A Multibillion-Dollar Issue
Studies have found that it takes anywhere from two to three months on average for construction companies to get paid, due to factors such as delays, multiple payment layers and cost overruns. The cost of sluggish construction contract payments climbed to $273 billion in 2023, representing 14% of the total project expenditures that year.
Back-Office Inefficiencies: A Root Cause
Matthew Calvano, along with Henry Bradlow and Francisco Enriquez, thought that the cause lay in back-office inefficiencies. So in 2021, the trio co-founded Adaptive, a platform that provides tools designed to simplify payments and accounting for general construction contractors.
"’The construction payment chain involves multiple layers, including banks, developers, general contractors and subcontractors,’ Calvano told TechCrunch. ‘We believe that this complex web, combined with the fact that most construction companies are small- and medium-sized businesses (SMBs) lacking financial expertise, are the primary drivers of the industry’s slow payments.’"
Adaptive: A Solution to the Slow Payments Problem
Adaptive delivers an array of workflow automations for financial management, including budgeting, expense tracking, accounts payable and electronic payments. Using Adaptive’s product, customers can upload documents like insurance agreements and payment requests in formats such as SMS and PDF and leverage automations to take action on these uploads, like approving requests and budgets.
"We’ve built several generative AI algorithms to automate the financial management and bookkeeping workflows unique to construction," Calvano said. "Our primary competitor is the manual labor required to manage financials, typically supported by email, Excel, file sharing and the financial features of legacy project management software."
Rivals in the Market
Adaptive’s other rivals include Briq, a startup with a similar financial workflow automation sales pitch; Beam, a fintech aiming to streamline payments, invoices and receipts for contractors; and MakersHub, which deciphers accounts payable data for construction companies.
A Healthy Business
But Adaptive has a healthy business by all appearances, with more than 280 construction companies on its customer roster ranging from custom homebuilders and commercial general contractors to real estate developers.
Growth Plan
The near-term plan for growth is to focus on acquiring subcontractor clients by building tailored products for that segment, Calvano said. Medium-term, Adaptive — which makes all of its revenue through software at present — will explore monetizing different integrated payments, insurance and payroll functions, according to Calvano.
"Given that we manage our customers’ entire financial workflows, there are numerous opportunities for embedded finance, especially with our focus on SMBs that tend to be underserved when it comes to financial services," Calvano said.
Funding
Andreessen Horowitz, Definition, Exponent, 3kvc, Box Group and Gokul Rajaram also participated in Adaptive’s Series A, which brings the startup’s total raised to $26.4 million. A portion of the proceeds will be put toward expanding New York-based Adaptive’s workforce from 29 to 45 by the end of the year, Calvano tells TechCrunch.
Opportunities Ahead
Adaptive is well-positioned to take advantage of the growing demand for financial technology solutions in the construction industry. With its focus on automation and AI, the company has a unique opportunity to revolutionize the way construction companies manage their finances.
The Construction Industry’s Slow Payments Problem: A Growing Concern
The construction industry is plagued by slow payments, with an average payment period of two to three months. This can lead to financial difficulties for contractors, who often lack the resources to manage complex payment chains.
The Impact of Slow Payments
Slow payments can have a significant impact on construction companies. They may struggle to meet their financial obligations, which can lead to cash flow problems and even bankruptcy.
Adaptive: A Solution to the Slow Payments Problem
Adaptive is a platform that provides tools designed to simplify payments and accounting for general construction contractors. The company uses AI-powered automation to streamline financial management, making it easier for contractors to get paid on time.
Features of Adaptive
Adaptive offers a range of features designed to help construction companies manage their finances more effectively. These include:
- Automated Invoicing: Adaptive’s platform automates the process of sending invoices and tracking payments.
- Expense Tracking: The company’s software allows contractors to track expenses in real-time, making it easier to manage cash flow.
- Accounts Payable Management: Adaptive’s platform helps contractors manage their accounts payable, ensuring that they pay suppliers on time.
Benefits of Using Adaptive
Adaptive offers a range of benefits for construction companies. These include:
- Improved Cash Flow: By automating the payment process and reducing delays, Adaptive helps contractors improve their cash flow.
- Reduced Administrative Burden: The company’s software reduces the administrative burden on contractors, allowing them to focus on core activities.
- Increased Efficiency: Adaptive’s platform streamlines financial management, making it easier for contractors to manage their finances.
Conclusion
Adaptive is a solution to the slow payments problem that plagues the construction industry. With its AI-powered automation and range of features designed to streamline financial management, the company is well-positioned to revolutionize the way construction companies manage their finances.