Brazilian startup Construct is announcing a R$1 million angel round to bring real-time project management to Brazil’s famously inefficient construction industry.
Construct co-founders Drew Beaurline and Patrick Albert are taking on one of the nation’s most corrupt and bureaucratic industries – possibly a job only twenty-something foreigners with no particular background in construction would be naïve enough to attempt.
Take Exhibit A: Petrobras, the state-run oil company and crown jewel of the Brazilian economy until a scandal of unprecedented proportions revealed Petrobras executives had been awarding Brazil’s biggest construction firms contracts in exchange for kickbacks. The damage stands at $16 billion so far — $2 billion which went directly into the hands of corrupt firms and executives — and this week heads of two of the top construction firms in Latin America, including one that built the Sao Paulo stadium for World Cup, were arrested.
Which brings us to Exhibit B: The mega-sports events. Brazil built or remodeled twelve stadiums for last summer’s World Cup, including a completely gratuitous installation in the Amazons, but they came in over $1billion over budget.
The renovation of the LEED stadium in capital city Brasilia alone was two times over budget and three times as expensive as some of the arenas that were built from scratch, and is now being used mostly as a bus parking lot. But the stadium debacle paled in comparison to the other sixty or so airport and transportation projects that were supposed to be the “legacy” of World Cup — only half of which have been completed a year after the games.
“The biggest problems are usually the ugliest. Look at Uber. Is hailing a cab the biggest problem that affects the largest amount of people? I’d say not as much as having a road to drive, having internet, watering your house. Drew Beaurline, Construct co-founder
Meanwhile, Brazil is about to pour an additional $64 billion into privatized infrastructure projects this year, and another $10.6 billion on Olympic costs, including $2 billion on infrastructure directly related to the games.
“The biggest problems are usually the ugliest,” Beaurline told me on a call from Belo Horizonte. “Look at Uber. Is hailing a cab the biggest problem that affects the largest amount of people? I’d say not as much as having a road to drive, having internet, watering your house. That’s the phase many of these developing countries are going through right now. Infrastructure has to come first, no matter what. And Brazil is known for having one of the largest infrastructure deficits in the world.”
When Beaurline saw millions of Brazilians take to the streets to protest the billions of dollars of taxpayer money being poured into World Cup and Olympic infrastructure projects, he knew he’d found his problem. He pitched his co-founder Patrick Albert, who was working for a company that built software for constructing and operating oil refineries, and started applying to government-funded accelerators.
Beaurline and Patrick moved to Belo Horizonte at the start of 2014 to participate in SEED, an accelerator run by the state of Minas Gerais that provided office space, about $25,000 in equity-free financing, and perhaps most important, permanent visas for foreigners accepted into the program. SEED only made it through two classes till a newly elected local government shut down the program, but by then Construct had hired three Brazilian developers, secured a couple of clients who were willing to give them feedback on the early product designs, and started raising their angel round.
In addition to the capital from SEED, Beaurline and Patrick secured a R$325K federal grant from Startup Brasil, put in about $45K of their own money and crowdfunded through Fundacity.
The R$1 million round (about $320,000) closed with participation from a dozen angels, including Maurizio de Franciscis and Arthur d’Hauteville, former GE Capital executives; Mark Neeleman, co-founder of Azul Airlines (and former JetBlue founder); Binh Tran, co-founder of Klout; and Eyal Miller, Head of New Business Development for Google in Israel.
“Mostly because of this piece of content I put out over World Cup,” says Beaurline, referring to a strategically planned launch of the Brazil Startup Report, which has gotten over 50,000 views to date. “People told us they normally invest in Brazilian founders these days, but we showed we knew what we were talking about.”
Next they had to pitch Brazilian construction executives they had a product worth paying for, and curiosity over their gringo status did not hurt. “If you have the right mentality, work ethic and right acceptance of the culture of what it is, you can use being an appreciative gringo to your advantage,” says Beaurline.
“When we go into meetings we’re like, anti-corruption,” says Albert. “We say, ‘This is going to increase transparency and help you cover your ass if someone is stepping out of line and do shady deals, because you have everything documented, and you can sleep well at night knowing that in real time my jobsite in Rio is OK, and the people managing it are doing what they are supposed to. And if questions come up a year down the road, I have everything documented.’”
One recurring comment they heard in their pitch meetings was, “This sounds cool, but we’re only going to use it for our management and top-level engineers” – the (elitist) idea being that the often under-educated on-site construction crew wouldn’t know how to use it. “We said, I think they can figure it out,” says Beaurline. “They love Facebook and Whatsapp. And now our top user is the mestre de obras, the guy managing the workers on the job site, who is sending about six photos a day back to the main office. That threw a whole bunch of negative hypotheses out the window. We’re very proud of that statistic.”
This is going to increase transparency and help you cover your ass if someone is stepping out of line and do shady deals, because you have everything documented, and you can sleep well at night knowing that in real time my jobsite in Rio is OK, and the people managing it are doing what they are supposed to. Patrick Albert
Construct currently offers a basic set of project management and communication tools on a smartphone app that is designed for real-time use on construction sites and is generating revenue from its first set of clients. “In terms of what our clients are asking for, usually it’s product suggestions to mimic what they have to do on paper word for word,” says Beaurline. “But we’re showing them a new way to do it with digital project management.”
Construct is currently targeting mid-market companies with 2,000 employees that have between five and ten concurrent job sites for pragmatic reasons. “One, in Brazil a lot of these companies don’t have their own dedicated tech infrastructure – they outsource their IT a lot of times,” Beaurline says. “Second, from a sales cycle perspective, we can get to decision makers relatively easily. It might take six to eight months to even get a meeting with the bigger players, and we need to be iterating more rapidly than that.”
But nothing has been slower than Brazil’s infamous bureaucracy. “Setting up a company as a foreigner in Brazil has been the craziest ride,” he says. “From the time we closed our round to when we could transfer the money down here was about seven months. It took forever to jump through hoops and get papers notarized, so we just kept the round open because we couldn’t use the cash.”
“Just to open a bank account for a company we already had in Brazil took close to 90 days,” says Albert. “And if you make the wrong move you can sink your company.”
Beaurline and Albert are undeterred. “We’re in one of largest mining towns in the world,” says Beaurline. “These guys have huge maintenance and construction teams. We’re just closing a shopping mall client. We have to keep telling ourselves, construction is the biggest, this is where we solve the problem. Let’s stay focused.”