According to McKinsey, the construction industry constitutes 13% of the world’s GDP and is still run mainly offline. In the McKinsey’s Global Institute Industry Digitization Index, only hunting and agriculture are more based on legacy analog systems.
This lack of data transparency and accuracy causes a mismatch between what managers see and what is happening on the ground, leading to mistakes and financial losses. For example, a lack of communication can easily lead to more construction delays and costs due to not having the right equipment.
In the end, the industry has historically relied on pen and paper to manage projects, blueprints, equipment logs, procure orders etc. Due to this, the flow of information within a single project is quite often delayed and out of synch. It is then nearly impossible to perform any in-depth analyses or draw meaningful conclusions. This has, in turn, led to low productivity and sluggish innovation. Without a change, the industry risks falling even more behind.
Yardlink is a B2B marketplace for the construction industry that digitizes the supply chain of equipment and machine rentals. The team has built a platform that aggregates thousands of plant hires, equipment depots, and suppliers of materials, such as fuel, that construction sites need.
In the UK alone, there are over 4,000 rental companies with no single significant dominant player in the market — the five largest players account for only a combined 20% of the market share. Add to that the fact that the equipment rental process is generally very clunky and cumbersome.
To enquire about the availability and price of an excavator or any other tool, a manager for a typical medium-sized construction project has to engage with 5–20 different suppliers. The process involves making multiple calls or visits to plants, even though the collection of heavy equipment cannot be made in person. This again results in more wasted time and money.
By digitizing and aggregating a range of different suppliers, a manager is able to guarantee the availability and delivery of needed equipment on the desired day. Since the cost of transportation, especially in the case of heavy equipment, constitutes a significant share of the cost of a rental, access to a broad network of equipment suppliers helps managers to come in at a budget with just one click.
When we first spoke to Neeral Shah, the CEO and founder of Yardlink, we were incredibly impressed by his vision. The UK is the largest market in Europe for construction equipment rental, worth £6.8bn and also has the highest propensity to rent, due to high storage and maintenance costs.
As marketplace investors, when we evaluate companies, the structure of the market plays an important role. The characteristics of the construction industry make it ripe for disruption by a marketplace player, and we immediately saw a huge opportunity to build a platform aggregator in the sector.
While B2B companies quite often face a tradeoff between AOV and frequency of orders, Yardlink benefits from both. The company targets SMEs whose average order values are much higher than those of sole traders or DIY builders, and the frequency of orders is consistently high.
While the industry has been muddling through the digital world, Yardlink took the opportunity to forge ahead and change how the industry operates. The digital platform that Yardlink has built provides such an immense improvement of the experience vs. the existing status quo. In a couple of years, it will be hard to imagine how the industry was able to operate in any other way.
At Speedinvest, we are thrilled to join Neeral and his team, along with our friends at FJ Labs, on this exciting journey to fundamentally change one of the most outdated, yet massive industries.
What the team has achieved to date in such a short period of time is remarkable, but what really excites us is the future potential of further expansion and building the dominant procurement platform for the construction industry.