🏗 Procore - Building the System of Records for the Construction Industry
🏗 Procore - Building the System of Records for the Construction Industry
Overlooked #158
Hi, it’s Alexandre from Eurazeo. I’m investing in seed & series A European vertical solutions (vSol) which are industry specific solutions aiming to become industry OS and combining dynamics from SaaS, marketplaces and fintechs. Overlooked is a weekly newsletter about venture capital and vSol. Today, I’m sharing a deep-dive on Procore which is one of the most iconic vSaaS listed in the US ($9.1bn market cap.) and building the construction industry’s operating system.
Introduction
I’m starting a new series of four papers dedicated to the construction industry. I’m planning to cover a public company (Procore), a private company (ServiceTitan), a list of interesting startup trends in the construction industry and a personal thesis on vertical Solutions (vSol) as industry operating system inspired by Procore. If you build or invest in the construction industry, I’d love to meet you! You can reach out at adewez@eurazeo.com.
In today’s article, I’ll delve into Procore. It started as a communication platform eliminating silos among the various stakeholders involved in a construction project (e.g. the owner, the general contractor, the sub-contractors and the suppliers). Overtime, it has evolved into the construction industry’s system of records offering modules that span the entire construction value chain from pre-construction to construction execution, financial management and workforce management.
I previously wrote a light introduction on Procore that you can find here. I divided this longer deep-dive into the following sections:
Key learnings
History
Product
Business Model
Go-To-Market
Financials
Competition
Key Opportunities
Key Risks
Key Learnings
Build the industry’s system of records. Procore streamlines communication on the job site among all the stakeholders involved (the owner, the architect, the general contractor, the sub contractors, the field workers). It serves as a system of record not only for a single company, as is the case with most vertical solutions, but as a system of records for all the stakeholders within a particular industry. This strategic positioning provides several advantages, including creating a strong barrier to entry and generating network effects, as all the stakeholders on a given project become potential paying customers.
Don’t rush to become multi-product or to embed financial services into your solution. Procore took 10 years to find product market fit for its initial product, which focused on job site communication. It waited 14 years to introduce a second product and 20 years to incorporate financial services into its solution. When you have a strong product market fit, it's crucial to capitalize on it as extensively and for as long as possible to capture market share before expanding your product offerings to increase your ACV. I had a similar learning experience while studying Doctolib. They waited for 7 years before launching an ERP for doctors to increase their market share, building upon their initial product, which was a booking management system.
Sell to mid-market and enterprise customers. Many successful vertical solutions, like nCino, Veeva, Olo or Mews, target mid-market and enterprise customers. Procore is a prime example of this pattern. Its initial ICP was mid-market general contractors in the US and today, Procore boasts an ACV of $50k (vs. $20k 6 years ago). By catering to these customer segments, vertical solutions have the flexibility to establish a scalable go-to-market strategy, making it easier to achieve a net dollar retention rate exceeding 115% and drive long-term revenue growth.
Win as a vSol without being an ERP. Procore has established a thriving vertical solution with a $9.35bn market capitalisation, all without being an ERP. Instead of focusing on financial transactions, Procore centered its system of record around communication. It proactively developed extensive integrations with prominent ERPs in the construction industry, such as Sage or Trimble. This strategic approach enabled Procore to operate as a global business right from the outset and reduced barriers to entry for users of its solution. It’s a great proof point that you can build a mission critical system of records without handling financial transactions.
Combining multiple business model dynamics on the same platform. Procore is a perfect vSol in the sense that it combines business model dynamics from (i) SaaS as all its products are offered through subscriptions, (ii) marketplaces as it features an app marketplace with over 400 partners enhancing the capabilities of its platform and as it has network effects with its unlimited user model, (iii) financial services as Procore is currently launching multiple financial services products (Procore Pay, materials financing and insurance).
History
Tooey Courtemanche co-founded Procore in 2002, drawing upon his personal history in the construction industry. During his student years, he gained experience working on construction job sites. His career began as a real estate developer before he ventured into building an internet company called Webcage during the dot-com bubble. The pivotal moment came when he built his personal house in Santa Barbara and observed a significant gap in communication among construction stakeholders on the job site. He was surprised to find that technology had not made significant inroads into the construction industry between his childhood experiences and the construction of his house.
It took a decade for Procore to truly take-off. It needed technology to be mature enough to have smartphones/tablets as well as internet connectivity on the job site. During this initial decade, Procore raised c.$5m from investors like ScOp VC, Greater Pacific Capital and Kevin O’Connor.
“Tooey’s path into entrepreneurship was unorthodox. He was a veteran of the first dot-com bubble, living in Santa Barbara, and had spent a decade struggling to get widespread adoption of Procore. A few times in those early years, the company even struggled to make payroll.” - Brian Feinstein (GP at Bessemer)
“The product didn’t immediately take off as the industry didn’t have the tools to fully benefit from a cloud-based offering at the time. In fact, it took over a decade for devices like smartphones and tablets, as well as Wi-Fi, to become ubiquitous on job sites.” - Tooey Courtemanche
In 2014, Bessemer led a $15m series D into the company. It kickstarted a series of successful funding rounds every 12-24 months. In 2015, Iconiq led a $30m series E at a $500m valuation. In 2016, Iconiq led a $50m series F at a $1bn valuation. In 2018, Tiger led a $75m series H at a $2.9bn valuation. In 2020, D1 led a $150m series I at a $4.9bn valuation.
During this second part of the journey as private company, Procore pursued multiple objectives:
Going from a single product around collaboration to a full platform for the construction industry with 13 products (Quality & Safety launched in 2017, Project Financials launched in 2017, Field Productivity launched in 2018, Design Coordination launched in 2018, Invoice Management launched in 2019, Procore BIM launched in 2019, Procore Analytics launched in 2020).
Going from serving only General Contractors (GCs) to serving multiple stakeholders in the construction industry including Specialty Contractors (SCs) and Owners.
Expanding internationally (Australia and Canada in 2017, UK in 2018, Latam in 2019).
Making strategic acquisitions to add capabilities to its construction platform (e.g. Honest Buildings to start serving owners, BIManywhere to launch Procore BIM).
In 2021, Procore went public raising $600m at a $9.6bn market capitalisation. As a public company, Procore has still the same objectives:
It pursued its geographical expansion opening the MENA and Asian market in 2021 as well as Central Europe in 2022.
It added key capabilities to its platform: Estimating (2021), Workforce Management (2022), Bid Management (2022), Procore Pay (2022), Insurance Brokerage (2023), AI Copilot (2023).
It made selected acquisitions: Levelset in 2021 to prepare its push into financial services and LaborChart to prepare the launch of its workforce management module.
Product
Procore’s platform can be divided into 4 main modules: pre-construction, project execution, workforce management, and financial management. Each module is a product or a suite of products. On top of these 4 modules, Procore has 3 horizontal products: analytics, network and marketplace.
Procore has 3 types of customers: General Contractors (GCs), Specialty Contractors (SCs) and Owners. Some products in Procore’s platform will be dedicated to a customer type (e.g. workforce planning and field productivity are mostly for SCs) when other products will be usable by all the stakeholders on a construction project (e.g. project management).
On average, Procore’s customers complete their projects 15 days earlier than other construction companies. On average, Procore generates a 48% increase in construction volume managed per person contributing to boost the productivity in the construction industry.
Project Execution
Procore’s historical product is Project Management. It streamlines communication on job sites between all stakeholders including the owner, the general contractor, specialty contractors, suppliers and field workers. It provides real-time information on daily tasks at the job site and serves as a platform for reporting and discussing potential issues. Building upon this initial product, Procore has expanded to offer a complete module aimed at enhancing project execution.
“Think of that tool as the water cooler on the job site. It's where people would go to share the most relevant up-to-date information and ensure that they are coordinated across the project” - Tooey Courtemanche during Procore’s Investor Day
It has a Safety & Quality product. Construction is a heavily regulated industry. This product allows for the incorporation of specific quality standards that owners or general contractors may require. It facilitates compliance with regulations by enabling blue collar workers to track these requirements directly through features such as inspection lists, full traceability, and incident reporting.
Procore has also two products that integrate Building Information Modelling (BIM) into the construction process. On the one hand, Design Coordination which is a tool that all the stakeholders involved on a construction project will use at the beginning of the project to identify potential issues with the initial BIM design. On the other hand, BIM which provides access to the latest BIM data on Procore’s mobile app, enabling field personnel to carry out and review construction work efficiently.
Financial Management
Project Financials serves as a bridge between the field and the office. Its primary objective is to gather real-time and accurate cost data, ensuring that projects stay aligned with their initials budget and timelines. It also features a module that enables on-the-fly management of budget changes, facilitating the request and processing of quotes for additional work. Furthermore, it includes a module for generating financial forecasts specific to the construction project.
Invoice Management assists construction companies in streamlining their invoicing process. You can establish bidding periods. You can invite your subcontractors to submit their invoices upon completing their work. It provides you with centralised place to collect, review and process all your invoices. Based on invoices from subs, you can create your own invoice for the owner.
Accounting Integrations are Procore’s direct integrations with Sage, Quickbooks and Viewpoint to send project construction data to your accounting system. It provides accounting teams with real-time visibility into the ongoing activities of the construction project and the ability to manage all order changes.
More recently, Procore has leveraged its financial management modules to launch financial services, which we will cover in more detail in the ““key opportunities” section.
Workforce Management
Procore launched a workforce management module targeted at SCs. Previously, Procore primarily catered to GCs. In 2018, it introduced a Field Productivity product designed to monitor the activities of field workers, ensuring that projects stick to their schedules and budgets. SCs can record Time & Materials (T&M) tickets when they perform work outside the project’s original scope, allowing them to be compensated accordingly. Additionally, they can measure the profitability of their construction projects for both people and materials.
In 2022, Procore launched a Workforce Planning product designed to assist both GCs and SCs with project scheduling while considering worker availability and skillsets. It replaces the use of traditional whiteboards and spreadsheets. This information also enables the creation of upskilling or reskilling plans tailored to future project requirements.
Pre-Construction
The pre-construction phase is when a project owner and a GC select their working partners and forecast the costs associated with the project. Procore distinguishes its pre-construction module by seamlessly integrating it into its construction module, creating a cohesive system that spans the entire construction project. This integration consolidates designs, plans, pre-qualification, bids, estimates, and budgets into a unified solution
With Prequalification, you can build forms based on 200 pre-qualification questions tailored for the construction industry (general information, safety, insurance & bonding, financials) that can be complemented by personalised questions. Once the form is built, it can be sent to construction companies that are in your network or on Procore Construction Network so that can qualify themselves and you can review them. Once companies are qualified, you can seamlessly invite them to bid on a construction project with the Bid Management product.
With Prequalification, you can create forms based on 200 pre-qualification questions specifically tailored for the construction industry, covering general information, safety, insurance, bonding, and financials. These questions can be supplemented with personalized inquiries. Once the form is constructed, you have the option to send it to construction companies within your network or on the Procore Construction Network, enabling them to self-qualify while providing you with the ability to review their qualifications. Once companies are qualified, you can seamlessly invite them to participate in the bidding process for a construction project using the Bid Management product.
With Bid Management, you can replace a manual bidding process that relies on email, phone calls, and paper documents with a centralized platform. This platform allows you to send bids, collect and review applications, and streamline the entire bidding process. You have the capability to create a comprehensive bid package, including essential bid information, construction project documents, and a list of qualified companies that you wish to invite to bid. Once the bid is sent, you gain the ability to track bid coverage, enabling you to monitor the progress of companies in the bidding process. This includes information such as whether they will bid or not, the amount they offer, and specific trades they can cover. Bid Management is seamlessly integrated with Financial Management for generating purchase orders and Project Management for initiating work with your selected partners.
With Estimating, pre-construction teams enhance their bid winning capabilities by seamlessly integrating estimating and take-off with the broader Procore platform (especially Financial Management, Project Management and Bidding). In the construction industry, takeoff involves quantifying and costing the materials required to execute a construction project based on construction designs including drawings and BIM data. Leveraging takeoff data, you can complete your estimates adding by factoring in your profit margin and labor costs. With Estimating, you have the ability to create professional proposals that reflect your brand and incorporate data generated within the platform. Furthermore, you can effortlessly respond to bids managed within Procore. Once a project is successfully awarded, you can transition it to your project team using the Project Execution module and ensure financial management is handled seamlessly through the Financial Management module
Horizontal Products
Procore has an Analytics product, which is a Business Intelligence tool leveraging data within Procore's platform and other tools used by Procore's customers (e.g. an ERP). Procore offers various industry-specific report templates. You can access analytics for individual projects and your entire portfolio of projects. Additionally, you can analyze your financial and operational data. In Sep. 2023, Procore launched an AI co-pilot to harness Procore's data for automating manual processes, retrieving information conversationally, and providing personalized recommendations for actions to be taken on the platform.
Procore has a Marketplace with over 400 applications that can enhance the Procore platform. These applications span categories such as procurement, risk management, CRM, scheduling, assets, and facilities management. It’s similar to what you might find on Shopify and Salesforce. Notably, 96% of customers utilize at least one integration, and 81% of customers use two or more integrations. When customers use multiple integrations, they are more sticky customers and they tend to have a higher Net Dollar Retention.
Procore has a Construction Network comprising 50k construction businesses aiming to serve as a LinkedIn-like platform for businesses in the construction industry. Owners, general contractors and specialty contractors can create profiles with key information including geography served, industry served, business type and specialties. The platform aids owners and general contractors in finding partners for new projects. It assists general contractors and specialty contractors in expanding their business. Procore’s Construction Network seamlessly integrates with the Procore platform, streamlining the bidding process for general contractors and specialty contractors.
Business Model
Procore is sold as a SaaS. It has c.14.5k customers paying on average $50k per year. Unlike most SaaS in the construction industry, Procore does not charge on a per-seat basis but rather based on (i) the construction volume processed on the platform as forecasted by its customers and (ii) the mix of products purchased. Procore adopted this business model to eliminate any barriers to user adoption and to establish itself as the preferred communication solution for all stakeholders in a given construction project. Consequently, Procore’s platform boasts over 2m users, with 60% being collaborators who do not pay but are invited by paying customers to collaborate on construction projects. On average each paying customer invites 170 participants on Procore. This singular business model grants Procore significant network effects: the more participants engaged in a given construction project, the greater value Procore delivers to its customers, leading to more qualified leads (construction companies already using Procore for free and deriving value from the platform), which in turn contributes to revenue growth. In H1-23, 40% of Procore’s new clients originated from companies whose collaborators were previously using Procore for free before converting into paying customers.
Go-To-Market
Procore divides its go-to-market team by geography (e.g. US, Latam, Europe), by customer type (GCs, SCs and owners) and by customer size. Initially, Procore primarily targeted mid-market GCs in the US. Today, Procore allocates 55% of its salespeople to GCs, 20% to SCs and 25% to Owners. It has also 30% of its salespeople working on enterprise accounts ($100m+ in annual construction volume), 40% on mid-market ($20-100m) and the remaining 30% on SMBs ($2.5-20m). It has a direct sales motion combining inside sales and field sales. It has also a robust customer success department tasked with contract renewals and expansions - expansion occurring through increases in construction volumes increase or product upselling.
Financials
In 2022, Procore generated $720m in sales growing at 40% YoY and growing at a 36% CAGR over the past 6 years. In 2022, it managed to re-accelerate its growth rate which is a noteworthy achievement for a company of its scale in terms of revenues. Procore’s growth strategy is well balanced, with 50% of its growth stemming from acquiring new customers and the remaining 50% from expanding its existing customer base. Certain new products have experienced substantial annual growth: 80% YoY growth for Invoice Management and 50% YoY growth for Analytics.
c.85% of Procore’s revenues are generated in the US. While the company embarked on international expansion efforts in 2017, only 15% of its revenues come from international markets - including 5.9% from Australia and 5.0% from Canada which were the first two countries Procore entered. Procore has encountered challenges in cracking the international market, and its international sales as a percentage of total sales actually declined from 14.6% in 2021 to 14.0% in 2022.
Procore generates 61% of its ARR from GCs which is Procore’s initial customer target. In 2018, it started to address more aggressively SCs with the launch of its Field Productivity product. Today, SCs contributes to 14% of Procore’s ARR. In 2019, it expanded its focus to owners following the acquisition of Honest Buildings. Owners account for 22% of Procore’s ARR.
Procore has c.14.5k customers. It targets mostly enterprise customers (41 customers are generating $1m+ in ARR) and the high-end of mid-market customers (1.4k customers are generating $100k+ in ARR). On average, customers are engaged on a 20 months contract duration. In the past 6y, Procore managed to double its ACV from $26k to $50k. It has an extremely strong 95% gross retention and a good $116% net dollar retention.
To expand its reach within its customer base, Procore leverages two main strategies: (i) increasing the construction volume tracked on Procore facilitated by the natural growth of the customer's business or the broader adoption of Procore within the organization, and (ii) upselling additional modules beyond the company’s historical products (project management, quality & safety and project financials) - products with which most customers initially land. Procore has 44% of its customers which are using 4+ products from its platform (driving 70% of ARR) and 12% customers which are using 6+ products.
Compared to companies trading at an EV/ARR multiple above 10x at the beginning of the year, you see that Procore has a strong annual growth, a good net dollar retention and a good gross margin. Nonetheless, below the gross margin, Procore has a cost structure that it too heavy compared to its revenues resulting in a negative 40% EBIT margin (vs. 17% EBIT margin for the 10x ARR club) and a 0% rule of 40 (vs. 52% for the 10x ARR club).
More specifically, Procore is overspending in sales & marketing. It pays off in terms of top-line growth generation. However, the company’s go to market efficiency has deteriorated with a payback period that is now well above 2y (42 months in 2021 and 33 months in 2022).
Competition
As the construction industry is under-digitised, Procore is mostly going after a greenfield opportunity. In 50% of its sales opportunities, Procore competes win pen, paper, phone and Microsoft Office. Sometimes, construction companies have built in-house solutions which don’t scale or use point solutions which struggle to cover all their business needs and to be used by several stakeholders on a construction project. Procore can also compete with large software platforms like Oracle, Autodesk and Trimble which have all large portfolio of products in the construction industry. Procore has two main differentiators compared to these players: (i) it is focused only in the construction industry when other platforms are more horizontal and (ii) it has an integrated platform in which all its products are interconnected when other platforms are more a collection of products independently built and distributed.
Autodesk
Autodesk has a suite of products dedicated to the construction industry called Construction Cloud. Autodesk is the leading construction design platform. It leverages this positioning in order to build downstream construction solutions for pre-construction, construction and operations. Autodesk made several acquisitions in the construction industry to build its platform including Plangrid in Nov. 2018 for $875m and Buildingconnected in Nov. 2018 for $275m. As a result, it has competing products with Procore which sometimes are better than Procore as point solutions (e.g. in pre-construction) but which are less integrated into a single platform. Autodesk has also an ecosystem of 240+ integrations including ERP and accounting integrations (Sage, Viewpoint).
It divided its platform into 4 main products:
Build: it’s a construction project management solution including communication, document management, cost control, issue management, as well as safety & quality. It connects the field and the office in real-time.
Takeoff: it enables construction companies to create estimates based on 2D and 3D designs in which material quantities will be automatically estimated based on design.
BIM Collaborate: it enables all stakeholders on a construction project to collaborate on the BIM to make sure that everyone can transform the BIM into a real project and to keep everyone in the loop with BIM changes.
Docs: it’s a document management solution to centralise and collaborate on documents during the entire construction project from design to operations.
Trimble
Trimble is a conglomerate of digital solutions operating in 4 sectors which are agriculture, transportation, geospatial and construction. In construction, it has a suite called Trimble Construction One which includes products competing directly with Procore (e.g. estimating, project management, construction financial management). It has also unique products around fabrication management (pre-fabrication) and field technology (capturing and analysis data on the field with laser scanning and VR).
Oracle
Oracle has acquired several construction software companies. In 2008, it acquired Primavera which is a project portfolio management solution operating in several industries including construction. In 2016, it acquired Textura for $660m which is a construction contract and payment management solution. In 2017, it bought a collaboration platform for construction project called Aconex for $1.2bn. As a result, Oracle has a construction platform with products in pre-construction, construction execution, post construction and financial services.
Key Opportunities
M&A Strategy
In the past 5 years, Procore has acquired 8 different companies in order to add capabilities to its construction platform. Procore has 3 acquisition rationale: (i) add or strengthen a product to its platform (BIManywhere fore Design Collaboration, Levelset for ProcorePay, Estimcom for Preconstruction Estimate), (ii) target a new stakeholder in the construction industry (Laborchart for Specialty Contractors and Honest Buildings for owners), (iii) add AI capabilities to its platform (cf. Indus.ai and Avata Intelligence).
Its acquisition strategy is to add point solutions that can be deeply integrated into the Procore’s platform. Autodesk has an opposite strategy in which it has acquired a portfolio of construction tech companies which are not integrated to each other and which have sometimes redundant features.
It’s interesting to note that Procore has acquired multiple products which were already connected to Procore and which were on the Procore marketplace like Levelset or Indus.ai.
Financial Services
As a vSol mostly focused on SaaS, there is an obvious opportunity for Procore to tie and monetise financial services to its platform. Procore is working on three main products: (i) payments, (ii) working capital financing, and (iii) insurance.
On payments, it launched Procore Pay in Nov. 2022 to streamline the payment process between GCs and SCs. In the construction industry, it typically takes 90 days for payments to be processed, making it a lengthy process. Procore Pay addresses this challenge by reducing the time it takes for SCs to receive payments. Simultaneously, it provides GCs with a unified interface to manage all payments to SCs based on project completion milestones. Shortening payment cycles benefits GCs as well, as SCs are more inclined to collaborate with GCs known for prompt payments. Procore Pay is built upon the Procore Financial Management module. It incorporates Procore’s invoice management product and combines it with Levelset’s lien management for comprehensive tracking of payment initiation requirements, including lien waivers, insurance tracking, invoicing, and contract compliance. Procore has partnered with Goldman Sachs Transaction Banking to embed payments capabilities within its platform.
On working capital financing, SCs have working capital constraints preventing them from bidding on new projects and expand their business. Procore is experimenting with a materials financing product enabling SCs to fund their materials without using their own cash and to reimburse when the project is being completed. The company is also looking at factoring to pay-out SCs earlier in exchange of a fee and to be reimbursed when the GC pays its SCs.
On insurance, it launched a product in Mar. 2023 called Procore Risk Advisors which leverages Procore’s proprietary data on contractors (e.g. data on financial health, on past incidents) and which partners with insurers to offer unmatched rates for insurance coverage to its best contractors. Procore acts as a digital broker. It earns a commission to bring new customers to insurance companies and an additional performance fee by providing its data to insurance companies to help them in their underwriting.
International Expansion
Procore currently derives 14% of its revenues from countries outside the US. It started its international expansion in 2017 with the launch of operations in Canada and Australia. Since then, it has regularly opened new geographical regions including the UK in 2018, LATAM in 2019, MENA and South East Asia in 2021 and Central Europe in 2022. Procore has made substantial investments to set-up a go-to-market motion in these geographies that have the potential to pay-off in the coming years. Procore has a $3.6tn addressable market in the US in terms of construction volume which compares with $5.9tn in the other countries where it operates. Procore is well-positioned to seize the international opportunity because its platform is easily adaptable from the US to other countries, with necessary adjustments for local regulations. Additionally, Procore already serves US customers with operations in multiple global regions, providing the company with initial logos and success stories to leverage when entering new markets.
Key Risks
Market Penetration
In the United States, Procore has a 2% logo penetration and a 14% volume penetration. Globally, it has a 1% logo penetration and a 2% volume penetration. Nonetheless, in its core segment which is mid-market GCs in the US, Procore has already a 25% market penetration. If Procore is not successful in expanding its market (expanding beyond the US, adding SCs and owners as customer segments and launching new products), it may quickly saturate its core segment and top-line growth could suffer from this saturation.
Innovation Dilemma
Procore primarily functions as a top-down solution, often mandated by owners or general contractors for all stakeholders involved in a construction project. It’s typically implemented by office personnel and enforced in the field. While Procore offers excellent mobile interfaces for field use, its complexity can be challenging for the average field worker. It creates an opportunity for a disruptive bottom-up product gaining adoption from field workers. This product would streamline communication on job sites and capture both formal and informal information shared. It will leverage this positioning to introduce more traditional construction execution modules.
Competition from Autodesk and ERPs
Procore faces intense competition from Autodesk and verticalised ERPs designed for the construction industry. Both possess unique competitive advantages that they leverage to introduce additional products that directly compete with Procore’s platform.
Autodesk is the dominant design solution in the construction industry, widely adopted by architects. It serves as the de facto platform for creating both 2D and 3D construction models. Autodesk leverages this advantage to develop or acquire product in the downstream construction process (from pre-construction to construction and operations).
Verticalised ERPs designed for the construction industry, such as Viewpoint or Sage, are essential tools because as they serve as repositories for financial and accounting data. In its product strategy, Procore has opted to establish partnerships with these ERPs developing strong connectors instead of directly competing with them. As a result, Procore does not aim to be an all-in-one platform for the construction industry and is always used in parallel to a verticalised ERP. These verticalised ERPs often offer additional modules that compete with Procore’s platform.
Indirect Impact from Economic Downturns
Construction is known for its correlation with the broader economy. Historically, it has suffered from economic downturns (residential during the great financial crisis, offices during the covid crisis, etc.). These downturns could indirectly impact Procore given that its customers operate in the construction industry and its pricing is based on the forecasted construction volumes of these customers. Procore has implemented several risk-mitigation strategies: (i) it operates across various segments of the construction industry (commercial, infrastructure, residential) which respond differently to each economic downturn, (ii) its own customers often build diversified project portfolio to reduce dependency on a single construction segment and (iii) the construction industry currently exhibits strong demand compared to supply, with numerous construction companies holding backlogs that extend several years into the future.
Thanks to Julia for the feedback! 🦒 Thanks for reading! See you next week for another issue! 👋