A major player in the US construction technology market, Procore is going to take on Aconex in its Australian back yard.
California, US-based Procore, a provider of cloud-based construction management software, has opened an office in Sydney, Australia, with experienced construction SaaS veteran Milton Walters appointed vice-president of marketing for the APAC region.
Procore says it is expanding there due to regional demand for “intuitive, reliable and cost-effective project management, financial and collaborations solutions built specifically by and for the construction industry”. It says it already has more than 100 customers and 50,000 users in Australia.
Procore chief executive Tooey Courtemanche said
“Procore’s expansion into Australia is in response to strong demand from local clients and other businesses across the construction industry for flexible solutions that will enable them to reduce costs, improve safety, and deliver projects within budget and on time.”
Procore highlights that Milton Walters has more than 10 years’ experience in the construction technology industry and extensive knowledge of the sector.
Before joining Procore, he was at Textura Australasia (December 2014 post), acquired by Oracle in April 2016 (post). Prior to this Walters was at Aconex, then QA Software, and more recently established a Melbourne-based company, Project Collaboration, to sell the 4Projects (now Viewpoint) SaaS solution in the Australasian market (August 2012 post), and later also marketed another UK developed solution, Kykloud (March 2014). The 4Projects arrangement initially looked to be successful (June 2013), but Viewpoint then switched to a direct sales model, terminating Project Collaboration’s contract on 1 April 2014 – a move which prompted a breach of contract lawsuit by Project Collaboration that was eventually settled out of court (see 4Projects facing Au$9m reseller claim) in July 2015.
Walters said he was excited to be part of Procore’s new office and growing presence in APAC:
“Procore is a highly innovative company with technology solutions that are disrupting the industry to deliver stronger value and results to customers. I look forward to working with the team to meet the increasing local market demand for smarter, safer and more cost effective construction technology solutions.”
Founded in 2002 and based in Carpinteria, California, Procore has been growing rapidly in recent years, attracting successive rounds of funding. When I first wrote about the company in 2008, it appeared to be focused on the construction management needs of a few hundred customers, mainly US high-end residential and mid-scale commercial builders (working on projects worth between US$250k and US$40m), having raised US$950k in 2004 and then US$4m in Series B funding led by Great Pacific Capital in January 2007. However, after weathering the global financial crisis, Procore has expanded its horizons into larger scale commercial projects, and has also been able to capitalise upon positive investor sentiment towards construction technology businesses.
It raised US$15m in Series D funding from Bessemer Venture Partners, BVP, in June 2014. Less than a year later, in April 2015, it raised a further US$30m in growth funding from ICONIQ Capital (with participation of BVP), and another US$50m in December 2015, by which point BVP was apparently valuing the business at around US$500m, with the Wall Street Journal reporting company expectations of generating more than US$75 million in upfront, 12-month license payments in 2016 – double the level in 2015.
According to Crunchbase, there was a further US$30m venture capital injection in February 2016, and in December 2016, Procore then raised a further US$50m investment, led by ICONIQ Capital, which it said it would use to fund international expansion – as well as Australia, it also talked of opening an office in Canada. At this point, the business was said to be worth over US$1bn (earning it so-called “Unicorn” status), and it said it had added 500,000 new users in 2016, growing its user base to 1.5 million, and claiming over 2,500 clients across 92 countries, served by almost 700 employees in seven US offices. Revenues in 2016 were forecast to be around US$55m.
‘Construction Operating System’
In late March 2017, Procore launched its “Construction OS” (see news release) aiming to create a “frictionless” construction process environment, while augmenting its core project management offering with two new cloud-based products, Procore Construction Financials and Procore Quality & Safety. The Financials product sees Procore competing directly with the Australia-based Aconex, which ‘soft-launched’ its Connected Cost module in late 2016 with marketing launches in early 2017 (post).
“We are a software company that believes openness means freedom, partnering, choice, and truth. Construction OS is the culmination of all the technology that we’ve built, the API and the App Marketplace, that will help Procore scale so we can help you realize the promise of the single source of the truth. It will help further align all parties around that common goal of a frictionless jobsite with free-flowing communication that gets everybody closer to the main hub of information.”
Procore vs Aconex
Procore and Aconex were both formed around the same time, but, while seeking to grow strong domestic market positions, have pursued different international growth strategies. Aconex quickly embarked on international expansion, establishing offices outside Australia – building customer bases in south-east Asia, the Middle East, Europe and, over the past five years or so, its toughest market: north America. Procore, by contrast, has until now focused on supporting a growing international customer base for its cloud-based technologies from US offices. Perhaps stung by Aconex challenges in the US market, by opening its first Australian office Procore is now aiming to compete against Aconex in its home market – outside the UK and some western European states, perhaps the most developed market for SaaS construction collaboration technologies.
While Procore has been backed by venture capitalist and private equity houses through an extensive series of funding rounds, Aconex only had one significant funding round (in 2008), then later decided to do an initial public offering, launching on the Melbourne Stock Exchange in December 2014. Floated at Au$1.90, the shares rose and rose, fuelling talk of Aconex being the next Australian ‘Unicorn’, reaching an all-time high of Au$8.38 some 20 months later in July 2016. This, I think, helped fuel investor enthusiasm for construction technology vendors, and Aconex’s example probably helped bolster Procore’s fund-raising efforts. However, the past nine months have been less kind to Aconex – its share price is now around half what it was last July partly due to some investor disquiet about its forecasts (see Aconex shares plunge then plateau).
The two businesses also differ in terms of revenue, user base, and headcount growth. If the 2016 reports of US$55m revenue for Procore are accurate, they suggest Procore generates less than half what Aconex is forecasting – US$122-126m for the year to 30 June 2017. Meanwhile, Aconex’s user base is three times greater – over five million according to the ticker on its website, compared to Procore’s claimed 1.5m. In terms of personnel, Procore has around 700 employees, not that far behind the 850 in Aconex. However, the latter gained some 200 people through the Conject acquisition in March 2016 (on top of a couple of earlier much smaller deals: Grazer and Worksite), while Procore’s growth has, I believe, been largely organic rather than through M&A.
Update (18 July 2017) – Procore’s entry into the Australian SaaS market has been covered by a report in The Australian newspaper.
[Disclosure: I have written occasional freelance pieces for Procore’s Jobsite, including content for its ‘Construction OS’ campaign.]