Business COVID-19 Public Venture

Procore Reportedly Pulls IPO, Raises $150M At $5B Valuation Instead

Construction management software provider Procore Technologies has put off its plans to go public in favor of raising more funding, sources close to the matter say.

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Bloomberg first reported on the news yesterday, which I confirmed with people who have firsthand knowledge of the decision this morning.

In late February, I covered how Procore had filed an S-1 with the U.S. Securities and Exchange Commission. The company outlined its plans, which we previewed here, last September for an initial public offering of its common stock.

But presumably in light of the unexpected economic downturn that has resulted from the COVID-19 crisis, the Southern California-based company has had a change of heart.

People familiar with the decision said that Procore has closed on more than $150 million in funding at a valuation of about $5 billion. New investors in the round include D1 Capital Partners, the investment firm run by Dan Sundheim, according to Bloomberg, which also reported that “Procore could still go public this year if markets stabilize.”

The numbers

Last September, we reported that an IPO could value 17-year-old Procore at more than $4 billion, according to Bloomberg, which cited “people with knowledge of the matter.” In December, we covered how the company had tripled its valuation to nearly $3 billion after raising a $75 million Series H from Tiger Global Management. That was up from a $1 billion valuation just two years prior when Procore raised $50 million in a Series G round from ICONIQ Capital. Since it was founded in 2003, Procore has raised just over $300 million in funding, according to Crunchbase data.

Other previous backers include Bessemer Venture Partners  and Lumia Capital.

Procore, which operates as a SaaS company, has seen impressive growth in recent years. As of August 2019, it had more than 1,800 employees, up 600 compared to a year ago, across 13 offices globally. Procore saw its annual recurring revenue surge from under $10 million in 2014 to over $250 million last August.

In its S-1, Procore shed more light on its financials. It revealed both increased revenue and net loss in 2019.  Specifically, the company’s revenue surged 55 percent in 2019 to $289.2 million compared with $186.4 million in 2018. At the same time, its net loss was up by 46.5 percent to $83.1 million in 2019 compared to $56.7 million in 2018.

Also, Procore revealed it had an accumulated deficit of $300.8 million at the end of last year.

Meanwhile, customer count nearly doubled from 4,310 at the end of 2017 to 8,506 at the end of 2019. It also has more than 1.3 million users.

Elusive profitability

Like other SaaS operators, Procore sells its products on a subscription basis for a fixed fee with pricing generally based on the number and mix of products and the annual construction volume contracted to run on its platform. As its customers subscribe to additional products, or increase the annual construction volume contracted to run on Procore’s platform, the company generates more revenue.

In citing its risk factors, Procore acknowledged a couple of things. Notably, it admitted “to a history of losses,” and that it “may not be able to achieve or sustain profitability in the future.” It also acknowledged that its business may be “significantly impacted” by changes in the “related reductions in spend across the construction industry.” No doubt that a downturn resulting in a slowdown in development would be harmful to Procore’s business.

As we’ve reported extensively, construction tech is one of those spaces that has not been considered traditionally sexy. It is, however, an industry that is growing both in terms of the number of companies receiving funding in the space and in terms of more mainstream investor interest. It’s also seeing more exits, although now we may be seeing less IPOs and more M&As.

Illustration: Li-Anne Dias

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