Procore Raises $634.9 million in IPO

Sun, 13 Jun 2021 07:00:00 -0500

Construction tech is one of the hotspots for investors in real estate. In 2018, construction technology saw a massive boost, with venture capitalists investing nearly $3.1 billion in contech startups.

Contech had a difficult year in 2020 with the pandemic restricting funding events. However, the post-pandemic world only sees an increasing demand for technology. The first half of 2021 saw a massive change with Procore, a construction software company, raising $634.5 million in its IPO.

What does it mean for the future of the contech industry? Find out below.

Procore’s IPO:

Procore technologies raised $634.5 million in its initial public offering, selling its shares above a marketed range. It sold around 9.47 million shares, each priced at $67. The company initially marketed them between $60 and $65, according to an exchange filing.

The company’s market value is above $8.5 billion, according to the filings listed with the US Securities and Exchange Commission.

But Procore’s market debut was valued at a whopping $11 billion, with each of its shares opening at $84. This is around 25% more than their share price in the initial public offering.

The effect of the pandemic

This was not Procore’s first run for the initial public offering. After nearly 20 years of founding, the company filed for an IPO in March 2020. But it had to eventually delay the process due to the ongoing pandemic. In the funding round held after the postponement, Procore managed to raise around $150 million.

The investors include big names like D1 Capital Partners, Lead Edge Capital, Dragoneer Investment Group, Bessemer Venture Partners, Tiger Global Management, ICONIQ Capital, Lumia Capital, and Scop Venture Capital.

During the pandemic, the company saw an increased number of users, with a 19% hike in its customer base as compared to 2020. In addition, Procore’s platform has facilitated more than 1 million projects accounting for $1 trillion in construction volume. With labor shortage affecting the costs and project completion rates of construction firms, the company said that digitalization is growing in the real estate industry during the past year.

Procore's future plans:

Procore aims to encourage the widespread use of technology in the construction industry. Unfortunately, the construction industry is one of the slowest in adopting technology. According to a report by Deloitte, other industries spend an average of 3.28% of their revenue on technology.

In contrast, the construction industry spends only 1.51% of its revenue on IT, standing lowest among the surveyed enterprises. Procore plans to change this by making contech accessible to all by allowing unlimited users to its platforms.

With its most recent expansion in South East Asia, Procore’s total user count reaches 1.6 million across 125 countries. Its core goals revolve around increasing its customer base and expanding globally while ensuring access to contech for everyone.

What does it mean for the future of contech?

A look at Procore’s 2020 survey shows the future of contech in the post-covid world. It shows that 46% of capital projects are on hold, and investments will drop by about 32% as the world recovers from the pandemic. But even with project delays and supply chain disruptions, 81% of the responders expected an economic rebound in the industry.

Tech emerged as a winner in this study, with 75% of respondents believing that there will be increased technology usage in the construction industry.

Cash flow key for Contech

With construction software companies overcoming pandemic restrictions on funding events, most rely on cash flow to get through these difficult times. As a result, companies offering software subscriptions have an advantage over traditional software companies, allowing access to technology at a lesser initial cost.

Contech industry soon to see a boost

Procore’s IPO has set a precedent for construction software companies to see a boost in investment in the future. The Covid-19 crisis proves to be an opportunity for the contech industry, as remote work has become inevitable.

In addition, the challenges created by difficult economic conditions could lead to more innovation and automation in the construction sector. With eight contech firms receiving funding from investors in early 2021, the trends favor the industry.

Where is the contech industry headed?

With the construction sector adapting automation due to the pandemic, certain technologies are of focus throughout 2021.

Subcontract management platforms will be popular

Post Covid-19, contractors will see a rise in the use of construction software, particularly subcontract management software. The fragmented construction sector is better managed with such project-centric technologies which seamlessly integrate field and design data into a single platform.

This will help contractors understand the actual cost of projects and help increase the margins. With centralized data, it can also help with accurate analysis and provide valuable insights to contractors.

Streamlined workflow will improve efficiency

The pandemic has brought in a new trend of remote collaborations, which may continue post-pandemic to some extent. As the primary goal of most companies is to improve the efficiency of their remote teams, digital infrastructure projects are set to be more popular.

Companies are also focusing on cost-cutting, which can make them opt for platforms that streamline workflow. Cloud-based platforms will also grow in the upcoming days, as they provide better access to data remotely.

More focus on safety

The pandemic has made all industries rethink their safety standards. The construction industry, in particular, is finding it difficult to implement safety processes due to the nature of work. The post-pandemic construction industry will focus on implementing technology such as simulation and design to facilitate the required safety norms.

Infield data analysis using 3D models

Building Information Modelling (BIM) is a relatively new technology that is quickly becoming popular. Through BIM, you can construct virtual models of construction projects, enabling you to digitally create the infrastructure before physically starting it. This can help detect potential errors as well as implement any required changes.

As a result, BIM helps the construction industry become more efficient and focus on cost-saving, especially in trying times like these.

Bottom line

The construction industry is undergoing a significant change in 2021. However, with Procore Technology raising about $634 million, the contech sector looks at a bright future. While the industry faces some challenges, they can be gradually overcome by embracing technology.

If you want to leverage the trends using effective construction management software, Assetsoft can help you with a solution. By integrating state-of-art software like Yardi, MRI, and Procore, we can build the right platforms for you. We are experts in Yardi consulting.

Talk to us today to know more about how we can help find the right ERP solution for you.

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