Constructware Looks to Expand

construction.com March 15, 2001

By Harry Goldstein

Constructware CEO Scott Unger

Last week, Constructware closed the biggest round of funding in its seven-year history. Cordova Ventures LLC, Atlanta has placed a $4.1-million bet that Constructware’s impressive revenue growth rate has made it one of the favorites to be left standing after the dot-com shakeout is finished.

Flush with fresh cash, Constructware is poised to expand its 60-employee operation in the Atlanta suburb of Alpharetta. The company, which has been known for keeping its burn rate low, has grown its revenues on average of 20% per month for last 16 months. Its revenue in 2000 was 2.7 times that of 1999. The last few months have been particularly strong, with the company ringing up sales of $641,000 in Dec. 2000, followed by $793,000 in January. This time last year, 22 of the ENR Top 400 contractors were using Constructware to manage one or more projects. Today the company counts 78 of the Top 400 as clients.

"Our sales are greater than our expenses already, provided we collect on all those sales, and our burn rate is down to zero," claims CEO Scott Unger. He acknowledges that the company won't be able to maintain this kind of astounding growth much longer and points out that traditional software companies often have annual growth rates in the neighborhood of 20-30%.

At a time when "dot bombs" are exploding in the faces of stupefied venture capitalists everywhere, it's no surprise that Unger takes pains to distance Constructware as much as possible from a sector that reeks of failure. "I don't know that we were ever truly a dot-com. The reality is that we’re a software company. We provide a hosted solution. The difference between us and [a traditional software company] is that we use the Internet as the medium to provide our software application."

Of course, Constructware is a Web-based solution. And like any other application service provider (ASP) it has had to convince potential customers that they should invest the time, money and resources in shifting from LAN-based project management solutions to an unfamiliar, and to some an economically unstable medium. Unger hopes that by landing some VC funding, potential and existing customers will put all thoughts of dotcom doom behind them.

"Perception of stability is a challenge," Unger admitted in an interview a few days before the new placement was officially announced. "VC money would be a statement and would add some resources that would better help us support our clients."

Paul Doherty, managing director of The Digit Group, an AEC information technology consultancy that works with many collaboration ASPs, believes that Constructware has "an awesome challenge in being the pioneer, trying to shift the behavior of industry while trying to be a growing business concern." Still, he rates the company's chances of emerging from the shakeout as favorable. "Constructware may remain under the radar and survive because of their service—that's why they’ve stayed around," he says. "They've done things right. They didn't try to do too much, didn't hop on the hype bandwagon, and are moving straight ahead one step at a time, which is why they're getting an investment in this environment."

For existing customers already counting on Constructware's longevity, the recent cash infusion was positive reinforcement. Jim Taylor, president of J.A. Jones Constructors, Atlanta, a Constructware customer whose relationship with Unger goes back ten years, sees this round of funding as a positive statement about the company's future." As we all know, capital infusion helps a growing company continue to grow and help meet people's needs," he said. "I think it's a huge vote of confidence."

Glossary

burn rate: differential between cash coming in and cash going out.

LAN: Local Area Network. A network of computers that spans a small area such as an office or a building.

Photo is courtesy of Constructware

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