Constrafor Receives $106M in Capital and Loan to Fund Construction Subcontractors

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Large construction projects often take a long time to complete, and subcontractors can get caught up in the flow of money, waiting, in certain circumstances, up to 80 days to pay general contractors. This not only causes delays, but also means that subcontractors are essentially being asked to fund their part of the project. Constrafor This was announced to TechCrunch by CEO Anwar Ghosh.

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“Subcontractors are hired on a project, and when they finish their first month of work, they issue an invoice and then wait an average of 45 to 60 days — even up to 80 days — to get paid,” he added. “In the meantime, they are buying equipment and borrowing money to do all this work. You also don’t borrow at a low rate because most banks barely touch them.”

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This is where Constrafor comes in: as a construction procurement SaaS platform with embedded financing, it streamlines information and documentation on how general contractors work with subcontractors, while its early payment program takes the risk associated with the invoice subcontractor, freeing up cash flow and relying on traditional and expensive lending options. The general contractor then reimburses Constrafor for the invoice.

Both of Gosh’s parents were builders, so he grew up listening to stories about the industry. After studying at MIT Business School and working in financial services at an AI startup, he co-founded Constrafor with Douglas Reed in 2019 and launched the platform in early 2020.

Constrafor subcontractor control panel

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Constrafor subcontractor control panel Image credits: Constrafor

General contractors can sign contracts with their subcontractors and collect relevant documentation, including insurance certificates, and then collect invoices and pay them through the platform. When several subcontractors appeared in the database, Contrafor began to offer the Early Pay Program. His income is based on receiving about 2% of the value of the account.

Two years later, Constrafor now has 15,000 companies in its network, as well as a slightly smaller group of active users and another group using Early Pay.

When it became too burdensome for the company to buy all the accounts, Ghosh and Reed decided to resort to venture capital, raising $106.3 million in both loan and seed capital. The breakdown is $100 million in loans and $6.3 million from an earlier equity round raised in June, which was not disclosed, Ghosh said.

CoVenture led the line of credit, while FinTech Collective led the equity stake with Village Global, Clocktower Technology Ventures, Commerce Ventures and a group of individual tech founders from Ramp, Uber and Paxos. The equity went to the company’s payroll, and the loan will be used to buy bills.

Over the past 12 months, the company has doubled its revenue every month for the past few months, and Ghosh expects this growth to continue over the next few months.

As further evidence of rapid growth, he added that Constrafor had less than $100,000 in annual recurring revenue in January, but was generating $2 million ARR by April and was expected to top $10 million ARR by the end of the year. Ghosh was not yet ready to share the company’s valuation, but said it will have a proper valuation when it goes into the next funding round.

Meanwhile, Ghosh says 70% of the dollars in construction still come in the form of checks, leaving a big opportunity to use technology to improve the email and spreadsheet approach the industry is using today.

The company is also working on a beta program to provide contractors with a virtual bank account via Stripe that will include credit cards.

“Construction firms spend less than 1.5% of their revenue on technology compared to others who spend 3.5% on average,” Ghosh added. “That’s why you see the poor performance and the difficulties of many companies in this industry. They don’t have the margin to buy a lot of software, so they’re trying to make their own, but can’t afford it yet. Together with us, we create software to organize their operations and charge a minimum fee so that they can use the technology.”

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