TracFlo

Early Stage

Construction financials done right

Analytics

Raised to Date: Raised: $404,985

Aggregate Commitments $

Platform

Republic

Start Date

05/31/2021

Close Date

09/10/2021

Min. Goal

$25,000

Max. Goal

$1,070,000

Min. Investment

$100

Security Type

SAFE

Funding Type

RegCF

Series

Seed

Valuation Cap

$6,500,000

Discount Rate

20%

Rolling Commitments $

Status
Funded
Reporting Date

09/30/2021

Days Remaining
Funded
% of Min. Goal

1,620%

% of Max. Goal

38%

Likelihood of Max
Funded
Avg. Daily Raise

$3,970

Momentum
Funded
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Location

New York, New York

Industry

Business Services, Software, & Applications

Tech Sector

EnterpriseTech

Distribution Model

B2B

Margin

High

Capital Intensity

Low

Business Type

Growth

TracFlo, with a valuation cap of $6.5 million, is raising funds on Republic. The company has developed a financial management app for empowering contractors. The platform connects the field to the office and supports real-time documentation, including photos and videos. Khalid David and Jake Snyder founded TracFlo in February 2019. The current crowdfunding campaign has a minimum raise of $25,000 and a maximum raise of $1,070,000, and the funds will be used to streamline the construction business from start to finish. TracFlo has customers, including Turner Construction Company, and is currently used on the third-largest construction project in New York City.

Summary Profit and Loss Statement

Most Recent Year Prior Year

Revenue

$57,585

$3,827

COGS

$6,075

$466

Tax

$0

$0

 

 

Net Income

$-75,878

$-65,046

Summary Balance Sheet

Most Recent Year Prior Year

Cash

$1,628

$5,446

Accounts Receivable

$0

$0

Total Assets

$48,915

$31,363

Short-Term Debt

$4,680

$0

Long-Term Debt

$26,250

$0

Total Liabilities

$30,930

$0

Financials as of: 05/31/2021
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Ratings

Analyst Report

Synopsis

The construction industry is one of the most profitable industries in America. It can be seen in all locales across society, and the positive impact its success has on the economy cannot be overlooked. However, the industry is, in fact, terribly inefficient. An estimated 70% of all construction projects do not come within a 10% range of initial expectations for cost and schedule, and reworking projects can cost contractors up to 20% more than planned. When change orders, or modifications to the original contract, are needed to address problems on a job site, the parties involved often rush them through. This includes foregoing proper documentation in an attempt to keep projects as close to on-schedule as possible.

The high costs and disputes that arise because of these inefficiencies beg for something to change. One company that hopes to be part of the solution is TracFlo. Through its mobile app and website, TracFlo gives construction companies the opportunity to upload the specifics of their entire projects and to submit change orders when necessary. These change orders then run through the proper channels to ensure documentation exists. The end goal is to reduce expenses, speed up approval, and relegate financial disputes to the past.

As part of its platform, the company allows users to utilize timesheets, issue tickets, and submit change order requests. However, the only revenue opportunity at this time appears to be the emphasis on the change orders. When a company issues one, TracFlo charges a 0.2% fee on the dollar value of the order. That said, the company does have plans for other features. With its current capital raise, it hopes to launch TracFlo Capital. That platform will allow construction companies to scale with ease by applying for funding through TracFlo Capital’s marketplace of lenders. Charging some sort of origination fee on these activities would be logical.

TracFlo’s current Republic raise has been rated a Neutral Deal by the KingsCrowd investment team.

Price

TracFlo is currently raising at a $6.5 pre-money valuation with a 20% discount in exchange for a SAFE. This valuation is quite low in comparison to other startups currently raising funds. The discount rate is also quite attractive for investors. TracFlo has seen some early revenue, so there is further justification for this valuation. Overall, the company scores strongly in the price metric.

Market

At first glance, the market opportunity for a company like TracFlo looks significant. The company’s own estimate pegs the opportunity at $226.5 billion. Other sources offer a similar figure with the commercial building construction market estimated to be worth $221.4 billion. Looking at the total construction industry in the US, the market should be worth around $1.29 trillion. A different source estimated the market to be worth $1.23 trillion this year, and an annualized growth rate of 5% should take it to $1.43 trillion by the end of 2025. However, it’s important to note that TracFlo isn’t a construction company, and thus wouldn’t be tapping into the full breadth of these markets. Instead, it’s a software company targeting construction companies, which is a much more niche space. The construction industry is known for being slow to adopt technology solutions, which will likely hinder the market potential for TracFlo. 

Due to the highly niche nature of TracFlo’s target market, it scores very poorly in the market metric.

Team

When it comes to TracFlo’s team, there are two key individuals. The first of these is Khalid David, the company’s CEO and one of its two co-founders. Prior to starting the business, he was employed as a safety engineer at Turner Construction Company. Before that, he was the CEO of Bunkers Hill Construction. David’s emphasis at that firm was on sales, project management, project estimating, scheduling, cost control, and more. His role before that was as assistant project manager and project leader at KBR Building Group. While there, he focused on quality assurance and scope of work activities. Before any of these activities, David worked as an estimator at Turner Construction, where he primarily dealt with the cost of construction for various projects.

The other key person at the business is Jake Snyder, the company’s other co-founder as well as its technical lead. He did work as the president and creative lead at Jupitercow. There, he focused on designing web applications and marketing sites for startups. Prior to that, Snyder was employed as a designer and web designer at Montana Banana Web Design and Development. His emphasis there was on both front-end and back-end application development. He was also employed as the creative director at Starkman & Associates, where he managed the marketing needs of the firm’s clients. His role before that was as a designer, computer-aided designs (CAD) drafting, and 3D modeling expert at Newwork. Another position he had was as a lead designer at DigitalThink in which he focused on 3D modeling work.

In addition to these two co-founders, TracFlo has just one other member of its team. This individual has limited work experience, having graduated college in 2019. Based on the overall experiences of the team members, TracFlo’s team score is slightly below average.

Differentiators

Our research shows that TracFlo is a fairly differentiated product. The emphasis on pushing change orders and monetizing from that is interesting. Plus, the company’s plan to create a marketplace of lenders to cover short term construction financing looks to be unique. We have not found any other firm that provides a similar service. That said, there are plenty of other construction apps on the market today. One of them is called Textura. Through its platform, the company focuses on billing and payments. This includes change orders and requisitions. It does not offer anything regarding timesheets and tickets, and it is worth mentioning that none of its activities are available through mobile means.  Another competitor is Procore, which has a wide variety of services. Examples include scheduling, account system integration, course correction applications, and much more. However, it does not serve as an attractive platform for somebody whose primary focus is on enacting change orders. In addition, its pricing appears to be monthly or annual in nature, not on a per transaction basis like the revenue strategy that TracFlo employs. 

The one factor working against TracFlo is defensibility. The company holds no patents, and this functionality does not look difficult to replicate, especially given pre-existing competitors. Balancing this weakness against the product’s strengths, the company’s differentiators score is above average.

Performance

In some ways, TracFlo has done well for itself. The business has launched its product and is actively generating revenue. Last year, the company experienced $17.4 million worth of change orders on its platform. It has no fewer than 19 construction firms — largely focused on big union contractors — utilizing its services. However, there are some ways in which performance is lackluster. Because of its business model, the change order revenue is still small. In 2020, the business generated $57,585 in revenue. This is up from just $3,827 in 2019 but is still small nonetheless. This small amount of revenue has caused significant net losses. The firm generated a loss of $65,046 in 2019, and this grew to a loss of $75,878 in 2020. However, over the same period of time, the company saw its operating cash outflows improve from $77,763 to $64,273. It should not be surprising for losses and cash outflows to be the norm in this environment, namely because of how small revenue is. The software nature of the business helps to alleviate concerns here since scaling up the business model should be low-cost in nature. Thus, TracFlo’s overall performance score is comfortably above average.

Risks

Altogether, the risk profile of TracFlo is quite low. The only category that is considered elevated is its financial risk. Revenue increased significantly from 2019 to 2020, but significant net losses and cash outflows do imply a financial issue for the firm. If growth cannot continue at a strong pace or margins cannot improve, there could always be the risk that management will have to come back for additional capital. If that does not succeed, it could mean the end for the business. This financial risk assessment is elevated, but it is not at the high end of our scale. That means the probability of this adverse scenario happening is still slim, but it is worth watching.

Bearish Outlook

The market opportunity for TracFlo is something to be wary of, due to the industry’s fragmentation and slow adoption of new technology. The industry is not growing at that fast a pace, either, so diversifying into other revenue streams may be necessary for TracFlo to continue growing. Another disadvantage is the company’s current financial status. Net losses and cash outflows cannot continue indefinitely. Without significant change to its revenue model, the company may find it difficult to capture significant revenue.

Bullish Outlook

On the positive side, the valuation which management is asking investors to accept in order to participate in this round of funding is quite low. The team is experienced, and the product has a reasonable amount of differentiation to it. The company’s overall performance has also been positive,  and hopefully, that could translate into a healthier bottom line soon. If TracFlo can overcome the hurdle of slow adoption, its platform could majorly increase the efficiency of the construction industry as a whole.

Executive Summary

TracFlo has identified a pain point in a rather large industry, and it is hoping to use technology and expertise to fix it. The company’s current raise has a lot working in investors’ favor. First, the valuation price is rather low. In addition, the company’s two co-founders are encouragingly experienced, and the product is unique enough to give TracFlo a good chance of standing out among its competitors. The company has fairly low risk and also demonstrated some early traction. 

On the other hand, investors might want to keep an eye on the company’s continuing losses. The limited market opportunity is a second concern. The construction industry is huge, but it is quite fragmented and slow to adopt new technology, which could hinder TracFlo’s prospects. Overall, TracFlo is a Neutral Deal at this time.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com

Analysis written by Daniel Jones.

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TracFlo on Republic 2021
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Platform: Republic
Security Type: SAFE
Valuation: $6,500,000

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