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Venture capital helps construction industry build online presence

Bidcom and BuildNet announce financing as the construction industry rapidly builds an online presence sparked by venture capitalists and executives aiming to tap a potentially lucrative e-commerce niche.

The construction industry is rapidly building an online presence, as venture capitalists and executives aim to tap a potentially lucrative e-commerce niche.

Start-up Bidcom yesterday said it has raised $46 million from several investors, including Oracle's venture capital arm, Internet holding company Internet Capital Group, VC firm Partech and real estate giant Hines. The San Francisco-based company has now attracted $63 million.

Meanwhile, BuildNet, which targets the home building industry, recently announced it raised $105 million in a third round of funding.

Bidcom and BuildNet are just two of the many companies scrambling to build software and online hubs to connect architects, engineers, builders, real estate companies, designers and materials suppliers. Other firms include Autodesk's Buzzsaw.com, Blueline Online, Framework Technology and Collaborative Structures.

Entering a giant field, these new companies are hoping to better manage the sharing of information among the many who work on any given building project. Construction was a $650 billion industry in the United States last year, according to trade groups.

As with many other industries, Net-based businesses have a real opportunity to grab a piece of the action, analysts say.

While software has long been used to manage construction and architectural projects, the Web holds the potential of sorting out the "spider web" of collaboration among companies involved in the building process, said Dennis Byron, a supply chain analyst at International Data Corp. Construction portals can help track a project, locate reports, research zoning laws, access information on materials and collaborate on projects, he said.

"We really think this (construction) is going to be a real (large) part of the business over the next couple of years," Byron said.

Buzzsaw.com chief executive Carl Bass said the construction industry has two ingredients that open the door for a Net-based business-to-business model: inefficiency and a high degree of fragmentation. The worldwide construction business includes 45,000 manufacturers, 180,000 retailers, 750,000 architects and 1.4 million contractors, according to industry trade groups.

Venture capital firms have recognized the opportunity, Bass said. "They just see this as a huge opening," said the former chief technology officer at design software company Autodesk.

Launched last November, Buzzsaw.com aims to help contractors pare project costs, for instance by reducing instances of lost faxes, missed calls and miscommunications. The savings can be between 20 percent to 30 percent, executives claim.

The San Francisco company is funded by Crosspoint Venture Partners, which has invested $15 million.

Many of the start-ups are building war chests to launch e-commerce initiatives. Some, such as Bidcom, will eventually charge by the transaction for companies buying and selling everything from bricks to services such as drafting.

Bidcom currently charges subscription fees for those doing business on the site, with the average number of clients per project reaching about 100, according to Daryl Magana, Bidcom's CEO and founder. The company is considering charging $1 to $10 per transaction made on the site to help generate revenues, he added.

Also yesterday, Bidcom announced the addition of Ron Pressman, president of GE Capital Real Estate, to its board of directors.

Last August, rival Blueline Online received $10 million in a third round of funding that included the backing of construction and engineering behemoth Bechtel. The company is expected to make several announcements next week, including another funding round, sources said.

BlueLine's main product offering, ProjectNet, is a subscription-based online project management service. The company is currently hosting more than 150 projects worldwide through ProjectNet, representing more than $40 billion in construction.

In the meantime, more users are discovering the sites. For one, Doug Cochran, computer-aided design director at architecture firm LPA in Irvine, Calif., said he uses Buzzsaw.com's ProjectPoint service to save about 30 percent on postage and labor costs.

"In the past if we had a (design) update we had to issue it to our different consultants," he said. "Twenty different people got data disks via email. That takes time and money to do."

Cochran said he and his partners now post drawings to the site, which is used as a central repository that everyone on the project uses to make changes. The service is free for up to 100MB of storage space, he said.