Textura

1
Textura

• Ruben Miranda
• Ryan Patrick
• Patrick Schneider

2
The Problem

• Chicken vs. egg
• Face-to-face
• Courier
• FedEx
• PAPER!

Subcontractor (sub)
Contractor (GC)
Why do we care?
3
Textura
is an electronic payment exchange.
Subcontractor (sub)
Contractor (GC)
Specially designed for construction.
4
Current Market Strategy

• Push strategy
• GC to sub
• You WILL use this.
• Subs Pay
• 5-50 per transaction

5
Critical Issues/Recommendations

• Critical Issue 1 Increase adoption?
• Introduce New Marketplace (eBay to our PayPal)
• Increase Advertising
• Critical Issue 2 Prevent switching?
• Maintain data forever (Netflix)
• Drive adoption (network effect)
• Critical Issue 3 Maximize value?
• More GCs
• More projects per GC

6
The Marketplace
Textura Today
Textura Marketplace
Bid Management
Payment Lien Management
Lead Generation
Project Management

• Backward integration
• Hook em early
• Drive transactions to Textura payment system
• Increases value proposition for all

AVOID
7
The Marketplace Features
Textura Today
Textura Marketplace
Bid Management
Payment Lien Management
Lead Generation
Project Management
New Features
AVOID

• Accurate Invoicing
• Automatic Payment/Lien Waiver Release
• Electronic Document Storage Retrieval

• Project announcements
• SC Marketing
• Login/Sign-up Form

• Project Specs
• Bid Placement
• Bid Ranking

8
Advertising

• Focus on GC (Push)
• Increase Sales, Marketing Support Resources
• Advertise Directly to subs (Pull)
• Direct them to Marketplace
• Conferences/Tradeshows

9
Switching Costs

• Maintain data forever
• Its all there. (Netflix)
• Project reference
• Auditing
• Drive adoption (Network effect)
• De-facto
• Keep GCs and subs happy

10
How do we make money?Where are your
financials?
11
Waterfall Analysis
Source 2002 U.S. Census
Number of contractors/subcontractors (combined)
Known Market
Available Market
Served Market
Total Market
Potential Market
?
700,000
601,000
138,000
69,000
12
Marketplace Assumptions

• 10 of free accounts use Textura
• 6,900 paid Textura users
• Bid fee 25
• Costs

13
Unit Economics
Transaction Revenue
Total 5.6K/GC
Fee Revenue
New Total 12K/GC
Removing GC fees would increase adoption which
would increase Revenues
14
Textura Pro forma
Incremental NPV (5y _at_ 25) 1,862
15
Texturas Options

• Maintain Push Strategyand Add Pull!

Maintain Current Strategy (Push to GCs)
Acquire Firm (Buy Market Place)
Joint Venture (Partner with Firm with Market
Place)
Develop Own Solution (Pull GCs and subs to
Market Place)
16
Conclusion
17
QUESTIONS
18
APPENDIX
19
Competition

• Consumer Ranking Sites
• Angies List (300,000 subs)
• ServiceMagic
• B2B (Upstream)
• Lead Generation
• McGraw-Hill Construction Dodge Report
• Reed Construction Data
• Marketplace
• McGraw-Hill Construction Network
• (Claiming 600,000 projects at launch)
• B2B Payment and Lien Transfer
• GCPay
• Eventually Oracle, SAP

20
McGraw-Hill Portal
http//www.construction.com
21
McGraw-Hill Construction
Dodge Report Lead generation
Products Material, procurement
Network Bidding

• Network Information Solutions
• Research and Analytics
• Product Marketplace
• Media

Boasting 1M customers
22
M-H, Information Media unit

• Business-to-Business Group
• BusinessWeek
• J.D. Power and Associates (JDPA)
• McGraw-Hill Construction
• Platts and Aviation Week
• Broadcasting Group
• 2006 984M sales (parent 6B)
• 5 Margin (contributes 3 to parent)

23
M-H Recent Activity

• Jan 2002 Acquired ConstructionZone
• May 2002 M-H Construction launched
• Jan 2005 Added Bid Management
• 600,000 projects at launch
• Average charge is 250/mo
• 100 conversion 1.8B

24
ServiceMagic Subs Marketing
25
Textura (Assumed) Costs
26
Financials
27
Other Notes

• Drive volume is key to business!
• Get more subs! Focus on GCs subs
• Provide value for revenue base (subs)
• Reduces searches for GCs (could help with cost)
• Eventually build Network effects (dominoes start
  falling like PayPal)
• Dont charge for initial cost, but charge for
  product upgrades
• Powered by Textura
• Messagingconversations documented in one place

28
How Textura solves it
29
How Textura solves it
30
Value Proposition for GCs

• Owners
• Easier way to interact with owners
• Justification on subcontractor selection
• Visibility for owners on project status
• Subcontractors
• Easier way to get lien waivers
• Easier way to manage legal documentation
• Easier way to manage subcontractors through work
  process
• Easier way to pay subcontractors and precisely
  manage cash balances (more streamlined process,
  less errors and rework)
• Easier way to manage issues with subcontractors
  as problems arise
• Easier way to select subcontractors for future
  projects

31
Value Proposition for SCs

• Easier way to get payments more quickly
• Easier invoice management
• Easier resolution process if issues arise
• Easier way to have low-cost marketing services
• Easier way to differentiate themselves with GCs
• Easier way to build business pipeline

32
Construction Industry Overview

• Commercial and Residential
• Over 1 Trillion Industry
• Commercial
• Market segmentation
• 54.6 in Non-Residential
• 45.4 in Civil Engineering
• Over 700K companies
• Over 5 Million employees
• 80 of companiesfewer 20 employees

33
Texturas Value Proposition

• Reduces risk
• Financial integrity
• Properly completed legal documents
• Faster, easier reporting
• Data is accurate and timely
• Potentially lower project costs
• Faster, more efficient payment process
• Much easier project tracking
• Eliminates need to use multiple systems
• Increased efficiency
• Online system facilitates exchange of documents
  and payments
• Standardized approach to projects

34
Marketing Analysis

• Customers
• Large general contractors in regional markets
• Sub-Contractors that work for General
  Contractors
• Owners

• Company
• Focus on commercial construction industry
• Focus on payment management services
• Utilize technology to improve efficiency
• Mngmnt team has significant industry experience

• Competitors
• GCPay.com
• Electronic Systems (e.g. QuickBooks)
• Paper-Based and Delivery Companies (FedEx, DHL,
  UPS, etc)
• SAP and Oracle for larger firms

• Collaborators
• General Contractors
• Trade Shows
• Industry Publications
• Video Professor

• Context
• Commercial construction is approximately 545
  Billion industry
• Residential construction is approximately 647
  Billion industry
• Growth slowing in Residential
• Lien waivers

35
Creating Value
36
Capturing and Sustaining Value
37
The Long Tail
Oracle and SAP
Textura Focus
38
Value Drivers

• Create network effects
• Stickiness without resentment
• Keep volumes high to cover fixed costs because
  variable cost are marginal
• High switching costs
• Develop supply-side and demand-side sources of
  differentiation
• Determine value discipline low-cost, innovative,
  customer intimacy

39
Why Do We Care?

• Construction is 1 Trillion Industry!
• 5 of US GDP

40
Unit Economics
Texturas Making Machine!
Transaction Revenue

4.5K/GC
X
X
0.75 active projects/GC
20 subs/project
300/sub
Total 5.6K/GC
Fee Revenue
X

1.1K/GC
0.75 active projects/GC
1.5K/project
New Total 12K/GC
Removing GC fees would increase adoption which
would increase Revenues