Jeff Booth is a compulsive doodler. It’s as though the 45-year-old CEO of BuildDirect needs to see his thoughts on a page while explaining them.
His doodles are the little pictures of a big-picture thinker.
There is probably a diagram somewhere from 1999, when Booth and his business partner, Robert Banks, set out to disrupt the building materials supply business.
What they created has been called the Amazon of building supplies – an e-commerce site where builders can order flooring or roofing materials directly from manufacturers at a significant discount.
The company has grown so rapidly in the last two years – from a head count of 80 to 275 today – that it recently relocated from its 14,000 square feet of office space at 717 Pender Street to 401 West Georgia Street, where it has 40,000 square feet on the 22nd and 19th floors and an option to take the 21st floor as well.
“We planned on being there for seven years, and we were there for two,” Booth said of the company’s previous location.
To finance the company’s growth, BuildDirect raised $16 million in venture capital from OMERS Ventures in 2012 and another $30 million in a Series B round last year led by Mohr Davidow Ventures.
Although BuildDirect is focused largely on the U.S. market, Booth insists his company’s growth over the last two years is not just because of a recovering American housing market.
As he points out, the long-term average for new housing in the U.S. is 1.5 million units per year but still remains at about 900,000 units per year.
“The business growth is coming from the platform we’re creating,” Booth said.
It’s a platform that has been 15 years in the making.
Born in Saskatchewan, Booth moved with his family to B.C.when he was a toddler but still has family connections on the Prairies. He was raised in Richmond and spent six months in university before dropping out to become a real estate agent at the age of 19.
He did well in real estate and ended up co-owning a real estate company.
With no background in building, he started his own home construction business in the mid-1990s.
He learned everything he knows about business from books. By his own estimate, he reads 50 business books a year.
Banks, who has a background in finance, had known Booth for about a decade and had suggested they start a business together.
In the late 1990s, at the height of the Internet bubble, an idea for a new Internet-based company crystallized when the building materials Booth needed to finish a house didn’t arrive on time.
“I failed to deliver a house on time for a customer,” he said. “I was a general contractor and the flooring didn’t arrive on time. And when they didn’t want to change the flooring to get in on time, we were stuck. We had to put them in a hotel and their furniture in storage.”
Booth realized that there were likely thousands of other building contractors throughout North America who similarly were held hostage to a supply chain that was costly and sometimes unreliable.
Booth and Banks came up with the idea of an e-commerce site that cut out the middleman and would allow builders to order their building materials directly from a supplier, at a significantly lower cost.
BuildDirect launched at the beginning of the dot-com bust, which meant no one was investing in Internet companies anymore.
They raised all their startup capital from friends and family.
“The first $8 million in the company all came from friends and family,” Booth said, adding that when all of a company’s money comes from friends and family, failing is not an option.
“They put money in because they care about you, and you keep going because you care about them,” Booth said.
Booth was also raising his own young family at the time. He and his wife, Kelly, have three children.
The company faced some significant hurdles at the beginning. The most daunting task was setting up a distribution network, which now includes eight distribution centres in the U.S. and two in Canada.
Whereas other e-commerce companies could rely on FedEx and UPS trucks and airplanes to deliver books or DVDs, BuildDirect had to establish its own delivery system that involved both railcars and semi-trucks and was able to deliver whole shipping containers of flooring and other building supplies from places such as Italy and Turkey to customers throughout the U.S.
The other major hurdle was trust.
“The first buyer that bought had to buy 25,000 square feet of product from an Internet company located in Canada, and they had to wire the money three months in advance,” Booth said. “Who would do that?
“But the price was so low that some people took the risk. Then for three months they called us every day saying, ‘Are you still in business?’
“When that product arrived and it was way better than expectations, they said, ‘I told you so,’ to a lot of their friends, which exploded our business.”
Customers weren’t the only ones who had to trust BuildDirect – so did suppliers. Essentially, the company was asking suppliers in other countries to ship hundreds of thousands of dollars worth of product to the U.S. and wait for BuildDirect to sell it.
But they didn’t have to wait long, because BuildDirect had invested in developing proprietary software that allowed the company to predict with a high degree of accuracy what the trends in home construction were.
An algorithm that the company developed analyzed search engine queries on building products to find out what products homeowners and builders were searching for, when they were looking for it and in what regions.
This allowed BuildDirect to order the right amount of materials at the right time, in the right place, so there was never a lot of inventory sitting around unsold. Suppliers loved it because they were able to move more product than ever before.
The company managed to grow, even through the financial crisis of 2008 and subsequent recession.
“Because the business model was so effective, we were still growing through the building collapse,” Booth said. “Where it really hurt was the financial crisis. Nobody could pay in advance.”
Howard Gwin, who helped broker a $16 million investment in BuildDirect by OMERS Ventures and now sits on the company’s board of directors, said the key to the company’s success is Booth’s ability to stay focused on the big picture.
“It’s not easy doing what they do, and the benefit of a market that’s not easy is – if and when you crack it – it becomes huge,” he said.
As Booth points out, flooring alone is worth $25 billion – just in the U.S. – and that’s just one submarket of building supplies. Which is why Booth thinks BuildDirect has the potential to become a multibillion-dollar company.
“A billion is way too low,” he said. “I want to build a platform-sized company. I want to build a Google-sized company right here.
“If you look at any single start of an ecosystem, it’s all from some crazy person who said, ‘I’m going to build it here, so help me God.’ People like Chip Wilson. We should be celebrating people who have gone before us.”
While that may require going public at some point, Booth said an IPO is not on the horizon just yet.
“There’s no shortage of access to capital for a company that’s doing what we’re doing, so I don’t actually see why we would go public any time soon.”
Mission
Build a simpler, friendlier and empowered home improvement industry
Assets
Will and perseverance. Keep standing up, overcoming and learning
Yield
Since 2010, revenue has grown more than 250% with 80% growth in 2013. In flooring alone, more than 40 million square feet delivered per year
