Why does Capstreet invest in construction?
Capstreet believes construction is early in adopting technology. That gives growing software and technology businesses room to expand, and it creates the chance to change efficiency and project delivery.
Capstreet states its view this way on its What We Do page:
Capstreet has identified construction as an industry where we believe technology can drive transformational changes in efficiency and project delivery. The industry is still early on in its technology adoption curve, which we believe creates a ripe environment for growing, innovative software and technology businesses. Capstreet targets software businesses that enable the critical areas of project and financial management for general and sub-contractors.
The firm is specific about the target. It wants software that supports project management and financial management. Its customers are general contractors and sub-contractors.
If you built a tool because you lived the problem on a job site or in a back office, this is your market. Capstreet says it sees a ripe environment for that kind of company.
What kinds of construction businesses fit Capstreet?
A fit is a growing, innovative construction software or technology business. The product should support project management or financial management for general or sub-contractors.
| Area | What Capstreet describes |
|---|---|
| Project management | Software that helps contractors plan and run jobs |
| Financial management | Software for job costing, billing and other finance work |
| Customers | General contractors and sub-contractors |
| Business type | Growing, innovative software and technology businesses |
Two portfolio companies show the range. One is a software and integration provider for field operations. The other is a tech-enabled services provider. Both are on the list below. Check your numbers against the firm’s criteria.
How do Capstreet’s criteria apply to construction companies?
Capstreet publishes five criteria, and they apply to construction owners the same way they apply to every other industry. Each one is listed below.
- Entrepreneur-owned businesses services companies
- $3 to $15 million of EBITDA
- Primarily majority investments
- Entrepreneurs reinvest alongside Capstreet
- Ability to apply the Capvalue Framework®
The firm also says it looks for “a tenured team of owners or managers seeking a majority capital partner, with solid financials, a defensive business model, untapped growth potential, and competitive advantages within their market niche.” Contractors run on thin timing and tight cash, so software tied to money and schedules can become part of daily work. That supports the kind of defensive model Capstreet describes. This is our reading, not a Capstreet claim.
Its $3 to $15 million EBITDA range sits in what many call the lower middle market. EBITDA means earnings before interest, taxes, depreciation and amortization. It is the profit measure Capstreet’s range uses. In a buy and build plan, the first business is the platform company, and later purchases are added to it.
Which construction companies has Capstreet backed?
Capstreet lists two construction companies in its portfolio. Both are current investments in Fund V. Status is shown as Capstreet publishes it on its portfolio pages.
- Allpoints: Current, Fund V. A tech-enabled provider of pre-construction and construction surveying services to high volume production homebuilders in the United States. Founded in 1996 and headquartered in Houston, TX.
- hh2: Current, Fund V. hh2 Cloud Solutions provides modular software and integration solutions that help commercial construction companies manage their field employees and operations. Based in Kaysville, UT.
What does Capstreet do after it invests?
Capstreet applies its Capvalue Framework® in three steps: Research, Build Scalable Platform, and Drive Business Transformation. Across its history, the firm reports 50+ Platform Acquisitions and 200+ Add-on Acquisitions.
- Research. Perform deep research to identify markets and build relationships with key entrepreneurs.
- Build Scalable Platform. Invest in top talent and technologies, and provide functional expertise for scale.
- Drive Business Transformation. Develop a long-term strategic roadmap and execute a buy and build strategy.
Capstreet does not publish a construction case study. Each portfolio page has the published company description.
There can be no guarantee that Capstreet will be successful in applying its Capvalue Framework®.
Next step
If your company serves construction, read the full deal criteria, then start a confidential conversation through the contact page. You can also call 713-332-2700 or email connect@capstreet.com. See all industries Capstreet lists.
Frequently asked questions
What construction companies does Capstreet invest in?
Capstreet targets software businesses that support project and financial management for general contractors and sub-contractors. It describes construction as early on its technology adoption curve. The company should also meet the firm's general criteria, including $3 to $15 million of EBITDA.
Does Capstreet invest in general contractors?
Capstreet's published thesis is about software that serves general and sub-contractors, not contractors themselves. Its construction portfolio includes a surveying services business, so ask the firm directly if you run a services company in construction.
Which construction companies are in the Capstreet portfolio?
Allpoints and hh2, both listed as current investments in Fund V. Allpoints provides tech-enabled surveying services to production homebuilders. hh2 provides modular software and integration for commercial construction field operations. Read each company's published description on its portfolio page.
Why does Capstreet like construction technology?
Capstreet believes the industry is still early on its technology adoption curve. It thinks that creates a ripe environment for growing, innovative software and technology businesses that can change efficiency and project delivery. Owners can start with a confidential call.
