The construction industry has long grappled with the issue of slow payments, which can cause significant delays and financial strain. On average, it takes construction companies two to three months to receive payment, resulting in a multitude of challenges such as delays, cost overruns, and multiple layers of payment.
In 2023, the cost of sluggish construction contract payments amounted to a staggering $273 billion, accounting for 14% of total project expenditures that year. These numbers highlight the urgent need for solutions to alleviate the burden on construction companies.
Recognizing the root cause of these issues, Matthew Calvano, Henry Bradlow, and Francisco Enriquez co-founded Adaptive in 2021. Adaptive is a platform that offers tools designed to simplify payments and accounting for general construction contractors. Calvano explains that the complex web of stakeholders involved in the construction payment chain, including banks, developers, general contractors, and subcontractors, coupled with the financial expertise gap among small- and medium-sized businesses (SMBs), are key drivers of slow payments in the industry.
To address these inefficiencies, Adaptive provides an array of workflow automations for financial management, including budgeting, expense tracking, accounts payable, and electronic payments. Through Adaptive’s platform, customers can easily upload documents such as insurance agreements and payment requests in various formats like SMS and PDF. The platform’s automations then take action on these uploads, such as approving requests and budgets.
Adaptive’s main competitors are the manual labor and outdated financial management methods that rely on email, Excel spreadsheets, file sharing, and legacy project management software. However, with its focus on streamlining financial workflows unique to the construction industry, Adaptive has carved out a niche for itself.
Other startups in the space include Briq, Beam, and MakersHub, each offering their own solutions to address financial workflow challenges in construction.
Despite competition, Adaptive has managed to build a strong customer base, boasting over 280 construction companies as clients. These customers range from custom homebuilders and commercial general contractors to real estate developers. The company’s success can be attributed to its commitment to understanding and meeting the specific needs of the construction industry.
Looking ahead, Adaptive plans to further expand its reach by targeting subcontractor clients and developing tailored products for this segment. Additionally, the company aims to monetize different integrated payment, insurance, and payroll functions, providing a comprehensive suite of financial services to its customers. By managing the entire financial workflow for their clients, Adaptive sees significant opportunities for embedded finance, particularly for SMBs that have traditionally been underserved in terms of financial services.
Adaptive’s recent Series A funding round, led by Emergence Capital, raised $19 million, bringing the total raised by the startup to $26.4 million. Notable investors such as Andreessen Horowitz, Definition, Exponent, 3kvc, Box Group, and Gokul Rajaram also participated in the round. The additional funds will be used to expand Adaptive’s workforce from 29 to 45 employees by the end of the year.
Overall, Adaptive’s innovative approach to automating and simplifying financial management in the construction industry has positioned it as a leader in the space. With its focus on tailored solutions and dedication to serving the needs of SMBs, Adaptive is well-positioned for continued growth and success in the coming years.