordable health insurance plans for freelancers, sole proprietors, and 1099 contractors, after he realized “that not everyone is fortunate enough to have great health insurance.” During Soman’s second year studying to get an MBA at l, he was diagnosed with Guillain-Barré Syndrome, and was paralyzed in intensive care for four months. He spent another six months in rehab. Later, Soman was working as a self-employed freelancer when he realized he was spending more on health insurance than for anything else in his family’s budget. So he focused his energy on helping freelancers have access to more affordable health insurance in the form of Decent, which he founded in 2018.

Decent CEO and Founder Nick Soman and his family

The startup just led by and including participation from (both out of Silicon Valley). So far, the company’s plans (which it claims have premiums that are 30 to 50 percent lower than typical market rates) are currently available in Austin and will soon be available in other parts of Texas and the country. Decent plans to use the new capital in part to grow its team over the next year.

“Health insurance is too expensive, especially for people who buy their own without subsidies. Freelancers are seeing premiums rise by more than 20 percent per year,” Soman said. “The future of work demands the future of insurance.”

Well, that’s it for this month! Hope everyone had a good Labor Day weekend. See you next time.

Photo credit: Mary Ann Azevedo, Data Credit: Jason Rowley