Skip to content

Constrafor, a construction procurement firm, goes the ‘SAFE’ route with new capital


More construction projects are starting, but payments to contractors and their subcontractors continue to bottleneck the normal course of completing a project.

“Banks are becoming more careful with their own financing of development projects, which means they will also slow down payments from you,” constrafor CEO Anwar Ghauche told TechCrunch. “What this means is that payment times to subcontractors are getting longer rather than shorter, it’s just getting more difficult for subcontractors because they generally don’t have the resources to go to their banks and increase their line of credit.”

Ghauche and Douglas Reed started Constrafor, a SaaS construction procurement platform, to provide integrated financing and software for general contractors to manage the workflow of their subcontractors. Its Early Payment Program assumes the risk of the subcontractor bill, freeing up cash flow and reliance on expensive, traditional borrowing options. The general contractor then reimburses Constrafor for the invoice.

The company grossed $106.3 million in equity and debt in 2022, and since then Constrafor has gone from 15,000 clients to 23,000. Ghauche admits that the company “had revenue problems” during this time, but that it had nothing to do with the market or the credit network. The company has since adjusted its credit origination and is now growing at 25% month-on-month this year “in sustainable growth.”

Constrafor has also joined the AI ​​trend by launching some initiatives using embedded generative AI related to automating manual reviews, for example insurance. It also partnered with Stripe to offer a banking product and now has over 80 businesses banking with them.

Now Constrafor is back with another cash injection of $7.5 million via a SAFE note, led by Motive Partners, which closed this month. The new investor Fifth Wall joined existing investors, including the FinTech Collective, Clocktower Technology Ventures, Commerce Ventures, FJ Labs and NotreVis, in the round. This gives the company $14 million in equity and $100 million in debt raised since the company was founded in 2019.

Anwar Ghauche, CEO of Constrafor

Anwar Ghauche, CEO of Constrafor. Image Credits: constrafor

Asked why Constrafor went for a SAFE note instead of a priced round, Ghauche said he did not think the market “did very well today in terms of pricing.”

“We have seen that deterioration in multiples for fintech companies,” Ghauche added. “We found this to be a much better way for us to continue to grow, hence our milestones on the revenue side for Series A, so we are aiming to cross $5m ARR before going for a Series A. If we can be At $10 million ARR, that’ll be better.”

In addition, the investment includes access to a line of credit with Apollo. That additional capital potential gives Constrafor “scalable credit and capital for our business,” Ghauche said.

And at a time when other financial players are raising rates due to the difficult economic environment, Constrafor can lower its price to clients and pass the savings on to them, he added.

Meanwhile, the new capital will be used for payroll and to finance operations. Ghauche intends to qualify its EarlyPay program and open up Constrafor’s APIs to general contractor clients.

“We are seeing quite a few new construction companies now, and we feel like we have quite a large network at the moment, so we want to open up our platform for these companies to connect with ours and build on top of Constrafor.” Ghauche said.


—————————————————-

Source link

For more news and articles, click here to see our full list.