Three and a half years ago, having just raised $50 million from investors and with plans to hire hundreds more workers, BuildDirect was cementing its reputation as one of Vancouver’s most celebrated homegrown tech companies.
Flash forward to October 2017: the local tech darling – often described as the Amazon.com Inc. (Nasdaq:AMZN) of homebuilding supplies – was in the throes of creditor protection. Court documents reveal it owed lenders $75 million in principal at the same time operating costs were exceeding revenue by $2.6 million a month.
Today: “We’re in the best financial position that we’ve been in, in BuildDirect’s 19-year history,” said CEO Dan Park, who took over from founding CEO Jeff Booth last fall and steered the firm out of creditor protection by March.
The company’s quick emergence from creditor protection and a bevy of new faces occupying the C-suite portends a shift for BuildDirect’s business model as it attempts to rebuild as one of B.C.’s few technology anchor companies.
Park, a U.S. army veteran who left Amazon to join BuildDirect as chief operating officer shortly before the company filed for creditor protection, said all he could do was stay calm not knowing the outcome as the company sought to settle its financial problems.
The next five months were spent cleaning up the balance sheet, reducing debt and addressing supplier issues.
BuildDirect eventually raised US$28 million and converted US$15 million of interim financing provided during the Companies’ Creditors Arrangement Act proceedings.
And as part of the plan, creditors agreed to convert US$58 million of debt into equity.
BuildDirect is a private company, and Park said he couldn’t reveal current revenue numbers, although court documents reveal revenue totalled $72 million through 2017’s first three quarters. But he said the company is now better positioned to scale and achieve rapid revenue growth, in part due to a shift in its business model.
“We’ve made a strategy pivot to professionals and B2B [business to business],” Park said, adding those market segments were always part of the company’s strategy but there was less focus on them.
“We stepped back and said, ‘Hey, we have a customer base that buys more than the average homeowner, they buy more frequently and they’re more loyal.’”
The Canadian homebuilders industry employed 90,000 workers and generated $36 billion in revenue from 2013 to 2018, according to a March 2018 market outlook from IBISWorld.
BuildDirect serves the entire North American market, so while Canadian growth was pegged at 1.1% between 2013 and 2018, the U.S. industry growth rate was estimated to be 4.4% during the same time period. American revenue, meanwhile, reached US$86.8 billion, and Park anticipates that within 12 to 18 months more than half the company’s revenue will be coming from professionals.
Perhaps the CEO’s biggest move since BuildDirect emerged from creditor protection was this month’s announced hiring of four new American executives, three of whom previously worked for Amazon.
Ken Stanick takes over as chief revenue officer, Mukund Mohan is the chief technology officer, Godwin Pavamani is chief merchandising officer and general manager of marketplace, while former Old Navy chief financial officer Stephanie Roberts will remain based in San Francisco while serving as interim CFO.
“This is a very complicated industry,” Park said. “There’s a reason why Amazon’s not in this yet.”
But he said that also means it’s one of the few traditional markets left wide open for a technology company to shake things up.
“Amazon’s not in this space yet, but we’ve got competitors out there that are larger than us and probably not as technologically innovative,” Park said.
“Not only do I feel great about the executive team but I think that resolve and perseverance [emerging from creditor protection] is something that we’ll need as an emerging technology company here in Vancouver.”