Effective cash flow management is essential to any construction project. With already so many moving parts in any project, the model of general contractors and subcontractors introduces complexities as an entire project can be beholden to any one part. Constrafor is an industry-specialized SaaS platform that allows general contracts and subcontractors to manage workflow and the procurement process in a centralized location. The platform also has finance options embedded for subcontractors to factor their invoices. By ensuring timely cash flows, Constrafor is attacking the cause of significant delays within the construction industry. Covering contracts, invoices and payments, AR processing, insurance requirements, and diversity procurement requirements, the company has built a network of 15,000+ contractors that have supported over 1500+ projects since the company’s founding in the Fall of 2019.
AlleyWatch caught up with Constrafor CEO and Founder Anwar Ghauche to learn more about the business, the company’s strategic plans, latest round of funding, and much, much more…
Who were your investors and how much did you raise?
This was a seed round of $100M+ in a combination of debt and equity, including a credit facility from CoVenture and an equity round led by Fintech Collective with participation from funds such as Village Global, Clocktower Technology Ventures, Commerce Venture and tech founders from Ramp, Uber, and Paxos.
Tell us about the product or service that Constrafor offers.
Constrafor is a SaaS and fintech innovator purpose-built for construction. For general contractors, we offer a robust cloud platform that streamlines and standardizes subcontractor procurement & administration, including contracts, COIs, invoices & payments and diversity procurement.
Our offerings for subcontractors include fast and cost-effective receivables financing, specifically through our Early Pay Program which shortens the revenue cycle and frees up cash for workers to take on more projects without incurring debt. Constrafor also offers FDIC insured deposit accounts and corporate debit cards.
What inspired the start of Constrafor?
I grew up in a family where both of my parents worked in construction and studied civil engineering at university. After working in finance and technology, I was eager to apply some of the skills and tools to the construction industry which has lagged in productivity and technology investments.
How is Constrafor different?
Constrafor is the first company to offer a construction-first procurement platform with embedded financing. Our platform is tailor-made for the specificities of General Contractors’ procurement processes, while our Early Pay Program solves a key challenge for Subcontractors. Both of these allow contractors to grow their businesses and take on more projects in a sustainable and profitable manner.
What market does Constrafor target and how big is it?
Constrafor targets the large commercial construction projects in the US, including industrial, multi-family homes, infrastructure, and offices. We have nationwide coverage with our 15,000 and growing subcontractor base. That’s a market of over $400B per year.
What’s your business model?
Constrafor gets distributed through General Contractors adopting the SaaS platform and EPP is the revenue driver.
What are your post-COVID office plans?
As of right now, Constrafor plans to have 3 regional hubs in NY, Miami, and the Bay Area and will continue to hire talented people who prefer to work remotely.
What was the funding process like?
Raising equity was not challenging given our growth and momentum. The credit piece however was a lot more involved. The capital markets offered numerous options with varying benefits. This required us to do a thorough evaluation of our priorities as we sought the right investor who would be excited about our journey and could provide flexible capital and support at this early stage.
What are the biggest challenges that you faced while raising capital?
We learned a lot about our own business and the challenges we could expect ahead of us through discussions with different investors. Raising this rather large sum on the equity side and applying significant leverage at such an early stage required us to develop detailed projections for the business and consider certain edge cases. That was particularly challenging given our team size and the maturity of the product when we began our fundraising process.
What factors about your business led your investors to write the check?
Strong demand and engagement from contractors demonstrated a clear product-market fit even in the earliest days. Seeing customers raving about Constrafor and calling it “a life-saver” was important in building conviction for our prospective investors. The high caliber and strong experience of our leadership team also helped a lot.
What are the milestones you plan to achieve in the next six months?
$10M ARR by end of the year.
What advice can you offer companies in New York that do not have a fresh injection of capital in the bank?
For small companies, focus on finding product-market fit and raise capital from VCs; the market may be choppy but there is a lot of VC dry powder out there.
For larger companies, focus on improving your unit economics; investors are spending more time understanding companies beyond a headline revenue number. The recent market pullback may frankly be a good thing to enforce some planning rigor and intellectual honesty. It’s refreshing to hear investors talk about the quality of earnings instead of speculating around GIF prices.
Where do you see the company going now over the near term?
Continuing to expand the product suite we offer GCs and Subs to boost their productivity and cash flow, including launching our virtual bank accounts and cards.
What’s your favorite outdoor dining restaurant in NYC?
There’s a cool little restaurant on the West Side Highway called Drift In. There’s something calming about eating with a waterfront view.