The construction industry has a problem with delayed payments. Studies show that due to factors such as delays, multiple payment tiers, and cost overruns, it takes an average of two to three months for construction companies to get paid.
The cost of missed construction contract payments is expected to reach $273 billion in 2023, accounting for 14% of total project spending that year.
Matthew Calvano, along with Henry Bradlaugh and Francisco Enriquez, saw the problem as being due to back-office inefficiencies, so in 2021, the three co-founded Adaptive, a platform that provides tools to simplify payments and accounting for general contractors.
“The construction industry payment chain involves multiple tiers: banks, developers, general contractors, subcontractors, etc.,” Calvano told TechCrunch. “We believe this complex network, along with the fact that most construction companies are small and medium-sized businesses (SMBs) and lack financial expertise, are the primary causes of payment delays in the industry.”
Adaptive, which this week closed a $19 million Series A round led by Emergence Capital, offers a suite of workflow automation for financial management, including budgeting, expense tracking, accounts payable, and electronic payments. Adaptive's products enable customers to upload documents such as insurance policies and payment requests in formats such as SMS or PDF, and then leverage automation to take action on the uploads, such as approving requests and budgets.
Image credit: Adaptive
“We’ve built several generative AI algorithms to automate financial management and bookkeeping workflows specific to the construction industry,” Calvano says. “Our main competition is the manual work required for financial management, typically supported by email, Excel, file sharing, and the financial functions of traditional project management software.
Adaptive's other competitors include Briq, a startup that similarly pitches itself as automating financial workflows; Beam, a fintech that aims to streamline contractor payments, invoices and receipts; and MakersHub, which decodes accounts payable data for construction companies.
But Adaptive runs a seemingly healthy business, with a client roster of more than 280 construction companies, ranging from custom home builders and commercial general contractors to real estate developers.
Image credit: Adaptive
Calvano said the short-term plan for growth is to focus on winning subcontract clients by building customized products for that space. In the medium term, Calvano said, Adaptive, which currently derives all of its revenue from software, will explore monetizing various integrated payment, insurance and payroll capabilities.
“Because we manage the entire financial workflow for our clients, there's a lot of opportunity in embedded finance, as we focus on small and medium-sized businesses, which tend to be underserved when it comes to financial services,” Calvano said.
Andreessen Horowitz, Definition, Exponent, 3kvc, Box Group and Gokul Rajaram also participated in Adaptive's Series A, bringing the startup's total funding to $26.4 million. A portion of the proceeds will be used to grow New York-based Adaptive's headcount from 29 to 45 employees by the end of the year, Calvano told TechCrunch.