Globe and Mail – BOYD ERMAN
The Canadian online home-improvement retailer posted 100 per cent revenue growth in 2013
BuildDirect, a Canadian company with the goal of becoming the Amazon.com of building products such as flooring and siding, has secured $30-million of venture capital funding to pursue its growth plans.
The Vancouver-based company’s lead investor in the series B round is Mohr Davidow Ventures, a new backer from Silicon Valley. BDC Venture Capital, one of the company’s existing investors, also contributed to the round. Earlier backers of BuildDirect include OMERS Ventures, which invested $16-million in 2012, and Difference Capital Financial, which put in $5-million last year.
After posting 100 per cent revenue growth in 2013, BuildDirect had plenty of interest for the latest round, but was looking for a specific type of investor – a U.S. firm with technology experience, said Jeff Booth, chief executive of BuildDirect. The company has ambitious growth plans. Mr. Booth has said he wants to build a company worth $1-billion.
With that in mind, the company wanted a backer that was familiar with companies growing to large scale. Mohr Davidow has backed internet-based startups such as Rocket Fuel and Shutterfly that have grown into publicly traded companies.
“The type of growth companies that that are out of the U.S., at least in the tech space, I don’t think Canada’s seen,” he said.
Mohr Davidow’s general partner Katherine Barr will join the board of BuildDirect.
The company has built a fast-growing business providing building products that are purchased online and delivered directly to the buyer. The key to its success has been creating a logistics system to deliver the heavy objects, and a data-crunching process that predicts what products will sell where. Those predictions help BuildDirect ensure products are in stock, and delivered on time. It also means that the company is able to convince manufacturers to put up inventory on consignment, meaning the company doesn’t need to tie up cash in stocking unsold products on warehouse shelves. That helps keep prices down.
The $30-million enables the company to grow more quickly by more than doubling the number of product lines it sells.
“We do believe there is an opportunity to create just an incredible size company here,” Mr. Booth said.
As a private company, BuildDirect does not disclose results. Mr. Booth did say that revenue has now reached “nine figures,” meaning it is more than $100-million a year. The company employs 175 people and plans to hire another 300 this year. Revenue growth has accelerated each year.
He declined to disclose the company’s valuation in the latest round, but said it was attractive.
“You’re not going to raise $30-million in a B round unless valuation is pretty significant, especially when you don’t really need the money,” he said.
The company still has plenty of growth possibilities, Mr. Booth says. The expansion will enable the company to add about 20 product categories and there are “probably 1,000 other categories like those.”