In Need of Solid Construction

By Luisa Bustos

A recent report by Boston Consulting Group predicts the online construction industry will be one of the hardest hit by the expected B2B rationalisation. Can ConstructOne stand the test of time?

Eric Mies, co-founder and managing director of construction portal ContructOne, is giving the business just six more months before bowing out. "If B2B hasn't taken off in this vertical by June 2001, then it will be time to move on," he told The Standard.

Eric Mies, co-founder and managing director of construction portal ContructOne, is giving the business just six more months before bowing out. "If B2B hasn't taken off in this vertical by June 2001, then it will be time to move on," he told The Standard.

Established in July 1999, ConstructOne went live on August 1 this year. The static site was upgraded in mid-October with offerings including industry news, education, web solutions and partner services. Employment and asset partner services are scheduled to go live over the Christmas period. According to Mies, collaborative toolsets and e-commerce offerings will be available in Q1 and Q2 respectively.

Today, after finding little success with the investor community, the company has changed tack and is looking at partnering with a number of organisations across different sectors, including integration services, commerce providers and collaborative toolset offerings. Mies said ConstructOne hopes to have partnerships with the likes of Ariba, Oracle or CommerceOne and one of the Big 5 consulting houses. He said the ultimate goal for ConstructOne is to position itself as an attractive target for a global construction e-marketplace and it is looking for a strong Australian and Asian connection in a few years time.

"We are not out to conquer the world, we are out to become part of the company that does conquer the world," Mies said. "Over the next couple of months we want to be the navigator. The industry ultimately has to be captain ... but at some point both (the industry and suppliers) have to come together."

According to Mies, discussions are already underway with an unnamed US-based collaborative toolset provider and other industry players. But with the Christmas period approaching and a slowdown in the building industry, an outcome is unlikely before February.

''I'm going to spend the next six months on the soapbox. I don't think I will pitch again. I will build relations with all the industry players," he said.

ConstructOne's cash-burn rate stands at about $20,000 a month and Mies said the company operates as a "classic bootstrap organisation, using leased equipment, public transport, working out of minimal space and leveraging the barter service as much as possible".

But if the road ahead looks challenging for ConstructOne, it's nothing compared with what Mies and his co-founders have already encountered. After more than 100 pitches to venture capitalists in Australia and the US over the past year, the company has been unable to attract the $5.4 million it was looking for from the investment community and remains self-funded by Mies. A capital injection from iChifley, which put the portal on the map back in July, fell through after the two organisations had different strategies in mind for the company. Since then, several other VCs have shown interest in the business plan, but none have coughed up.

In addition to failing to attract investors, the company has also faced leadership hurdles, with three out of the four founders opting out of the venture between July and September. "I was willing to give it one more year," Mies said of his decision in July to stick behind the company.

Founders Oz Ozturk and Dinuke Ransinghe chose to leave the company at a weekend meeting mid-year. Like many dot-corns at the time, ConstructOne conducted what Mies calls a "gut check". "We assessed the level of risk (in order to) decide whether to continue on or cash out. Nothing was guaranteed and it was at least three months before funding would come in."

The risks and dot-com cash-burn rate proved too high for Ozturk and Ransinghe, Mies said. He added, however, that both men have retained a small equity stake and are likely to return to the business once it is fully operational.

In September, when the situation had got little better, Michael Bloomfield followed suit and also chose to pursue other opportunities. Around the same time, Peter Morris, former CEO of Bovis and general manager at SOCOG, came on board as de facto chairman and director. Morris had been associated with ConstructOne since December 1999 in an advisory role and had a written agreement to become a director upon funding, Mies said.

Still keen to attract investor interest, in September, prior to a trip to Silicon Valley, Mies and Morris approached two prospective candidates to fill the positions of CEO and CFO. In yet another setback, the candidates, although willing, would not commit to ConstructOne until funding was secured. Nonetheless, with their resumes on hand, Mies went to tackle the US VC market and pitched the ConstructOne business plan to 63 different VCs. Two visits later and three months down the track, there was still no funding.