Latest / The Official SaaStr Podcast: SaaS | Founders | Investors / How Tooey Courtemanche Built a $1B+ ARR Construction SaaS Empire Over 23 Years

Transcript

How Tooey Courtemanche Built a $1B+ ARR Construction SaaS Empire Over 23 Years · The Official SaaStr Podcast: SaaS | Founders | Investors

0:00
So we're all of a sudden,
0:01
wait a minute,
0:01
this,
0:01
these businesses are surviving.
0:02
SPEAKER_00: So we're going to go focus on them.
0:04
SPEAKER_00: And then once everything came out of the great financial crisis,
0:08
SPEAKER_00: like around 2011,
0:08
SPEAKER_00: 12 in our industry,
0:11
SPEAKER_00: it was really interesting.
0:12
I actually found a document the other day in my archives from
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2007 of all of our competitors.
0:18
SPEAKER_00: And there were like 20 names.
0:20
SPEAKER_00: I don't even remember.
0:22
SPEAKER_00: And I always,
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SPEAKER_00: I don't know if you surf Jason,
0:24
but if you duck dive under a wave and on a surfboard and you go underwater,
0:28
SPEAKER_00: you come up the other side.
0:29
SPEAKER_00: I always think of that as the great financial crisis.
0:31
SPEAKER_00: Cause when we duck dove that wave with 30 other surfers,
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SPEAKER_00: we're the only ones who came up the other side.
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SPEAKER_00: Everybody did.
0:37
SPEAKER_00: It was extinction level event in the
0:38
SPEAKER_00: Yeah,
0:38
SPEAKER_00: it was an extinction-level event,
0:39
SPEAKER_00: which gave us this huge advantage,
0:41
SPEAKER_00: too,
0:41
SPEAKER_00: of buying us more time to capture the market share.
0:44
SPEAKER_00: Hey, everyone, Sastr, watching, listening, running with your podcast.
0:49
SPEAKER_00: However you're going to consume this content,
0:51
SPEAKER_00: we have one of the great Sastr founders who I'm excited.
0:55
SPEAKER_00: Tried to get him to Sastr annual in person before.
0:57
Things have changed,
0:58
but we've got Tui Cordomanch,
1:00
who is the CEO and founder of Procore.
1:04
SPEAKER_00: the leading SaaS for construction management.
1:08
SPEAKER_00: We'll dig into what that means in a minute, but it's great.
1:12
If there's probably,
1:15
there's two or three great vertical SaaS players we can talk about.
1:18
SPEAKER_00: And Procore might be one of the ones that folks know the least about,
1:21
SPEAKER_00: although you should know a lot more about it.
1:24
Especially because we've got a founder CEO who's been running
1:27
it for a few years.
1:29
SPEAKER_00: How long have you been doing it, Tui?
1:32
SPEAKER_00: 23 years and counting.
1:33
SPEAKER_00: So yeah, quite some time.
1:35
So I want to talk next a little bit about the past and mostly
1:38
about the future,
1:39
SPEAKER_00: but how the platform's evolved.
1:41
SPEAKER_00: But you don't look tired.
1:43
SPEAKER_00: How have you done this for 23 years?
1:46
SPEAKER_00: I've done a pretty good job of keeping...
1:49
the drama and the concerns and the chaos of the business out of
1:53
my personal life.
1:55
SPEAKER_00: And I think that was really critical.
1:57
SPEAKER_00: And my wife has been very good about this for the last 23 years.
2:00
SPEAKER_00: When I get home from work at night, I am not the CEO of Procore.
2:03
I am Tui,
2:04
the husband who,
2:05
you know,
2:06
we talk about everything other than Procore.
2:08
SPEAKER_00: So it's been a, I've been trying to balance this for a long time.
2:12
SPEAKER_00: Yeah.
2:12
But of course she falls asleep and then all I do is Procore
2:16
until I can't keep my
2:17
SPEAKER_00: eyes open any longer.
2:18
SPEAKER_00: So I fake it a lot when I'm at home too.
2:21
SPEAKER_00: So it never turned,
2:22
SPEAKER_00: for a great founder,
2:23
SPEAKER_00: it never turned,
2:24
SPEAKER_00: your brain never turns off even after 23 years.
2:26
SPEAKER_00: It never turns off.
2:27
SPEAKER_00: No,
2:28
SPEAKER_00: it always gets me wondering,
2:29
SPEAKER_00: Jason,
2:29
SPEAKER_00: like someday when they put me out to pasture,
2:31
SPEAKER_00: like what am I going to do?
2:32
Because I think pretty much everything I think about has to do
2:36
with some permutation to Procore.
2:38
SPEAKER_00: So yeah.
2:38
SPEAKER_00: Yeah.
2:39
SPEAKER_00: You're going to have to get a hobby or something.
2:41
SPEAKER_00: I wanted to get some quantitative data.
2:44
My rough sense from the folks that I've interacted with over
2:47
the years that have
2:47
SPEAKER_00: gone big and then moved on.
2:50
SPEAKER_00: is 40 to 50% somehow are happy.
2:52
SPEAKER_00: They're phishing.
2:53
SPEAKER_00: They're often,
2:54
a lot of folks go into clean tech and other areas because they
2:57
think that's more
2:58
SPEAKER_00: rewarding than business software.
2:59
SPEAKER_00: I used to think that.
3:01
SPEAKER_00: I don't anymore.
3:02
SPEAKER_00: And maybe half are unsettled.
3:05
SPEAKER_00: They're unsettled.
3:06
SPEAKER_00: But no, and then I want to talk more, but no...
3:09
SPEAKER_00: Not even a moment of angst of doing it for 30 years, right?
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SPEAKER_00: If you're doing it for 30 years or more, right?
3:14
SPEAKER_00: Yeah.
3:14
SPEAKER_00: It's just who I am.
3:15
SPEAKER_00: So it's just, yeah.
3:17
SPEAKER_00: Yeah.
3:18
SPEAKER_00: I don't think in the earlier days,
3:19
SPEAKER_00: maybe when Procore started,
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I don't think we could imagine folks would be running a
3:23
standalone software company
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SPEAKER_00: for 30 years doing billions of revenue.
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There were examples,
3:27
but it seemed crazy to think about three decades,
3:30
didn't it?
3:30
SPEAKER_00: Yeah, absolutely.
3:32
SPEAKER_00: Yeah.
3:32
SPEAKER_00: If I had known...
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SPEAKER_00: I was going to be running this long.
3:35
SPEAKER_00: I don't know.
3:36
SPEAKER_00: I don't know what decisions I would have made differently, but yeah.
3:39
SPEAKER_00: And I actually,
3:39
SPEAKER_00: people come up to me a lot that they're like,
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SPEAKER_00: I can't believe you're still running Procore.
3:43
SPEAKER_00: When are they going to bring in the professionals?
3:45
SPEAKER_00: And I'm like, I don't know.
3:47
SPEAKER_00: I guess it's up to the board.
3:49
SPEAKER_00: I don't know.
3:49
SPEAKER_00: We, I actually, there's exceptions.
3:53
SPEAKER_00: I did this,
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SPEAKER_00: this analysis a little while ago that of the SaaS companies that IPO,
3:58
SPEAKER_00: 90% of a founder CEO.
3:59
SPEAKER_00: Mm-hmm.
4:01
SPEAKER_00: And so I just, I don't know.
4:03
SPEAKER_00: My one bias out there,
4:05
SPEAKER_00: my one,
4:07
SPEAKER_00: or I'm just,
4:08
SPEAKER_00: is thinking anyone could do better than a founder or CEO that's all in.
4:11
SPEAKER_00: It's just so much.
4:14
SPEAKER_00: We underestimate they know so much.
4:16
SPEAKER_00: I will say this to all of the founders out there too,
4:18
SPEAKER_00: which is you really want to make sure that you,
4:21
SPEAKER_00: as much as you want to be the face of the business,
4:23
SPEAKER_00: you don't want to be the totality of the business.
4:27
SPEAKER_00: And that's why-
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You can't scale to a billion dollars in revenue without having
4:32
an amazing team
4:32
SPEAKER_00: under you that are doing just phenomenal work.
4:36
SPEAKER_00: But some founders conflate themselves as being the business.
4:41
And Procore has gotten so much bigger than me over the years
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that I'm just the conductor.
4:48
SPEAKER_00: So I want to dig in on some details, but...
4:51
SPEAKER_00: Just give us a landscape of,
4:54
SPEAKER_00: talk about maybe Procore five years in,
4:56
SPEAKER_00: six years in as a platform,
4:58
SPEAKER_00: like how much you were able to,
4:59
SPEAKER_00: what it did,
5:00
SPEAKER_00: who your ICP was,
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SPEAKER_00: what your sweet spot,
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SPEAKER_00: and compare how much that's evolved.
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Now you've got like a $5 million customer,
5:07
I think,
5:08
that you talked about.
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How has that evolved today as a platform,
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not day one,
5:11
but maybe X years in?
5:13
SPEAKER_00: Yes.
5:14
SPEAKER_00: When Procore started,
5:15
SPEAKER_00: we were a,
5:15
SPEAKER_00: by the way,
5:16
SPEAKER_00: for those of you who don't know,
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SPEAKER_00: Procore is a construction management software platform.
5:20
SPEAKER_00: But when we started, we were a single code based multi-tenant.
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SPEAKER_00: And this is 2002.
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SPEAKER_00: This is before the word SAS even came out.
5:27
SPEAKER_00: You couldn't even had your podcast up in because there was no such one.
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SPEAKER_00: I misspelled it the first time I wrote it around 2002.
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SPEAKER_00: I think I wrote SES.
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SPEAKER_00: That's actually a really funny, funny anecdote.
5:36
SPEAKER_00: I like that.
5:38
SPEAKER_00: So yeah,
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so at the time we got lucky that we actually started off as a
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single code-based
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SPEAKER_00: multi-platform architecture,
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but we were primarily serving the residential custom home
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builder in high net worth areas.
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SPEAKER_00: So think like Aspen, San Diego, Santa Barbara, where we are.
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SPEAKER_00: Seven-figure homes or commercial.
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SPEAKER_00: Yeah.
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SPEAKER_00: And in fact, mostly on the west side of LA.
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So like Eddie Murphy's house and Barbra Streisand's house and
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Ben Stiller's house.
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And these folks that are high network that are building these
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kind of mega mansions.
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And so what we found was is that you had the combination of an
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owner who was
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SPEAKER_00: probably on the road who was absent.
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SPEAKER_00: So you had a distributed team.
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You had complexity because most of these homes are built like
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commercial buildings.
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SPEAKER_00: And so you needed a solution like ProForce.
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SPEAKER_00: So anyway, in the beginning, we were very narrowly focused.
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And so that was our ideal customer profile was a custom home
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builder serving high
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SPEAKER_00: net worth individuals.
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SPEAKER_00: And what could they pay you back then?
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SPEAKER_00: What were they paying as project members?
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SPEAKER_00: We had two versions of our product.
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We had a full version for $195 a month and a truncated version
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for $95 a month.
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SPEAKER_00: And then the business model made no sense at all.
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And there were enough Eddie Murphy homes to get you there on
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$195 a month?
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We weren't making a lot of money,
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but we also were very capital efficient,
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right?
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So I think in the first nine years of Procore's existence,
7:01
we raised $5 million,
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right?
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SPEAKER_00: We were always very cognizant of being capital efficient,
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SPEAKER_00: but yeah,
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SPEAKER_00: it was not anything that was like going to,
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SPEAKER_00: we were not going to change the world by any way,
7:14
SPEAKER_00: shape or form.
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But what it did do was it allowed us to really focus on the
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needs of one particular
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SPEAKER_00: customer profile that turned out to really matter,
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SPEAKER_00: which is the project manager.
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SPEAKER_00: So you zoom out in the construction world.
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If you're a project manager on a Eddie Murphy's house or a
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nuclear power plant or a
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SPEAKER_00: whatever,
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SPEAKER_00: a waste treatment plant or a wind farm,
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SPEAKER_00: you basically are dealing with the same set of problems.
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SPEAKER_00: They just are different scales and they might have different terminology.
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SPEAKER_00: So that allowed us to over the years,
7:44
SPEAKER_00: so like year five,
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SPEAKER_00: like you mentioned,
7:46
SPEAKER_00: to start thinking about how do we become a multi-product,
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SPEAKER_00: multi-stakeholder,
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SPEAKER_00: multi-geo company.
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SPEAKER_00: But honestly, we didn't even start doing that until 2016 or 17.
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SPEAKER_00: So we were like 14, 15 years into it before we even started embarking.
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SPEAKER_00: On all of that.
8:02
SPEAKER_00: And by the way,
8:02
SPEAKER_00: that's one of the advantages that we had,
8:05
SPEAKER_00: Jason,
8:05
SPEAKER_00: was things,
8:07
SPEAKER_00: first of all,
8:07
SPEAKER_00: it was an,
8:08
SPEAKER_00: it was a,
8:08
SPEAKER_00: it was an industry nobody cared about.
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SPEAKER_00: So we had this,
8:11
we were one of very few that were in there and things evolved
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so slowly that it
8:16
gave us time to really nail the solutions that we were bringing
8:22
to market.
8:22
SPEAKER_00: Yeah.
8:23
SPEAKER_00: The iPhone came out in 2007. iPad came out in 2011.
8:27
We'd already been in business for five and seven years at that
8:29
point before the
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SPEAKER_00: real catalyst came that drove the demand for what we did.
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SPEAKER_00: So privileged by moving in a slow TAM, that was huge.
8:40
SPEAKER_00: Lots of opportunities for us.
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And so 10,
8:43
12 years in,
8:44
you're still really an SMB solution primarily,
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it sounds like.
8:47
SPEAKER_00: Pretty much.
8:48
SPEAKER_00: By the way,
8:49
SPEAKER_00: during the great financial crisis,
8:51
SPEAKER_00: which is when everything changed to Procore,
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SPEAKER_00: was all of our custom home builders went out of business.
8:55
SPEAKER_00: Like literally every customer we had.
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SPEAKER_00: The world stopped for eight months.
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SPEAKER_00: It literally stopped.
9:01
SPEAKER_00: Yeah, it was tough.
9:02
SPEAKER_00: It was tough.
9:03
SPEAKER_00: The only customers that stayed around with us were folks that did...
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SPEAKER_00: both residential and commercial.
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SPEAKER_00: So mostly mixed multi-use.
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SPEAKER_00: So you moved over utilities.
9:14
So we're all of a sudden,
9:15
wait a minute,
9:15
this,
9:15
these businesses are surviving.
9:17
SPEAKER_00: So we're going to go focus on them.
9:19
SPEAKER_00: And then once everything came out of the great financial crisis,
9:22
SPEAKER_00: like around 2011,
9:22
SPEAKER_00: 12 in our industry,
9:26
SPEAKER_00: it was really interesting.
9:27
I actually found a document the other day in my archives from
9:30
2007 of all of our competitors.
9:32
SPEAKER_00: And there were probably like 20 names.
9:34
SPEAKER_00: I don't even remember.
9:36
SPEAKER_00: And I always,
9:37
SPEAKER_00: I don't know if you surf Jason,
9:38
but if you duck dive under a wave and on a surfboard and you go underwater,
9:42
SPEAKER_00: you come up the other side.
9:43
SPEAKER_00: I always think of that as the great financial crisis.
9:45
SPEAKER_00: Cause when we duck dove that wave with 30 other surfers,
9:48
SPEAKER_00: we're the only ones who came up the other side.
9:50
SPEAKER_00: Everybody did.
9:51
SPEAKER_00: It was extinction level event in
9:52
SPEAKER_00: Yeah,
9:52
SPEAKER_00: it was an extinction-level event,
9:54
SPEAKER_00: which gave us this huge advantage,
9:55
SPEAKER_00: too,
9:55
SPEAKER_00: of buying us more time to capture the market share.
10:00
SPEAKER_00: It's funny.
10:00
SPEAKER_00: I'm dating myself,
10:01
SPEAKER_00: but I remember I've written that time up,
10:03
SPEAKER_00: and now it's getting to be a while ago.
10:04
SPEAKER_00: But actually,
10:05
SPEAKER_00: because I had all the data from Adobe Sign,
10:07
SPEAKER_00: Echo Sign,
10:08
SPEAKER_00: and our peers,
10:09
SPEAKER_00: and all that really happened to us,
10:10
SPEAKER_00: and this program is so different,
10:11
SPEAKER_00: all that really happened to us is our churn went up.
10:14
SPEAKER_00: But actually, this is really interesting.
10:15
SPEAKER_00: Even in 2008 and 2009...
10:17
SPEAKER_00: Our gross growth was there.
10:19
But like the S&B churn was like,
10:21
because everyone thought the world was over.
10:23
But for Procore,
10:24
man,
10:24
you must have had two years where it was awful,
10:28
like literally awful.
10:30
Steve's on my co-founder and I,
10:31
we went for two years without taking a salary.
10:33
SPEAKER_00: I sold everything I own.
10:35
SPEAKER_00: My wife, thank goodness, didn't divorce me.
10:37
SPEAKER_00: And I will tell you this,
10:40
SPEAKER_00: if we didn't have an amazing investor,
10:42
SPEAKER_00: Kevin O'Connor,
10:43
SPEAKER_00: who was the founder of DoubleClick,
10:44
SPEAKER_00: the internet.
10:45
SPEAKER_00: Oh, yeah.
10:46
SPEAKER_00: He could go long.
10:47
SPEAKER_00: Yeah.
10:47
And so he basically wrote us a check for 300,000 bucks and
10:51
basically to keep us alive.
10:52
SPEAKER_00: And that check alone saved Procore.
10:55
SPEAKER_00: Wow.
10:57
SPEAKER_00: Yeah.
10:57
SPEAKER_00: In fact, he's been on our board for 20 years.
10:59
SPEAKER_00: He's an amazing individual.
11:00
SPEAKER_00: It's funny.
11:01
SPEAKER_00: I look back at that time and just as a case study,
11:03
SPEAKER_00: I'm like,
11:04
SPEAKER_00: things weren't as bad as they seemed,
11:05
SPEAKER_00: but I wasn't selling to an impacted industry.
11:09
SPEAKER_00: It's just disaster.
11:09
SPEAKER_00: I remember, I think December 2008,
11:15
I didn't want to spend – the problem was no one wanted to spend
11:16
any money.
11:17
SPEAKER_00: It was like massive deflation.
11:18
And so I took all the points I had saved up and flew to Hawaii
11:23
and stayed at the St.
11:23
SPEAKER_00: Regis on Kauai.
11:25
SPEAKER_00: And everything was points, including food.
11:27
SPEAKER_00: And I went to the front desk.
11:28
SPEAKER_00: I'm like, can I pay for –
11:29
SPEAKER_00: The buffet with points are like, no one's ever asked.
11:32
SPEAKER_00: I'm like, our global currency has ended, so I'd love to pay for points.
11:36
SPEAKER_00: I'll get for 8 million points you could pay for the buffet.
11:38
SPEAKER_00: And I went out to the St.
11:40
SPEAKER_00: Regis in December 2008.
11:41
SPEAKER_00: We were the only people there.
11:42
SPEAKER_00: Wow.
11:43
SPEAKER_00: I went to the bartender, right?
11:45
SPEAKER_00: Wow.
11:46
SPEAKER_00: And I'm like, where is everybody's?
11:48
SPEAKER_00: I mean, people just stopped spending money.
11:52
They're certainly not going to buy a $5 million custom home in
11:55
Beverly Hills,
11:56
are they?
11:56
SPEAKER_00: No.
11:57
SPEAKER_00: And by the way,
11:57
try raising capital in a market where the real estate is the
12:01
poster child for the
12:02
SPEAKER_00: collapse of the economy.
12:04
SPEAKER_00: Yeah.
12:04
SPEAKER_00: Yeah.
12:06
SPEAKER_00: So I should know.
12:06
SPEAKER_00: So 2018, you start to go.
12:08
SPEAKER_00: So like the GFC brings you into the commercial side from residential.
12:13
SPEAKER_00: And then but you're 14 years in before you really go big.
12:16
SPEAKER_00: I'm all in on what we would call enterprise.
12:19
SPEAKER_00: And what was that accelerant?
12:22
SPEAKER_00: What was that?
12:23
SPEAKER_00: What created that big change?
12:24
SPEAKER_00: So we were being pulled into bigger and bigger companies.
12:28
SPEAKER_00: So the interesting thing about construction is very transient.
12:30
So project manager,
12:31
one company goes to work at another one,
12:32
they bring Procore with them.
12:33
SPEAKER_00: And so we were getting pulled into bigger and bigger customers.
12:37
SPEAKER_00: And we decided we were going to focus on one particular market.
12:40
SPEAKER_00: So we chose the Boston metropolitan market,
12:42
SPEAKER_00: which actually had some of the largest contractors there.
12:46
And so we,
12:47
myself and one of our salespeople,
12:49
we just went knocking on doors and
12:52
We finally found somebody who would let us in and we basically
12:57
were able to show
12:58
SPEAKER_00: them the value of what we were able to provide.
13:00
SPEAKER_00: We clearly were not enterprise-grade at the time.
13:02
SPEAKER_00: They knew that, but they basically worked with us.
13:03
And then the thing about the construction industry is because
13:06
it's so hyper-local,
13:07
SPEAKER_00: if you think about it,
13:08
SPEAKER_00: if you're a construction company and you have a DA bulldozer,
13:11
you're not going to work 400 miles away because how are you
13:14
going to get that...
13:15
25 ton equipment over there because it's so local every there's
13:19
a FOMO factor there
13:21
so the minute we got one everyone else wanted to take a meeting
13:24
with us and so we
13:25
just leveraged that to get into all of the other ones and we
13:28
would get a pilot
13:29
project and man they would rake us over the coals and they
13:32
would put us up in front
13:33
of these committees of 50 people that were like judging our
13:36
software and yeah we
13:39
SPEAKER_00: We opened up a whole enterprise market that way.
13:42
SPEAKER_00: You brute forced it almost.
13:44
SPEAKER_00: You almost brute forced it then.
13:46
Yeah,
13:46
but the reason we were successful was because we just made it
13:49
about the customer.
13:50
SPEAKER_00: The whole time it was about the customer.
13:52
They felt as if they were their development shop,
13:55
the product organization for Brogore.
13:58
That transient nature of the project manager where a real
14:01
estate project will wind
14:02
SPEAKER_00: up and they'll go to another potential customer and bring you in...
14:06
SPEAKER_00: That is the secret sauce, right?
14:07
SPEAKER_00: Word of mouth is the secret sauce, I think, of all software growth.
14:11
SPEAKER_00: But I feel like today we're putting so much pressure on renewal,
14:14
SPEAKER_00: so much pressure on customers not to leave,
14:16
SPEAKER_00: so much drama.
14:19
SPEAKER_00: We're almost doing the opposite.
14:20
Are there things that you did to especially incent that to
14:23
create some sort of,
14:24
SPEAKER_00: it's probably not financial,
14:26
SPEAKER_00: but to create any sort of community,
14:28
SPEAKER_00: any sort of positive loop so that when they went to the next gig,
14:30
SPEAKER_00: they'd be even more excited to bring Procore in?
14:32
SPEAKER_00: Yeah, so one of the things that, because
14:35
SPEAKER_00: The incumbent software for our entire history,
14:39
SPEAKER_00: whenever we go into an account,
14:40
SPEAKER_00: has always been pen and paper or really Microsoft Office.
14:44
SPEAKER_00: So what happens is when somebody adopts Procork,
14:47
SPEAKER_00: there's some pride that they're bringing a technology platform into a
14:52
SPEAKER_00: underdeveloped company,
14:54
SPEAKER_00: right?
14:55
SPEAKER_00: People feel as if they're in the Procore club, right?
14:59
SPEAKER_00: And we make them feel that way.
15:00
SPEAKER_00: We bring them to,
15:01
SPEAKER_00: they go to Groundbreak,
15:02
SPEAKER_00: our annual user conference,
15:03
SPEAKER_00: and they feel like they're on the inside of something that's special.
15:07
And that really goes a long way to building that loyalty and
15:12
trust with those folks.
15:14
SPEAKER_00: Yeah.
15:16
SPEAKER_00: Our best salespeople always have been our customers.
15:19
SPEAKER_00: They're out there constantly.
15:21
SPEAKER_00: And also the customers that recognize that if Procore is successful,
15:24
SPEAKER_00: they're de-risking their investment in Procore.
15:26
So they're not,
15:27
they want our success is actually gonna lead to their success.
15:31
SPEAKER_00: And that's worked really well for us.
15:33
SPEAKER_00: Yeah, when people, sometimes folks don't realize
15:36
SPEAKER_00: When you're doing a big process change like Prokera is,
15:40
it might be someone's only app they deploy for a couple of
15:42
years and do it right,
15:43
SPEAKER_00: they're a hero.
15:44
SPEAKER_00: Do it right, they're a hero, right?
15:46
SPEAKER_00: Do it wrong, their one big initiative is a miss, right?
15:50
SPEAKER_00: It's so funny.
15:51
SPEAKER_00: Back in the 2016, 17, and 18 timeframe, we walked to a firm.
15:56
SPEAKER_00: They wouldn't have an IT department.
15:58
SPEAKER_00: The last software that they bought was their ERP solution.
16:00
SPEAKER_00: It was like 15 years ago.
16:01
SPEAKER_00: They didn't know how to buy software.
16:03
SPEAKER_00: And so we had to teach them how to buy software.
16:06
SPEAKER_00: and then have them buy software.
16:08
SPEAKER_00: Now it's a completely different world today.
16:10
SPEAKER_00: The industry is really misunderstood.
16:15
SPEAKER_00: It is a highly complex industry that is very data intensive.
16:19
And people think of construction as guys sitting on an I-beam
16:22
whistling at people walking by.
16:23
SPEAKER_00: That is not the construction industry.
16:25
Construction industry is extremely complicated with these
16:28
complex workflows and
16:30
SPEAKER_00: lots of liability and low margins and lots of stakeholders,
16:33
SPEAKER_00: right?
16:34
SPEAKER_00: You have a lot of stakeholders in it.
16:36
I think I was reading in your analyst day or your,
16:39
it's 10 stakeholders per deal,
16:40
wasn't it?
16:41
SPEAKER_00: Yeah.
16:41
SPEAKER_00: So there's,
16:42
SPEAKER_00: so,
16:42
SPEAKER_00: well,
16:43
SPEAKER_00: if you think about it this way,
16:43
SPEAKER_00: an average construction project,
16:45
SPEAKER_00: a commercial project probably had 30 trades on it and all of those folks.
16:49
So you have an owner,
16:49
you have GCs,
16:50
you have the subcontractors and some other folks.
16:53
SPEAKER_00: All of those folks are people that we sell to.
16:55
There's a,
16:56
there's an opportunity for us to be selling to all of these folks.
16:59
SPEAKER_00: We call it the triple TAM because on one project,
17:02
SPEAKER_00: we can have three different cohorts of stakeholders that are customers.
17:06
Which is really good for Procore because of the nature of
17:08
construction is very collaborative.
17:10
SPEAKER_00: And all teams,
17:11
SPEAKER_00: all of these stakeholders,
17:13
SPEAKER_00: they work for different companies,
17:14
SPEAKER_00: but they all share the same workflows.
17:16
And so to be able to tie all that together and to de-risk it
17:19
for everybody is
17:20
SPEAKER_00: really advantageous.
17:21
SPEAKER_00: Do you have any,
17:22
SPEAKER_00: in any of the functional areas,
17:23
SPEAKER_00: do you have any pods that service the different stakeholders?
17:26
SPEAKER_00: Or is it the same teams?
17:27
SPEAKER_00: Or how do you get smart with each of those different groups?
17:30
SPEAKER_00: So we do.
17:31
We,
17:32
several years ago,
17:33
we basically changed our go-to-market motion to be very focused on...
17:39
A hyperscaler building a data center is really different than a
17:43
subcontractor that
17:44
SPEAKER_00: is operating tobacco.
17:46
SPEAKER_00: So we had to make sure that there were people that could talk the talk.
17:49
SPEAKER_00: The good news was that one of our secrets was we would...
17:54
Because the industry is so big and we have millions of users on
17:56
our platform,
17:56
SPEAKER_00: we were able to pull the best users into the organization.
18:00
And then when you go into a sales opportunity and you bring
18:03
with you a sales
18:04
SPEAKER_00: engineer who's actually a next project manager from the field,
18:08
SPEAKER_00: and as much as our sales reps can represent Procore really well,
18:10
SPEAKER_00: the moment that...
18:12
SPEAKER_00: The sales engineer who's like,
18:14
SPEAKER_00: hey,
18:14
I used to sit in your job in your chair and I used to do
18:17
Procore and I used it this
18:18
way and it saved me that all of a sudden the game changed for
18:20
us is that bringing
18:21
SPEAKER_00: in the resident experts into the deal really made a big difference.
18:26
SPEAKER_00: Yeah, I wanted to ask about that.
18:27
SPEAKER_00: Wyatt, your chief product officer, came to annual last year.
18:30
SPEAKER_00: And I forget what he said his background was.
18:31
SPEAKER_00: He might have been a carpenter too or something like that.
18:34
SPEAKER_00: He was straight out of the industry, wasn't he?
18:35
SPEAKER_00: His dad was a contractor in Colorado.
18:40
SPEAKER_00: So he worked for him for years.
18:41
SPEAKER_00: But Wyatt's fame is he's a DJ.
18:44
SPEAKER_00: He traveled the world as like a very famous DJ.
18:48
SPEAKER_00: Yeah, he's got an interesting background.
18:51
SPEAKER_00: So let's just spend a minute.
18:53
SPEAKER_00: then we can move on.
18:54
But the domain expertise topic for vertical SaaS in general is
18:59
a nuanced one.
19:01
SPEAKER_00: And so to go enterprise, you're actually going out
19:05
SPEAKER_00: You're doing the sales with your sales lead, right?
19:07
SPEAKER_00: You're going into the office convincing them that super domain experts.
19:11
SPEAKER_00: You're bringing in SEs and solution experts now.
19:14
SPEAKER_00: How does that, what have you learned and how has it changed over time?
19:17
Is Procore a big enough brand now you can get away with hiring
19:20
some kids out of
19:21
SPEAKER_00: college and then not really understanding what construction software is?
19:25
SPEAKER_00: Not really.
19:25
SPEAKER_00: It actually has nothing to do with the scale.
19:28
SPEAKER_00: It's just the complexity of the problem space that we're solving for.
19:33
SPEAKER_00: What's really interesting is,
19:34
SPEAKER_00: and if I was one of your listeners and I was building a business,
19:39
SPEAKER_00: brand is one of those things that is highly misunderstood by founders.
19:43
SPEAKER_00: But our brand in the United States is ubiquitous in construction.
19:47
SPEAKER_00: Everybody knows Procore.
19:48
SPEAKER_00: We are the market leader.
19:51
SPEAKER_00: But when we enter into a new market, like when we go into...
19:55
SPEAKER_00: UK, Ireland, we go into the UAE or whatever.
19:59
SPEAKER_00: You have to remember,
20:00
SPEAKER_00: and as a founder,
20:00
SPEAKER_00: you cannot forget that no one has a clue who you are,
20:04
SPEAKER_00: right?
20:05
So you're the life of the party and then you go to another
20:07
party and no one knows who you are.
20:08
You got to remember that the playbook is completely different
20:12
for entering new
20:12
SPEAKER_00: markets because you really do have to build your brand intentionally.
20:15
SPEAKER_00: And in the vertical market like Procore is,
20:18
SPEAKER_00: you have one chance to make a good impression with your brand.
20:21
SPEAKER_00: And if you make a bad impression, you're essentially...
20:25
SPEAKER_00: doomed in that market.
20:26
SPEAKER_00: So we are very intentional about how we go to market in new geos.
20:32
SPEAKER_00: And what's really interesting is that,
20:33
SPEAKER_00: so we sell into 11 markets today in particular,
20:38
SPEAKER_00: but we actually have people using Procore in 160 countries.
20:41
SPEAKER_00: So because of the fact that this SaaS solution,
20:44
so what we're doing is we're building brand in all of these
20:46
different areas,
20:47
SPEAKER_00: building stakeholders that are really
20:51
SPEAKER_00: They love Procore.
20:52
SPEAKER_00: So by the time we actually go to market in one of these new areas,
20:55
SPEAKER_00: we have a foundation,
20:56
SPEAKER_00: a brand,
20:56
SPEAKER_00: but building brand has to be very intentional.
20:59
SPEAKER_00: It takes a lot of boots on the ground and there's no shortcuts.
21:03
SPEAKER_00: But so when you go into these deals today,
21:06
SPEAKER_00: you have a big brand,
21:07
SPEAKER_00: but it's only in the US and it's only,
21:09
SPEAKER_00: it has its limits is your point.
21:11
SPEAKER_00: You're bringing in,
21:13
it's okay to have a sales rep that has come out of Salesforce
21:16
or a B2B environment
21:17
SPEAKER_00: because you've got the SE that is the industry expert.
21:20
SPEAKER_00: And does the salesperson
21:22
SPEAKER_00: Because these are sophisticated problems with sophisticated workflows.
21:26
I don't want to talk to a sales rep that knows nothing other
21:28
than price,
21:29
do I?
21:30
What value does the sales rep add at Procore if in these
21:32
sophisticated conversations?
21:34
So we spend a considerable amount of time enabling our sellers
21:38
as to how to
21:39
SPEAKER_00: understand not only the technology,
21:40
SPEAKER_00: but the problem space that we're solving for.
21:44
SPEAKER_00: I actually just went through our new enablement boot camp.
21:48
SPEAKER_00: I'm like, if I'm going to do it, let's do it.
21:50
SPEAKER_00: By the way, lots of pressure on the founder because everyone saw it.
21:53
SPEAKER_00: I got I nailed it.
21:55
SPEAKER_00: But I was very I was a little nervous on that front.
21:59
SPEAKER_00: But the thing that we find interesting in our world is.
22:03
SPEAKER_00: We definitely could bring people,
22:05
sellers in who've sold elsewhere because we really do think
22:08
that selling is the
22:10
SPEAKER_00: skill that's needed in order to build the foundation of how we're,
22:14
we've tried bringing in people from the industry and teach them
22:16
how to be sellers.
22:17
SPEAKER_00: It doesn't work that well.
22:19
SPEAKER_00: Even in the early days, it didn't work well.
22:20
SPEAKER_00: It worked well enough.
22:22
SPEAKER_00: We probably could have done better.
22:23
SPEAKER_00: Yeah.
22:25
By the way,
22:25
you have to bring the right seller profile into the right account.
22:28
SPEAKER_00: Like we used to hire,
22:29
we would occasionally hire people from one of the big tech
22:32
companies and put them
22:34
SPEAKER_00: into a small opportunity and they would railroad the conversation and the
22:42
SPEAKER_00: The prospect would be like, get out of my office.
22:44
SPEAKER_00: I don't want to be bullied by you, Mr. Name that big name.
22:49
SPEAKER_00: Yep.
22:50
SPEAKER_00: Sales rep.
22:51
SPEAKER_00: So there's a lot of nuances to all of this,
22:53
but we do find you got to hire salespeople that understand
22:57
sales and teach them construction.
22:58
The thing that I tell all of our new hires is that as insecure
23:02
as you are walking
23:03
SPEAKER_00: into your first meeting with the prospect,
23:05
SPEAKER_00: you have to remember from their vantage point,
23:07
SPEAKER_00: they're insecure because they don't understand technology.
23:09
SPEAKER_00: So it's not going to be a one-sided conversation.
23:12
You're going to bring the expertise around the solution space
23:14
that we provide for
23:15
SPEAKER_00: and the products that we deliver.
23:17
And they're going to be experts around their problem space and
23:20
how they can use our technology.
23:23
SPEAKER_00: It demystifies the whole thing, but it takes a lot of effort.
23:26
One of the things I wish we had done better earlier is to
23:31
really invest in enable.
23:33
SPEAKER_00: It became a cottage industry in this business, but we're
23:36
People grew their own knowledge base based on their experiences
23:39
and all,
23:39
which is great.
23:40
SPEAKER_00: But we didn't have a standardized process until several years ago.
23:43
SPEAKER_00: And I wish we had done that earlier.
23:45
SPEAKER_00: Much earlier, probably, right?
23:46
SPEAKER_00: Much earlier.
23:47
SPEAKER_00: Yeah.
23:48
I see too many folks in specialized spaces thinking that they
23:52
can shoot from the
23:52
SPEAKER_00: hip because they came out of selling sales tools.
23:55
SPEAKER_00: If you're a sales rep and you sold sales tools,
23:57
SPEAKER_00: you could have a sense what the buyer's looking for.
23:59
SPEAKER_00: I want to hire off.
24:00
SPEAKER_00: And it's just,
24:02
SPEAKER_00: I do believe the best in sales can sell anything,
24:04
SPEAKER_00: but I'm not sure the mid-pack in sales can sell anything without trading.
24:07
SPEAKER_00: I think they need a lot of help, right?
24:09
SPEAKER_00: Yeah.
24:09
And I think the problem was,
24:10
is that our best sellers had been grown up in the business.
24:14
SPEAKER_00: They really understood the space.
24:16
So we bring on somebody else expecting that they would just do
24:18
it and that would not work.
24:21
SPEAKER_00: So yes, it's...
24:23
SPEAKER_00: It requires some thought and investment.
24:27
Can we talk about a topic that's super interesting to me when
24:30
you are a vertical
24:30
SPEAKER_00: like Procore,
24:31
SPEAKER_00: which is market share?
24:32
SPEAKER_00: Yeah.
24:33
SPEAKER_00: You called out, it was pretty fun.
24:34
SPEAKER_00: I don't know a lot of public companies do this.
24:35
SPEAKER_00: It was fun.
24:36
SPEAKER_00: You called out,
24:36
SPEAKER_00: I think,
24:37
SPEAKER_00: in your analyst or whatever presentation,
24:39
SPEAKER_00: your win rates versus your top three competitors.
24:41
SPEAKER_00: She said you had 63% win rate and then 86% into Greenfield.
24:46
SPEAKER_00: I want to unpack that, but at a meta level,
24:50
SPEAKER_00: It took me a little while to be smart here.
24:53
How much market share do you think you can get if you really
24:57
own a whole vertical like Procore?
24:59
SPEAKER_00: You've got like 10 products, right?
25:01
You're automating 10 stakeholders up and down the stack in
25:05
terms of functionality,
25:06
right?
25:06
SPEAKER_00: From invoicing to management to everything.
25:08
SPEAKER_00: You are the ERP for the industry, right?
25:10
SPEAKER_00: Can you get 80%, 90% mark?
25:13
SPEAKER_00: What's your goal?
25:13
SPEAKER_00: What are you quietly telling the team behind?
25:15
Can you get 100% market share versus Mark Benioff for years has
25:19
been claiming he
25:19
SPEAKER_00: has 18% market share,
25:21
SPEAKER_00: right?
25:21
SPEAKER_00: Yeah.
25:23
SPEAKER_00: So our industry is really unique.
25:24
SPEAKER_00: And by the way,
25:25
one of the biggest things when we're raising capital back in
25:27
the early days was
25:28
SPEAKER_00: everyone was very concerned about TAM.
25:30
And I'm like,
25:31
look,
25:32
back then it was like the global construction TAM was 11 to 15 trillion.
25:35
SPEAKER_00: So let's say it's 13 trillion.
25:37
SPEAKER_00: Look, we believe the vertical software is a winner take most opportunity.
25:41
SPEAKER_00: Yeah.
25:44
SPEAKER_00: This is such a big vertical that
25:47
SPEAKER_00: It's almost an irrelevant conversation, right?
25:49
SPEAKER_00: So if I was serving a vertical that had a very limited TAM,
25:52
SPEAKER_00: I would be talking a lot about,
25:54
SPEAKER_00: is it a winner take most and how much,
25:55
SPEAKER_00: what percentage can we get?
25:57
SPEAKER_00: Procore doesn't need to get to 80% in order to be the
26:01
SPEAKER_00: most successful company on the planet, right?
26:03
We have visions and goals to get there,
26:06
but for us,
26:08
it's,
26:08
it always comes back to the customer.
26:10
SPEAKER_00: And I think one of the reasons when you ask,
26:11
SPEAKER_00: like,
26:11
how do I sustain this is because every day for me is centered
26:16
on our customers.
26:18
SPEAKER_00: If you just focus on your customers,
26:20
SPEAKER_00: you will get the market share that you deserve,
26:23
SPEAKER_00: but don't focus on the market share to try to get the customers.
26:26
SPEAKER_00: If that makes sense, it's,
26:29
SPEAKER_00: And so we've always focused on the customers.
26:31
SPEAKER_00: And then we wake up and we look around.
26:33
SPEAKER_00: We're like,
26:33
SPEAKER_00: oh,
26:33
SPEAKER_00: we have a certain percentage of the market,
26:35
SPEAKER_00: but we don't conflate it the other way.
26:38
SPEAKER_00: That's helpful.
26:39
SPEAKER_00: If your TAM is mega, right?
26:41
SPEAKER_00: You were criticized at first, but now you're accessing so much budget.
26:44
SPEAKER_00: Your TAM is mega, right?
26:45
SPEAKER_00: You're tapping into trillions.
26:47
SPEAKER_00: You don't have to sweat it as much, right?
26:50
SPEAKER_00: I asked Andrew Bilecki of Klaviyo of this.
26:53
SPEAKER_00: I don't know if Klaviyo, he's one of the best.
26:55
SPEAKER_00: And they're at a billion, growing 30% or 40%.
26:58
SPEAKER_00: But they have 80% market share on the Shopify ecosystem.
27:01
SPEAKER_00: And that's big.
27:02
But Shopify ecosystem,
27:03
as big as it is,
27:04
it's not as big as all of global construction.
27:07
SPEAKER_00: So I asked him this question.
27:08
SPEAKER_00: He's like, why shouldn't you get all of it?
27:12
SPEAKER_00: But as big as that, that is like a mid-high TAM.
27:15
SPEAKER_00: But if you really think of that multi-trillion, it's so big.
27:19
SPEAKER_00: That's not your issue, is it?
27:20
SPEAKER_00: Yeah, actually, our issue is focus, right?
27:22
SPEAKER_00: If you have a narrow TAM,
27:24
you basically know what to do with us because there's so many
27:29
different types of
27:29
SPEAKER_00: owners out there,
27:30
so many different types of GCs and so many different types of
27:32
subs and projects and GOs.
27:34
SPEAKER_00: in international regulations and everything else.
27:37
SPEAKER_00: The question for us is always, where do you put your next dollar to work?
27:41
SPEAKER_00: And that's really my job as the CEO is capital allocation.
27:45
SPEAKER_00: And how do we actually do that in a disciplined, strategic focused way?
27:51
SPEAKER_00: That's the hard part.
27:53
SPEAKER_00: It's not being limited by a TAM.
27:56
SPEAKER_00: It's funny.
27:57
SPEAKER_00: So Procore is over $1.2 billion in ARR, right?
28:01
And so I don't know what your gross margins are,
28:03
but let's call them 80 roughly.
28:04
SPEAKER_00: So you've got a billion to play with the year.
28:06
SPEAKER_00: Is that your job?
28:08
SPEAKER_00: And yet it goes so quickly.
28:09
SPEAKER_00: It goes so quickly.
28:12
It is always funny how no matter how much revenue you make,
28:15
you're always constrained.
28:17
SPEAKER_00: Yeah.
28:18
SPEAKER_00: Yeah.
28:19
SPEAKER_00: And I think about the amount that we put into our product each year is...
28:24
it's just hundreds and hundreds of millions of dollars into R
28:27
and D hundreds of millions.
28:29
SPEAKER_00: Yeah.
28:29
SPEAKER_00: And I just,
28:30
you think about back in the day when we had million to put into
28:36
R and D maybe,
28:38
SPEAKER_00: but the amount that we actually got done,
28:40
SPEAKER_00: it's all,
28:40
SPEAKER_00: yeah,
28:41
SPEAKER_00: it's everything.
28:42
SPEAKER_00: I said,
28:43
SPEAKER_00: one thing I always tell people that I mentor as founders,
28:45
SPEAKER_00: I'm like,
28:46
SPEAKER_00: it never gets any easier.
28:48
SPEAKER_00: It just gets different.
28:49
SPEAKER_00: It's funny on the 300 engineers or 300 million versus one,
28:52
SPEAKER_00: I've noticed that no matter how big you get,
28:54
SPEAKER_00: every release has three to four lighthouse features.
28:57
Like when we were at a million,
29:00
we could do three to four lighthouse features a quarter.
29:02
SPEAKER_00: Now, granted, they weren't enterprise grade and they didn't do much.
29:05
SPEAKER_00: And today it's three to four per quarter.
29:07
But your point is that,
29:08
yes,
29:08
when you get to scale,
29:09
Enterprise Braid adds so much complexity.
29:12
SPEAKER_00: So much.
29:13
SPEAKER_00: Yeah,
29:14
SPEAKER_00: it's,
29:15
SPEAKER_00: yeah,
29:15
SPEAKER_00: it's,
29:16
I have so much respect for the engineers at Procore and the
29:18
product people at
29:18
SPEAKER_00: Procore that do all that work.
29:20
It's,
29:21
by the way,
29:21
I've re-engaged my,
29:23
my programming chops over the last like couple of months.
29:26
SPEAKER_00: I've been just writing stuff in Python like crazy, just trying to.
29:29
SPEAKER_00: That's why you put, you went deep seat local.
29:31
SPEAKER_00: You put it, you install it locally on your laptop, right?
29:33
SPEAKER_00: Yep.
29:34
SPEAKER_00: Yep.
29:34
SPEAKER_00: Yeah.
29:36
SPEAKER_00: Yeah,
29:36
SPEAKER_00: so I like to write just a bunch of programs that leverage the LLMs,
29:40
but also look at Procore data and then try to make sense out of
29:42
the data in our system.
29:44
SPEAKER_00: When was the last time you coded before that?
29:46
SPEAKER_00: I probably took almost a decade off.
29:49
SPEAKER_00: Yeah.
29:49
SPEAKER_00: Yeah.
29:50
I was busy running Procore,
29:51
and frankly,
29:52
it's not my best skill,
29:54
so there was no demand for it.
29:57
SPEAKER_00: This is more fun for me.
29:59
SPEAKER_00: I just realized I really enjoy programming.
30:02
SPEAKER_00: Yeah.
30:03
SPEAKER_00: I really think...
30:04
SPEAKER_00: It's obviously more important for a CTO,
30:06
SPEAKER_00: but man,
30:07
SPEAKER_00: if the CEO is still a little bit of a hacker,
30:09
SPEAKER_00: that's a good sign.
30:11
SPEAKER_00: Yeah,
30:12
SPEAKER_00: this is what I,
30:13
SPEAKER_00: from the best VP of Eng CTO I ever worked with,
30:16
SPEAKER_00: the best one I ever worked with.
30:17
SPEAKER_00: My first startup,
30:17
we got acquired for a billion and the company that bought us
30:20
made him their VP of Eng.
30:21
SPEAKER_00: Like they picked him out of the target.
30:24
And what I learned for him is don't hire anyone where the first
30:26
line in their bio,
30:27
SPEAKER_00: whatever,
30:27
SPEAKER_00: wherever it is,
30:28
SPEAKER_00: isn't hacker.
30:29
SPEAKER_00: He said, I don't care how deep they are in there.
30:31
And I found this like every time I interview engineering
30:33
leaders and it's strategy or,
30:36
SPEAKER_00: no,
30:37
SPEAKER_00: hacker.
30:38
SPEAKER_00: I want to see someone that's always a hacker.
30:40
Isn't that the whole thing with the deep seek company was that
30:42
founder only will
30:44
SPEAKER_00: hire people with no experience,
30:46
SPEAKER_00: right?
30:46
SPEAKER_00: Because he doesn't want them to bring in their predisposed biases.
30:51
SPEAKER_00: And it's something really interesting to be said for that.
30:55
SPEAKER_00: All right, so maybe let's wrap on AI just for fun.
30:58
SPEAKER_00: But before we get there,
30:58
a very tactical topic where I think we've all learned a lot the
31:02
last couple of
31:02
SPEAKER_00: years is strategy and timing ongoing multiproduct,
31:06
SPEAKER_00: right?
31:07
And I think I read again,
31:08
your average customer now uses three to four products,
31:11
right?
31:11
SPEAKER_00: And the bigger ones are like five to six.
31:14
SPEAKER_00: Meta learnings to go earlier there, did you sequence it properly?
31:19
SPEAKER_00: Would you do a different...
31:19
Because I find you have to almost move faster today than when
31:22
you had a handful of
31:24
SPEAKER_00: competitors that died in the great financial crisis.
31:27
So what have you learned on how quickly and deep to go here in
31:30
vertical SaaS?
31:31
My experience is probably going to be irrelevant to the new
31:35
founders out there
31:36
SPEAKER_00: because we,
31:36
SPEAKER_00: to your point...
31:38
We had so much time to figure this out because the industry was
31:42
moving slow in
31:43
SPEAKER_00: adoption and there wasn't a lot of technology.
31:45
SPEAKER_00: I was thinking about this the other day.
31:46
SPEAKER_00: If I'm a founder today,
31:47
SPEAKER_00: and especially if I'm doing something in AI,
31:50
SPEAKER_00: a 24-hour news cycle can change my entire business,
31:53
SPEAKER_00: right?
31:53
Take it from a huge opportunity to being completely worthless
31:56
or vice versa.
31:58
SPEAKER_00: I didn't have to deal with that.
31:59
SPEAKER_00: Yeah.
32:00
SPEAKER_00: Just to set the stage,
32:01
like I had time to get the multi-product and the pricing and
32:05
packaging stuff done
32:07
SPEAKER_00: in a way that works.
32:08
And again,
32:08
it always comes back to we just met our customers with where
32:11
they were.
32:12
SPEAKER_00: And we never built a product that our customers didn't ask us to build.
32:15
SPEAKER_00: And the preponderance customers didn't ask us to build.
32:19
SPEAKER_00: It was always very clear as to...
32:22
SPEAKER_00: When you're serving an industry that is completely non-digitized,
32:27
SPEAKER_00: completely analog,
32:28
SPEAKER_00: the first,
32:29
SPEAKER_00: second,
32:30
SPEAKER_00: third,
32:30
SPEAKER_00: fourth,
32:31
and fifth problem are all very obvious because it's like a
32:35
layer of an onion,
32:35
SPEAKER_00: right?
32:36
There are certain things in project management that you just
32:39
have to get right
32:39
SPEAKER_00: before you do like drones or something.
32:42
SPEAKER_00: Like you got to get the fundamentals right.
32:44
SPEAKER_00: For us, it was always very clear.
32:46
SPEAKER_00: Yeah.
32:47
SPEAKER_00: And then...
32:50
I will tell you that the moving from a single product company
32:53
to a multi-product
32:54
SPEAKER_00: company was one of the hardest transitions we had to make.
32:59
SPEAKER_00: You talk about capital allocation challenges.
33:02
Now you have to figure out like,
33:04
where am I going to put my next dollar to work?
33:06
SPEAKER_00: Is there something accretive across both?
33:09
SPEAKER_00: It gets much more difficult,
33:11
SPEAKER_00: but if you listen to your customers,
33:12
SPEAKER_00: you probably will get it right.
33:14
SPEAKER_00: I find today the vertical SaaS companies that I'm closest with,
33:17
SPEAKER_00: whether it's in restaurants or salon software or others,
33:21
SPEAKER_00: they're all multi-product by 10 million or earlier.
33:24
SPEAKER_00: They all have the suite.
33:25
SPEAKER_00: They all have workflow and marketing and payroll and invoicing and scale.
33:30
SPEAKER_00: Like the customers just are too demanding today.
33:34
SPEAKER_00: They don't want a little piece anymore.
33:36
SPEAKER_00: Why?
33:38
SPEAKER_00: Procore has it all.
33:38
SPEAKER_00: Toast has it all.
33:40
SPEAKER_00: I'm not going to buy one little piece.
33:41
SPEAKER_00: Why would I buy one little piece?
33:43
that's yeah the era point solutions is over i could we could do
33:47
a whole podcast on
33:48
the evolution of software adoption in yeah by industry but yes
33:52
it's a good we it
33:53
was a different era because we just had more it was markets
33:56
were smaller but we had
33:56
more you could do things sequentially you could listen to
33:58
customers for a year and
34:00
then plan that out and today the rate of change is so high
34:03
right in in our world
34:05
too people used to download apps and job site trailers like a
34:08
punch list app or a
34:09
SPEAKER_00: document app or a photo app ever
34:12
SPEAKER_00: But what's happened to the industry,
34:13
SPEAKER_00: and this is going to tee you up for the AI conversation,
34:15
what happened to the industry is that construction is so data
34:18
intensive that having silos,
34:20
SPEAKER_00: single point solutions is not going to help you.
34:23
SPEAKER_00: What you really need is a corpus of data,
34:25
SPEAKER_00: not only your own corpus of data,
34:27
but you need the corpus of data of an entire ecosystem to
34:30
basically make sense out of.
34:31
SPEAKER_00: And that's why...
34:33
our business I think is so prime for future success is that we
34:36
have all the
34:38
SPEAKER_00: construction data you could ever want.
34:40
We can help people build better because the patterns are very
34:43
obvious and it's a complex thing.
34:46
SPEAKER_00: And right now the industry relies on people that are very,
34:50
SPEAKER_00: they have a lot of experience in pattern recognition,
34:52
SPEAKER_00: but they're non-scalable,
34:53
SPEAKER_00: right?
34:53
SPEAKER_00: And they tend to be better in their career.
34:56
And so we believe that leveraging all this knowledge that's in
35:01
our platform is
35:01
SPEAKER_00: really going to change the way people build.
35:04
SPEAKER_00: Yes, let's wrap on AI.
35:05
SPEAKER_00: I find that when I talk to folks that are in very niches,
35:08
SPEAKER_00: verticals,
35:10
SPEAKER_00: they're all fascinated,
35:11
SPEAKER_00: right?
35:12
But they don't necessarily see the same customer pull that you
35:16
do in deep tech.
35:18
SPEAKER_00: And I see a more measured approach.
35:19
SPEAKER_00: And now this may have changed just in the last week.
35:21
SPEAKER_00: We're talking about DeepSeek,
35:22
SPEAKER_00: which right or wrong opened our eyes to,
35:24
SPEAKER_00: hey,
35:24
SPEAKER_00: maybe we could do 10 times as much as we could do last week.
35:26
SPEAKER_00: Right.
35:28
Tell us what you're thinking,
35:29
what you're working on,
35:30
and how do the customers think about it?
35:32
SPEAKER_00: Are they begging you for more AI?
35:33
SPEAKER_00: Do they want more automation, more workflows?
35:36
Do they want some part of Procore just to be easier to use
35:39
because it's 2025?
35:40
SPEAKER_00: How are you thinking about also what are the customers asking for?
35:44
All of what you just said,
35:45
but by the way,
35:46
it does start with ease of use.
35:47
SPEAKER_00: So forget about AI for a second.
35:49
SPEAKER_00: People need tools that they can actually use.
35:51
SPEAKER_00: So we invest a lot in our UX kind of investment front.
35:56
SPEAKER_00: But when it comes to data,
35:59
SPEAKER_00: what people are asking for is,
36:00
SPEAKER_00: first of all,
36:01
our customers tell us that they can run 50% more construction
36:04
volume online.
36:05
through their business if they're running on the Procore
36:07
platform than if they're not.
36:09
SPEAKER_00: And why that matters is in the construction industry,
36:11
SPEAKER_00: it's a very low margin business,
36:12
SPEAKER_00: like 2% to 3% gross margin business.
36:14
SPEAKER_00: So you're talking about 80%.
36:16
SPEAKER_00: Imagine running that business like a grocery store.
36:18
SPEAKER_00: It's very difficult, low margin.
36:20
SPEAKER_00: And so every...
36:23
SPEAKER_00: Every time you can avoid hiring the next person,
36:26
SPEAKER_00: especially in a constrained market like construction,
36:28
SPEAKER_00: there's not enough people to do the work.
36:29
SPEAKER_00: You actually have a competitive advantage.
36:31
SPEAKER_00: So first and foremost,
36:32
they want to increase the productivity of their workforce by
36:36
leveraging technology.
36:38
But that usually starts with just managing workflows and
36:44
capturing data and stuff
36:45
SPEAKER_00: like that,
36:45
SPEAKER_00: which is fine.
36:47
SPEAKER_00: But what the industry is waking up to realize is that, wait a minute,
36:51
A lot of money is lost in construction because mistakes are
36:54
made that shouldn't have been made.
36:56
SPEAKER_00: Because somebody didn't have the pattern recognition that they need.
36:59
SPEAKER_00: So now that they want to leverage the data that's in the platform,
37:02
SPEAKER_00: not just their data,
37:03
SPEAKER_00: but the anonymized data of the world,
37:05
SPEAKER_00: to be able to make these more informed decisions.
37:07
SPEAKER_00: And now with agents, what they're asking for is they want...
37:11
to take the repetitive work out of their people's hands and put
37:15
it into the hands
37:16
of agents so that the people can get outside of the job site
37:18
trailer away from the
37:19
SPEAKER_00: computer and get back to building.
37:22
SPEAKER_00: And that's does two things that makes the companies more efficient.
37:25
And it also attracts more people into the industry because
37:27
instead of being paper pushers,
37:30
SPEAKER_00: pencil people,
37:31
SPEAKER_00: they're actually out building and doing what they want to do.
37:33
SPEAKER_00: So it's an exciting time.
37:35
SPEAKER_00: And is there even a lot of cases,
37:39
SPEAKER_00: when you talk to real customers,
37:41
one of the reasons they want the AI is they just can't hire
37:42
anybody to do a lot of
37:43
SPEAKER_00: this basic work.
37:44
They can't hire anyone to do the data entry or the input or
37:46
just sit in the trailer.
37:47
SPEAKER_00: There's just, the turnover is so high, right?
37:50
SPEAKER_00: That the people don't even exist.
37:51
SPEAKER_00: The human, I should tell you this.
37:53
SPEAKER_00: This is that our industry,
37:54
the construction industry is probably the most chronically
37:57
understaffed industry on
37:59
SPEAKER_00: the planet.
37:59
SPEAKER_00: People just don't want to get into construction.
38:01
SPEAKER_00: There's a stigma to it, which I really can't stand.
38:03
SPEAKER_00: But, but the reality is there's just not enough people to do the work.
38:06
SPEAKER_00: So it's not even people are leaving.
38:08
SPEAKER_00: It's just, they're not even there.
38:09
SPEAKER_00: So yeah,
38:10
SPEAKER_00: it's a necessity because you just,
38:13
SPEAKER_00: here's the thing,
38:13
SPEAKER_00: like data centers is a big business right now,
38:15
SPEAKER_00: obviously,
38:16
SPEAKER_00: right?
38:16
SPEAKER_00: Microsoft's going to spend $80 billion on data centers.
38:20
SPEAKER_00: A lot of our customers that are general contractors,
38:22
SPEAKER_00: as much as they want to spin up a data center business,
38:24
SPEAKER_00: they don't have,
38:26
they can't find people to do the work because there's just not
38:28
enough people on the
38:29
SPEAKER_00: planet that actually know how to build a data center.
38:32
using products like Procore allow them to do more with less,
38:36
which is really cool.
38:37
SPEAKER_00: All right, last question, then we'll wrap.
38:39
SPEAKER_00: So you're getting back into Python.
38:42
SPEAKER_00: You're playing with DeepSeq.
38:44
SPEAKER_00: Did you have any epiphany?
38:45
SPEAKER_00: Did you think,
38:45
SPEAKER_00: God,
38:46
maybe in a year I could do this with Procore or I could just do
38:48
something in the industry?
38:49
SPEAKER_00: Any AI?
38:50
SPEAKER_00: I don't mean to put you on the spot, but we're all seeing so much change.
38:53
SPEAKER_00: Any aha moments you had out of all of this?
38:56
SPEAKER_00: You know what I like?
38:58
SPEAKER_00: Yes.
38:59
The aha moment is that we're all limited by our ability to
39:02
prompt engineer.
39:03
SPEAKER_00: So I think as we get better at prompt engineering,
39:07
we're going to be able to ask these models much more
39:10
sophisticated questions.
39:11
SPEAKER_00: And now that you actually get chain of thought,
39:14
you can actually ask really deep questions and ask for really
39:18
deep analysis,
39:19
which is completely different than just predicting the next
39:22
word that's going to
39:22
SPEAKER_00: come up.
39:24
SPEAKER_00: For me,
39:25
now that you have these models that are reasoning models that
39:28
can do this chain of thought,
39:29
SPEAKER_00: I think that everything is going to change.
39:33
I actually think the way construction gets delivered is going
39:36
to change because a
39:37
lot of processes in construction are built around trying to do
39:42
risk mitigation
39:43
SPEAKER_00: because people know that mistakes are going to happen.
39:45
SPEAKER_00: If you can prevent those mistakes from happening,
39:47
you can actually reduce all the risk mitigation and actually
39:49
increase people's profits.
39:50
SPEAKER_00: So I think...
39:53
SPEAKER_00: Yeah,
39:53
I just think there's a lot that's coming and it could not be a
39:56
more exciting time
39:57
to be essentially a data company in a industry that's as big as
40:04
construction is.
40:05
SPEAKER_00: When you talk about doing tasks that we don't have humans to do,
40:08
SPEAKER_00: when you talk about removing errors from mega projects,
40:13
SPEAKER_00: does AI over the next couple of years,
40:15
SPEAKER_00: does it unlock more budget from the customers,
40:17
SPEAKER_00: more TrueTAM,
40:19
SPEAKER_00: or is it a push?
40:20
SPEAKER_00: Like the customers just deserve this stuff, right?
40:22
SPEAKER_00: I'm not gonna pay $2 for every resolution or $2 for every, is it a push?
40:26
SPEAKER_00: Is it more budget?
40:27
SPEAKER_00: Do you have a gut where we stand today?
40:29
SPEAKER_00: There's two questions in there.
40:30
SPEAKER_00: One is like, how do we think about monetizing this?
40:32
SPEAKER_00: And the other question is where,
40:33
SPEAKER_00: because what I would say is for now,
40:37
we're not looking to create a product line around this that's
40:40
gonna be separately monetized.
40:41
SPEAKER_00: Now that's always open for debate.
40:44
We really want to get more feedback from our customers before
40:46
we make any sort of
40:47
SPEAKER_00: decision on that.
40:48
SPEAKER_00: But I believe that our industry in particular,
40:51
SPEAKER_00: once they see the power of AI on their data,
40:55
unlocking opportunities for them to have higher margin business
40:58
or whatever else,
40:59
that to me is going to unlock more budget to be able to do more
41:01
with technology in general.
41:03
And they may end up buying more products of ours because we
41:06
have more insights that
41:07
SPEAKER_00: we can deliver or whatever.
41:09
SPEAKER_00: So I think they're somewhat distinct.
41:10
SPEAKER_00: But yeah, I think...
41:13
I think every industry is going to start realizing that a
41:16
dollar invested in some
41:18
SPEAKER_00: form of AI is going to deliver significant returns.
41:23
SPEAKER_00: You just have to make sure that dollar goes in the right place.
41:26
SPEAKER_00: Yeah, we can wrap on that.
41:27
That's what I love,
41:28
which is that we're getting back to our roots where it's a service.
41:31
SPEAKER_00: We're providing 10x value.
41:33
We're not trying to rip customers off,
41:35
not the Procore does,
41:36
but other vendors.
41:36
SPEAKER_00: We're growing 8%,
41:38
so we've got to get everything out of our base because we've
41:42
lost net new logos.
41:44
There's a lot of that going around today,
41:45
and we're not about providing 10x value.
41:47
SPEAKER_00: I think AI can get us back to our roots where...
41:51
SPEAKER_00: $199 in the old days of Procore,
41:52
SPEAKER_00: or whether it's $1.9 million today,
41:53
SPEAKER_00: I want to provide $19 million of value or $190 million of value.
41:57
SPEAKER_00: That's how you get a customer for life, isn't it?
41:59
SPEAKER_00: And I'll tell you,
42:00
SPEAKER_00: that's why I really appreciate competition,
42:02
SPEAKER_00: which is it keeps us on our toes.
42:03
SPEAKER_00: We have to earn our customer's business generally every year, right?
42:06
SPEAKER_00: So we couldn't be in that business.
42:09
We have to deliver more value than they're paying for
42:11
significantly in order to
42:12
SPEAKER_00: keep these customers.
42:13
SPEAKER_00: So it keeps us focused on all the right stuff.
42:16
SPEAKER_00: And yeah,
42:17
and I think that's one of the reasons Procore has been
42:19
successful is that we've
42:21
SPEAKER_00: forced ourselves to just be so customer centric.
42:24
SPEAKER_00: Cool.
42:24
SPEAKER_00: All right.
42:25
SPEAKER_00: This was great, too.
42:26
SPEAKER_00: Is there anything we missed that you can think of?
42:27
SPEAKER_00: I know.
42:28
I appreciate you,
42:29
and I always enjoy getting a chance to talk to you,
42:31
Jason.
42:31
SPEAKER_00: All right.
42:32
SPEAKER_00: This is great.