Procore Acquires Construction Payment Startup Levelset for $500M
The lien payments compliance software startup is the construction management giant’s largest acquisition ever
By Philip Russo September 23, 2021 11:01 am
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Construction management giant Procore Technologies Inc. announced late Wednesday that it has acquired Levelset, a software company that facilitates lien payments for construction projects, for $500 million, the largest acquisition in Procore’s history.
The acquisition of the New Orleans-based proptech startup consists of approximately $425 million in cash, subject to typical adjustments for working capital, transaction expenses, cash and indebtedness, and approximately $75 million in Procore common stock, according to a Procore news release. The closing of the transaction is anticipated in the fourth quarter of this year and is subject to customary closing conditions.
Founded in 2007, Levelset will add lien rights management to the Procore platform, enabling the latter company to manage complex compliance workflows and improve the payment process in construction, according to Procore’s statement. It also presents future growth opportunities for Procore, including capitalizing on the companies’ complementary data assets.
Levelset is venture-backed by S3 Ventures, Altos Ventures, and Brick & Mortar Ventures.
Asked if he was surprised at the price Procore paid for Levelset, Darren Bechtel, managing director of Brick & Mortar Ventures, which led the seed-round investment into Levelset, called the moment, “bittersweet, because I think [Levelset CEO] Scott [Wolfe Jr.] and his team are far from being done executing on their vision of trying to help subcontractors and vendors get paid faster, which is a large and not-yet-perfected process in the sort of product construction value chain.
“It’s a great outcome for employees and all the investors, including us early investors, but definitely [there was a] consideration of whether to continue putting up the good fight,” Bechtel said. “So I could argue that Procore is getting a deal. You’d also say that this is definitely top-of-the-market price as far as comps go, but as we’ve seen over the last three or four years, all comps are unfortunately outdated, and we keep seeing the bar continue to be raised.”
The acquisition by Procore, which went public only four months ago, is especially significant as it is the second-largest M&A exit for a venture-backed, construction software business, Bechtel said, trailing only Autodesk’s $900 million acquisition of PlanGrid.
“That’s huge for the ecosystem at large,” he said. “That’s encouraging to investors, to founders, and to founder-curious individuals.”
Asked what he saw in Levelset so early in its development, Bechtel said of Wolfe: “He’s a refreshing breed of founder. Scott was a lawyer by training and by profession for a short while. Somehow, he operates on 30-hour days and has a very thoughtful, high IQ and EQ. He’s not about fluff or flair, but a real doer, visionary and strategist. You couldn’t help but be inspired when you met him.
“I really appreciated the hyper focus that [Scott and his team] had on not chasing what was a hot focus area, but instead focusing on the problems that no one was really working on. In this case, it was helping contractors, subcontractors and vendors navigate this very archaic and confusing world of lien rights and waivers.”
“Construction work is hard enough — getting paid shouldn’t be,” Procore founder and CEO Tooey Courtemanche said in a statement. “Levelset helps the construction industry get paid faster and their offering will be a perfect addition to the Procore platform. This acquisition will also give Procore access to industry data, including payments and compliance activity, allowing us to deliver valuable risk intelligence to our customers, and to develop innovative financial products.”
Burdensome compliance workflows contribute to the construction industry’s median of 90 days of sales outstanding and 74 days of payable outstanding, the slowest of all industries surveyed across the globe, according to the Procore statement.
In the U.S., liens are foundational to these compliance workflows, with construction stakeholders spending considerable time and energy managing lien rights — from those downstream looking to preserve lien rights and having to comply with the nuances of lien law that varies from state to state — to upstream stakeholders constantly procuring lien waivers at the point of payment to ensure their projects are free and clear.
“Our solution gets people paid faster with less cash stress,” Levelset CEO Scott Wolfe Jr. said on a Procore conference call Wednesday concerning the acquisition. “Over 250,000 users have deployed Levelset on more than 6.5 million construction projects. This activity generates highly reliable payment and relationship data.
“Together with Procore, we can further empower the industry to get paid faster with better visibility and smoother documentation.”
Levelset has been a Procore App Marketplace partner since April 2018. Today, more than 3,300 customers use its lien rights management tools for compliance workflows. It has more than 250,000 customers on some 6.5 million construction projects. The company has approximately 300 employees at its New Orleans headquarters and offices in Austin, Texas, and Cairo, Egypt.
Philip Russo can be reached at prusso@commercialobserver.com.
