Construction tech: learnings from the home renovation space
By: Bertrand Nembot
Tags: Startup, Construction, Construction Industry, Marketplaces, Startup Canada

We’re almost one year into our journey of building Billdr, a vertically integrated home renovation marketplace with a mission to make home renovations simple, transparent and efficient. We’re building the digital platform infrastructure for the home renovation industry, or simply put, a one-stop-shop for everything home renovation.

I’m writing this article as a follow up to our thesis we published ten months ago when we launched in February 2020, to cover our progress and share our learnings openly.

Launching a home renovation marketplace during the COVID-19 pandemic

We launched Billdr in Montreal in February 2020, a month before the COVID-19 pandemic hit North America. Most of Canada went into lockdown for three months between March and May. The construction industry came to a halt during that time.

The lockdown was a pretty dire situation for our team. We were a very early-stage company with no funding, only one customer, in the middle of a pandemic. I spoke about uncertainty in a previous article, and then it became a reality on a global scale. That moment in time was our Sahara desert crossing to reference the Bible.

We decided to focus on what we could control: improving our product (website and mobile application) and onboarding new general contractors (GCs).

In April, we acquired three new customers who planned to use their quarantine time to renovate their homes. Each contract signed felt like an oasis in the middle of the desert. Shortly after, our first angel investor came on board with a check of USD 150,000, boosting our team morale and confidence (shout out to Aleka Capital!).

Summer came, and many homeowners across the country wanted to improve the comfort of their homes. It was a particularly busy summer for the residential construction industry. Despite three months of lockdown this year, 2020 home renovation spending in Canada was only expected to decrease by 5% (source). We did a recent survey with Leger Marketing and found that 38% of Canadian homeowners decided (or accelerated their decision) to undertake their home renovation due to the pandemic!

We started to generate leads organically via word-of-mouth. As of June, we also invested between $500 and $700 per month on Search Ads to promote our services but over 80% of our traffic and leads remained organic.

Projects posted value: sum of the estimated value of projects posted on the platform

Over the summer, we continued to acquire more customers. Over time, as we continually refined our sales strategy and completed more projects, our conversion rate improved. By the end of the summer, we raised an additional USD 350,000 from angel investors (simple.Capital(), Formentera Capital, and other angels from my Uber family, shout out to you all!) to close our seed round at USD 500,000 / CAD 650,000.

2020 has been a rollercoaster of emotions, and we’re grateful for what we accomplished as a team despite the challenging environment. We gathered several learnings on the industry that are shaping our future strategy and that we are openly sharing in this article. “We make Big Bold Bets” is one of our core values, and this article is a testament to it!

A reminder of the problem

I extensively covered the problem within the home renovation industry in this article.

There is a high asymmetry of information between homeowners and contractors, leaving the home renovation experience stressful for homeowners. According to a recent survey we mandated to Leger in November 2020, 77% of Canadian homeowners still find the home renovation experience stressful. Additionally, almost 50% are not confident to undertake major home renovations by themselves, mostly due to lack of knowledge.

In 2019, 70% of general contractors (GCs) businesses had less than five employees, and most can’t afford administrative support for their businesses. GCs also lack tools to manage their responsibilities outside of the construction site.

The opportunity is huge: the global home renovation industry is approximately USD 1.9 trillion industry. US and Canada home renovation spending is estimated to be USD 400 B.

Different strategies to solve the problem

Over the last four years, the home renovation space has started to get some footing within the tech community. Several startups identified this untapped opportunity before us and are challenging the original incumbents (Angie’s List, Houzz). Across Europe and North America, there may be less than ten players that have adopted a vertically integrated approach to building a home renovation marketplace: Billdr (Canada), Hemea (France), Renovation Man (France), Sweeten (USA), Block Renovation (USA), Made Renovation (USA), Pro.com (USA), and Skylight (USA). This list is not exhaustive and may not include all the players. However, each player has adopted a very different go-to-market strategy.

Most marketplaces can be considered homeowner-centric (i.e. Houzz, Angie’s List, Block Renovation, Made Renovation, Pro.com, and Skylight). They put the homeowner experience at the center of their strategy, with less emphasis on improving the home renovation experience for GCs.

Other marketplaces can be considered general contractor-centric (i.e. Billdr, Sweeten, Hemea, and Renovation Man). They put the general contractor experience close to or at the center of their strategy, which also offers a better homeowner experience.

Two marketplaces decided to specialize by limiting the scope of their offering to specific types of home renovations such as bathrooms or kitchens (i.e. Block Renovation and Made Renovation).

Other marketplaces have a more generalized approach, serving all types of home renovation projects (i.e. Billdr, Sweeten, Hemea, and Renovation Man).

Based on these characteristics, we came up with a competition matrix that categorizes each player’s approach.

Note: Pro.com & Skylight are fully licensed general contractors

Billdr’s general contractor centric approach

The 2008 financial crisis impacted the home renovation industry quite drastically in North America. Between 2008 and 2010, the sector lost 30% of its workers. Although the number of workers has almost recovered, home renovation spending has increased by 50% between 2010 and 2019. So there are slightly fewer construction workers today than in 2008, with 50% more demand. I believe that demand could probably be higher than reported, taking into account homeowners who can’t find general contractors (GCs) and the black market. The lack of contractors is even becoming a problem in some cities (source).

Number of employees in the construction industry (Chart: FRED Economic Data)

Because supply is scarce, it is evident that whoever wins over top-performing GCs’ loyalty wins the game. At Billdr, at the heart of strategy, we focus on the GC experience. Our value proposition is simple: we want to offer them the most cost-efficient and hassle-free home renovation experience. We plan to automate most of their administrative tasks by building tools that address their pain points and offering them a concierge service experience to facilitate the relationship with customers (i.e. change orders, selection of materials, coordination, review of deficiencies).

We realized that by solving GCs’ problems, we’re solving homeowner pain points simultaneously. It may seem counterintuitive, but we consider GCs to be our main clients rather than homeowners. Hear me out: Homeowner purchase frequency is relatively low (assume they may undertake a home renovation every five years), and the frequency of “purchase” for GCs is medium to high (our top GCs use our app every week). We believe that this approach will delight GCs while providing us with a competitive advantage.

Here are two concrete examples of how a GC-centric approach has a positive effect on the homeowner experience:

Example A: Prequalified Leads

Problem — Only 20% of GC leads are sales qualified (i.e. customers who intend to do a renovation within the next couple of weeks and have a realistic budget). Thus GCs waste a significant amount of time filtering inbound calls.

— Only 20% of GC leads are sales qualified (i.e. customers who intend to do a renovation within the next couple of weeks and have a realistic budget). Thus GCs waste a significant amount of time filtering inbound calls. Solution — We pre-qualify all projects posted on our website before sending them to the Billdr app, where GCs gain access to an incredibly detailed project report like this one. GCs have shared that we’re already saving them 60–70% of time pre-construction (see testimonial, turn on English captions). They have also reported that our services save them between $600 to $3,000 depending on the project’s size.

— We pre-qualify all projects posted on our website before sending them to the Billdr app, where GCs gain access to an incredibly detailed project report like this one. GCs have shared that we’re already saving them 60–70% of time pre-construction (see testimonial, turn on English captions). They have also reported that our services save them between $600 to $3,000 depending on the project’s size. How it ends up helping homeowners — As part of the project scope, we provide homeowners with an independent estimate, providing them more transparency into the process and pricing. They can rest assured that the quotes that come in will be within range and that all contractors are pricing out the same scope of work.

Example B: Educating Homeowners on Construction

Problem — Educating homeowners on construction topics in the middle of a project can complicate the decision-making process and add time to an already tight schedule for general contractors.

— Educating homeowners on construction topics in the middle of a project can complicate the decision-making process and add time to an already tight schedule for general contractors. Solution — We introduced a renovation expert that works with GCs and homeowners for the project’s length. That way, GCs can focus on delivering projects with excellence and managing their teams effectively. GCs can discuss issues with the renovation expert — who speaks a similar language — who then communicates with the homeowner for a faster and more favourable resolution.

— We introduced a renovation expert that works with GCs and homeowners for the project’s length. That way, GCs can focus on delivering projects with excellence and managing their teams effectively. GCs can discuss issues with the renovation expert — who speaks a similar language — who then communicates with the homeowner for a faster and more favourable resolution. How it ends up helping homeowners — A renovation expert can articulate the technical information received from GCs on the site and help homeowners make better decisions when a problem arises on-site. Our renovation experts are there to disseminate information to homeowners, thereby increasing transparency and trust between both parties.

I could give you many other examples like this impacting the payment experience, quotation process, project management, and construction materials selection.

Billdr flywheel

We came up with the first iteration of our Billdr Flywheel, similar to the famous concept Jeff Bezos made popular with the Amazon Flywheel.

Billdr Flywheel: our first attempt at defining our flywheel

The flywheel starts by providing a transparent experience for homeowners, which leads to a more trustworthy first impression and a better customer experience. A better customer experience leads to advocacy from satisfied customers and better home renovation leads (high-quality projects like home extensions, new foundations, full home reno). These high-quality leads will naturally attract GCs who pride themselves on quality work onto the platform. As more of these GCs engage with the Billdr platform — and stay because of a better experience vs projects outside of Billdr — our marketplace will experience higher liquidity and efficiency: projects get matched faster, and price points are competitive for most projects. A more liquid and efficient platform leads to a better homeowner experience, and the flywheel is on.

Building an ecosystem: the digital infrastructure for the home renovation industry

To disrupt the home renovation industry, we’re building the underlying technology infrastructure to support general contractors and homeowners throughout the entire home renovation experience. Progressively, we will add tools to include additional stakeholders (i.e. architects, structural engineers, interior designers, real estate agents, lenders, suppliers) to create an integrated ecosystem that still offers flexibility for homeowners. We’re ordering chaos, one block at a time, to reduce information asymmetry for everyone.

Building the platform infrastructure, one block at a time

What’s next for Billdr in 2021?

We’re planning to raise a new round of funding that we’ll kick off in January 2021. We have a clear go-to-market strategy to expand across Canada (first stop Toronto) and then the USA. It’s time to build!

Wish us luck. :)

Bert, on behalf of the Billdr Crew

PS: I can give you access to the full 2020 Leger home renovation survey if you send me a DM on LinkedIn