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Carpinteria, California – (NYSE: PCOR) Like everyone else you are probably asking yourself: why would Procore pay $500M for LevelSet? Don’t worry you are not alone and most likely it’s not why you would think. LevelSet is a platform for managing lien notice of intents, placements and payment collection for the United States.
The construction industry handles $1 trillion a year in revenue, much of it flowing through a complicated, obsolete, clunky and slow web of payment documents, operating systems, and large corporations. As a result of excessive red tape, receiving payment has become a stressful ordeal full of corruption, payoffs, affiliates, partners, delays, bullying, paperwork, and expensive disputes.
LevelSet provides, resources, education and blogs related to lien management. “We’re here to help those working in the construction industry around the world get paid what they’re worth.”
This technology is not anything new, nothing high tech, no ip that would explain why it’s worth $500M. So why would Procore pay $500M for something with tons of off the shelf solutions for this? Data? You can file a lien with $13, two legs, FedEX or online.
The platform creates a database on developers, contractors, subs and other general contractors. It shares that payment history with its users, the web or other stakeholders.
If you have a lien filed on your property then you are approaching being 90 Days late. Most liens must be filed within 90 days of being on site or delivery. Some states go to 120 Days and or go by the first invoice date for the finished or furnished materials. There is only a few variables nationwide.
LevelSet makes this information and data public and searchable. You can now make “smart” decisions on who to deal with in the construction industry, so they would say. Is it smart?
Is this the reason why Procore would pay $500,000,000.00 for LevelSet?
I mean the program could be developed or similarly bought and set up in about 30 days. The Data? Nothing a data set and large OCR system cant compile from public title records compiled with other available data.
Concerns
Procore just had a IPO and raised $635M and spent nearly all that in cash and stock for LevelSet. So why would a company in debt buy another company, that we are presuming is in debt?
Levelset has raised a total of $46.8M in funding over 6 rounds. Their latest funding was raised on Dec 20, 2019 from a Series C round. Investors making money on this deal are:
Is It Smart?
Procore most likely will lose subscribers most of which are on “the list” of bad or slow payers, more importantly sub-contractors will lose awards for filing liens and intents, from which they turn to profit off of.
How much time will Procore have to make a profit off the investment? Who is buying your payment history? More importantly who knows you are not getting paid? Companies like Billd, a integrated partner of Procore, both capitalize on you not getting paid.
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Unfortunately these practices are predatory and target already suffering small business, most of which are Hispanic and minority owned. The amount of interest inflates a project and suffocates any profit left on the job after the contractor is forced to level their bid and sign a contract.
Are liens going to be obsolete? Yes and no. With smart contracts payments or budgets are backed and executed, much like a performance and payment bond, through real time sets of processes and procedures that have funds. Lien law built in already if required. Lien Waivers are more needed but again a simple process.
Reasons Why You Do Not Want To Record A Lien Formally
- Once you file a formal lien on a property you not only kill your future with that GC you slow or bankrupt the project.
- A domino effect happens where everyone does not get paid and loses money.
- You wont get paid in full most likely due to litigation.
- You will be blackballed by other GC’s that know you filed a lien against someone.
- Future work lost. You will lose all future work and referrals.
I letter of “intent to lien” is a good tool and nothing more then a warning. We encourage this to be sent with urgency and repercussions spelled out before filing a formal lien.
Root Of The Problem
Ironically, these are the handful of corporate players and GC’s that “control & lead” the construction industry as well as payments. These main software developers, banks, and General Contractors are solely responsible for small business, material suppliers and sub-contractors not getting paid. These companies were supposed to be and had the chance for paying the materials and sub-contractors down the line. Most of which do not pay for 120-240 days and face no repercussions or social justice.
Our parent company deals with liens all the time. One case study had to lien a property this year in Connecticut for non-payment for $240,000.00 worth of work over a 2 year period . Besides losing the relationship with the client they could only get $80,000.00 of the $240,000.00 and had to finance settlement for an additional 7 months more. Subtract an additional $20,000.00 in attorney fees. Attorney fees and referrals programs are another huge money maker for LevelSet/Procore model.
This is a sub-contractors choice. It is that or you bankrupt them, foreclose the property, pull the bond and everyone is screwed. Including the residents in the affordable housing project or other end user. Sure you might get the property or paid in a few years but its not feasible or a solution.
Conclusion
Think twice about where you are at. Evaluate how important and valuable your relationship is. Rethink your processes and systems and who you share your data with. They just might be the reason why your in this mess and keep you stuck there. Relationships in business, honesty, empathy and culture will never become obsolete and cant be bought. The pandemic hit a lot companies, especially small business, and continues to. We are not out of the woods yet.
This article is sponsored by The North American Institute For Construction Professionals, Inc (N.A.I.C.P.) at the forefront of data protections, smartcontracts, the construction digital currency, tokens, and tech implementations and specifications for construction industry prosperity and social equity.
