Autodesk, Inc. said today it plans to acquire cloud-based software startup PlanGrid for $875 million “net of cash.” The transaction is expected to close sometime in AutoDesk’s fiscal fourth quarter, which ends Jan. 31, 2019.
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The deal is significant for a number of reasons. One, PlanGrid fills a gap in publicly traded Autodesk’s offerings by giving it a “more comprehensive, cloud-based construction platform,” according to Autodesk. Jim Lynch, construction general manager at Autodesk, said in a statement that the buyout will also let the company “do more for general contractors.”
San Rafael, California-based Autodesk develops 3D design software for use in the architecture, engineering, construction, and media industries. Founded in 1982, it went public three years later and has acquired 67 companies, according to its Crunchbase profile.
PlanGrid’s software aims to allow general contractors, subcontractors, and owners in commercial, heavy civil, and other industries to work together throughout the construction project lifecycle. The San Francisco-based company claims to offer real-time collaboration, keeping the field and the office on the same page. It also says it gives builders real-time access to project plans, punch lists, project tasks, progress photos, daily field reports, submittals, and more.
PlanGrid was founded in 2011 and has raised a total of $69.1 million over three funding rounds, according to its Crunchbase profile. Most recently, in September 2017, it raised $50 million in a Series B. Among those firms and people that have invested in PlanGrid are Y Combinator, 500 Startups, Reddit co-founder Alexis Ohanian, Founders Fund, Sequoia Capital, and Northgate Capital.
“As designing and making converge, Autodesk is connecting project data from design through construction and putting predictive insights into the hands of contractors,” said Andrew Anagnost, Autodesk CEO, in a prepared statement. “There is a huge opportunity to streamline all aspects of construction through digitization and automation. The acquisition of PlanGrid will accelerate our efforts to improve construction workflows for every stakeholder in the construction process.”
The deal is also notable because it is just one of many in the space that involves a large company scooping up a smaller player in the sector, as we reported on in May.
The construction industry is known to suffer from great inefficiencies and low productivity gains. Why that’s the case isn’t hard to figure out. Construction projects involve so many players from general contractors to subcontractors, as well as a slew of paper documents including time cards and site plans. In an attempt to modernize the industry, more and more startups have been formed to tackle its problems. And because these startups seem to be innovating faster than a lot of the big players, the space has seen some impressive exits over the years.
Most acquisitions of construction tech startups today are being conducted by larger companies who realize that buying innovation is “much easier” than building it, Travis Connors, a partner at Borealis Ventures, told Crunchbase News in May. The investing group has seen four portfolio exits in the construction tech space so far.
These big companies “are trying to acquire smaller players with massive distribution so they can hold on to customers,” Connors told Crunchbase News. “The startups they’re buying have already had some established presence in the construction space.”
Zachary Scheel, co-founder and CEO of startup Rhumbix, told me today that he believes the Autodesk-PlanGrid transaction represents “another great exit” for the construction technology space on the heels of some “solid” exit multiples from the likes of Aconex (acquired by Oracle for $1.2B late last year), Viewpoint (acquired by Trimble for $1.2B in April), and e-Builder (acquired by Trimble earlier in February) .
“Hopefully the PlanGrid exit will open more investors’ eyes to opportunities in $13 trillion global construction industry,” Steel added. “In addition to the massive labor shortages the industry is facing, the Baby Boomers are retiring in droves and being replaced with digital natives who see technology as a way to gain competitive advantage. Construction companies are increasingly looking to develop digital strategies for the future, which is something they’ve never done before.”
Funding in the sector also continues to rise.
As we reported last month, North American construction tech startups raised $220.7 million across 14 deals in the third quarter. That’s up 348 percent from $49.3 million raised over 19 deals in the third quarter of 2017, and a staggering 5,865 percent higher than the $3.7 million raised in six transactions in the third quarter of 2013. Here is what that pace of investment looks like year-over-year.
iStock Image / Skarie20
This post was updated to correct a misspelling of Zachary Scheel’s name.