BuildDirect’s co-founder Jeff Booth
On the heels of a string of successful financings for promising technology companies in the past year, Vancouver-based BuildDirect, an online home improvement retailer, has announced its second financing of the year.
After securing $30-million from venture financiers last January, BuildDirect has now closed another $50-million financing. Past backers, including Silicon Valley venture capital firm Mohr Davidow Ventures and Canadian pension giant OMERS, as well as newcomer BMO Asset Management, provided the funding for a common share offering, bringing BuildDirect's total raised to date to just over $100-million. Sources familiar with the deal say the latest financing values the company at around $450-million.
BuildDirect has been on a growth spurt of late; it is now earning more than $100-million in annualized revenues and is on track to grow between 50 per cent and 75 per cent this year after doubling in size last year, said CEO Jeff Booth. Part of the proceeds from the financing will go toward expanding both their technological and physical infrastructure.
The company, which started in 1999 as an online home improvement retailer, tweaked its business model in the late 2000s to focus on a specific niche within the market. Rather than try to be all things to all handy-people, it now specializes in large, heavy orders. If you just need a hammer, some nails and a chainsaw, a chain retailer like Home Depot, Lowe's or Rona might be your best bet. BuildDirect positions itself as the company to go to when you want to order enough oak floor panels to cover your house.
"Virtually all of our products are over 150 pounds, and in most cases over 2,000 pounds," said Mr. Booth. "We created an entirely different infrastructure [than what Home Depot uses] to support a heavyweight good that uses a different backbone."
Behind BuildDirect's website is actually a lean logistics business with 12 North American warehouses (in the coming year, the company plans to expand that number to 22) and sub-contracted delivery services, backed by data-intensive technology that allows the company to be the only layer buyers and sellers have to deal with. The company houses inventory on consignment for suppliers, meaning it doesn't actually have to pay them until orders come in, keeping cash flows strong.
"It's pretty brilliant what the company is doing," says Canadian-born Katherine Barr, a general partner with Menlo Park, Calif.-based Mohr, who also sits on BuildDirect's board. "They're cutting out all the middle men," she says, adding that they are leveraging their data and analytics software to help manufacturers know what to make, when to make it – and when and where to ship it.
"That's really never been done in this industry before," said Ms. Barr. She estimates that such efficiencies translate into savings for the consumer of up to 80 per cent.
Adds Jim Orlando, managing director with OMERS Ventures: "What really excited us is how they're attacking an unconventional market in an unconventional way" by focusing on heavy loads. "Anything that can't be shipped by FedEx – this is where BuildDirect comes in."
After making its biggest in-roads into flooring, BuildDirect is working to expand its reach into other parts of the home improvement business, such as patio furniture, siding, moulding and deck supplies.
So, can regular investors expect to see BuildDirect among the next wave of technology companies testing the public markets? ? Probably not. Three other venture-backed private Canadian tech firms, notably Shopify, Hootsuite and Vision Critical, are the three most likely companies that go public in the next 12 months, industry observers say. But BuildDirect may not be that far behind.
"We wouldn't rule that out," Mr. Booth said of a possible IPO. "As the business expands it offers all sorts of opportunities, including going public."
Sean Silcoff