BuildStream is raising a crowd SAFE at a $10 million valuation cap with no discount. The company is currently in a pre-product stage but has begun to take in revenue, so this valuation isn’t completely unreasonable. However, the lack of discount is disappointing and subsequently lowers the company’s price score. Altogether, BuildStream is middle of the road for the price metric.

It is challenging to pinpoint the exact market size for BuildStream as it does not actually conduct inspections but merely connects inspectors with companies. The Testing, Inspection, and Certification market was valued at $207.75 billion in 2020 and is expected to reach $294.01 billion by 2027. The far smaller Quality Management Software market — composed of software designed to monitor quality concerns — was valued at a far smaller $7.96 billion in 2019. However, it is expected to expand at a CAGR of 10.1% to reach a size of $17.08 billion by 2027.

BuildStream’s share of the testing, inspection, and certification market is likely closer to the quality management software market in size — but again, this is difficult to measure. BuildStream may also be limiting itself in focusing almost exclusively on the engineering sector, given how easily its software could be turned to other verticals. Due to all these factors, the market score for the company is only slightly above average.

BuildStream’s two co-founders began work on the company in early 2018, incorporating in mid-2019 after spending a short period in product testing and management. CEO Terry Clarke holds a Master of Science in Renewable Energy from Newcastle University in the U.K. Clarke got his start as a quantity surveyor in construction then migrated to ensuring product sustainability for British real estate. He dipped his toe into the world of technology startups with LOOP Hub, a platform designed to expand on his sustainability work. BuildStream is his second startup and appears to be off to a stronger start.

Product Lead David Polanski got his start with five years in the Israeli Intelligence Corps, working in analysis and product management. Polanski shifted to Ireland and the technology giant Apple where he spent two years working in product testing and quality insurance of hardware and software. Together, the two are somewhat lacking in long-term business experience and deep industry experience. Consequently, BuildStream’s team score is middling.

BuildStream has had some early success in its product trials, perhaps partly due to its time at startup accelerator Y Combinator. Thus, its software will enable it to address a market need from two sides with a high-quality product.

BuildStream is addressing a pain point in the quality inspection industry. While there are many companies offering quality inspection software, they do not provide the connection to inspectors that BuildStream is offering. However, the company’s software is not patent-protected and may not be particularly defensible. It seems highly likely that competitors in adjacent fields who already manage quality inspection through software could build their own programs tif BuildStream’s model proves effective. 

Balancing the company’s lack of defensibility against its current product distinctiveness, BuildStream scores above average for the differentiators metric.

At this stage, BuildStream has conducted a number of product trials with $150,000 in trial profits. As a result of these trials, BuildStream has signed contracts with eight clients for quality inspection supply services. It has also established partnerships with three quality inspection agencies and more than 1,000 independent inspectors and auditors. This level of short-term revenue at this stage of product development is promising.

It should be noted, however, that the business has experienced the usual and expected financial shortfalls as a result of running a tech-based startup, with -$456,243 in net income last year. The business holds nearly half a million dollars in long-term debt, and these expenses are likely to grow as the product scales. However, due to the company’s encouraging trials and early traction, the performance score for BuildStream is slightly above average.

While BuildStream is rising to meet a real need in the market, the company faces a major threat in regards to defensibility. By focusing on the engineering sector and exclusively on networking for supply chain quality inspection, it could be limiting its appeal. There already exist many companies with software designed to support product quality inspections, and more could emerge to challenge BuildStream with their own custom-fit solutions.

While BuildStream has had no shortage of interest in its trial stages, it may face significant problems as it attempts to scale up. The company will need to establish reliable vetting processes for its inspectors and auditors. It will also need to convince demand-side companies that these processes are solid enough to engage such inspectors and auditors on a contract basis.

Supply chain quality inspection is by definition a niche, if important, marketplace. To succeed in its business plan and see significant returns for investors, BuildStream will need to capture a relatively large portion of the engineering testing, inspection, and certification marketplace — and for that, it will need to prove that its product can work at scale. As businesses reeling from the COVID-19 recession seek to ensure product integrity, they may be more inclined to hire their own inspectors rather than entrust their quality assurance needs to such a young company.

Quality inspection is vital work. In an engineering sector that is seeking to cut costs all the time, BuildStream’s all-in-one solution could provide all that energy, industrial, and contracting clients could ask for. The platform significantly cuts costs and administration requirements for businesses and offers smaller-scale inspectors and auditors the chance to earn more than they would with larger agencies.

BuildStream’s early focus on renewable energy niches may also pay off in a big way. As governments push for increased focus on renewables to combat climate change, energy producers will be under huge pressure to prove that said renewables are cheap, safe, and effective. Should this occur, BuildStream can connect“high-quality” quality inspectors at a reduced price on both ends. Bylocking down this part of the market, BuildStream could attract significant long-term customer engagement and see its revenues grow into the millions within a few years.

BuildStream is an online platform for managing supply chain quality inspection. By using the platform, businesses can connect with pre-vetted quality inspection professionals, manage scheduling and payment, and streamline record-keeping electronically. BuildStream has set its sights primarily on engineering with an eye towards niche energy sectors like offshore wind.

The software appears to have generated solid results in trial contracts, solving a real problem in the industry. However, the inexperience of its founders, a high valuation cap, and serious defensibility issues in a growing market indicate a risk of poor returns for investors. As a result, BuildStream is a Neutral Deal.

For questions regarding the KingsCrowd staff pick or ratings for this company, please reach out to support@kingscrowd.com.

Analysis written by Benjamin Potts.