Constrafor, a construction supply company, takes the “SAFE” route with new capital

Constrafor, a construction supply company, takes the “SAFE” route with new capital

Constrafor, a construction supply company, takes the "SAFE" route with new capital

Other construction projects are underway, but payments to contractors and their subcontractors continue to bottleneck the normal course of project completion.

“Banks are increasingly cautious with their own funding of development projects, which means they will also slow down payments on their own side,” Constrafor CEO Anwar Ghauche told TechCrunch. “This means payment terms to contractors are getting longer rather than shorter, which is becoming more and more difficult for contractors as they generally don’t have recourse to go to their banks and increase their Line of credit.”

Ghauche and Douglas Reed launched Constrafor, a SaaS construction procurement platform, to provide integrated financing and software for general contractors to manage their subcontracting workflow. Its prepayment program assumes the risk of the contractor’s invoice, freeing up cash flow and reliance on traditional and expensive lending options. The general contractor then reimburses the invoice to Constrafor.

The company raised $106.3 million in equity and debt in 2022, and since then Constrafor has grown from 15,000 customers to 23,000. Ghauche admits the company “had a revenue hiccup” during this period, but that it has nothing to do with the market or the credit network. Since then, the company has tweaked its credit issuance and is now seeing 25% month-over-month growth this year in “sustainable growth.”

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

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

Anwar Gauche, CEO, Constrafor

Anwar Gauche, CEO of Constrafor. Picture credits: Constrafor

Asked why Constrafor opted for a SAFE rating over a priced round, Ghauche said he didn’t think the market “looked great today in terms of price.”

“We’ve seen this deterioration in multiples for fintech companies,” Ghauche added. “We have 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 will be better.

Additionally, the investment includes access to a credit facility with Apollo. This additional capital potential gives Constrafor “scalable credit and capital for our business,” Ghauche said.

And at a time when other financial players are raising their rates due to the tough economic environment, Constrafor is able to lower its price to customers and pass the savings on to them, he added.

During this time, the new capital will be used for payroll and to finance operations. Ghauche intends to have its EarlyPay program noted and open Constrafor’s APIs to general contractor customers.

“We’re seeing a number of construction startups popping up right now, and we think we have a pretty big network right now, so we want to open up our platform for those companies to connect to ours and build on top of it. Constrafor”, says Ghauche.


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