Nov 29, 2023

The cloud installer model

Been a bit of a busy November. Back with a shorter piece, but one that I’ve been asked about a lot in recent days.

Cloud Installers.

One of these fancy VC terms that I’ve coined? Or does it really stand for something?

It does mean a specific model that applies software and standardization to blue-collar workforce opportunities.

Let me unpack.

Where it was proven first: Cloud manufacturing

Avid followers of my musings will have heard of companies such as Infra.Market or Zetwerk before. Two companies that our team here at Foundamental backed early.

We define cloud manufacturing as a software-enabled marketplace with the following characteristics:

1. Guaranteed capacity from manufacturers
2. In return, highly secure revenues and cash flows provided to manufacturers
3. Admin and overhead tasks become centralized and solved for with software
4. As a result, high utilization, high conversion and improved margins for manufacturers
5. While the central software and brand takes care of order intake, quoting, invoicing, cash collections and payments, “supplier on record” warranties etc.

A cloud manufacturing marketplace typically undergoes 3 stages to reach the highest level on all 5 characteristics

• First, your scale is underwhelming. You are going after underbranded and under-utilized manufacturers.
• Second, as you reach some scale (ballparkish ±100M annualized GMV), you begin to unlock the ability to ask for 20-30% capacity guarantee, while providing some revenue and cash flow certainty.
• Third, as you 10x from there, and unlock access to affordable debt, you begin contracting your manufacturers for up to 100% of their capacity.

This model works REALLY well in cloud manufacturing.

Cloud installers are cloud manufacturing for blue-collar workforce opportunities

We @ Foundamental had coined the term “cloud installers” in early 2022, when we started partnering with exciting projects and founder teams in the energetic renovation space, such as Enter and Lun in April and May 2022.

In its essence, the cloud installer model takes the same characteristics and applies it to blue-collar workforce:

1. Seeks a way to build guaranteed capacity from a workforce
2. In return, provides utilization, revenue and cash flow certainty
3. The critical addition is radical standardization: Verticalizes tasks down to the absolute smallest tailoristic level. (Below an example of this)
4. Mirrors these granularly standardized vertical tasks in software
5. And centralizes admin and overhead tasks with software
6. As a result, high utilization, high conversion and improved margins for the workforce
7. While the central software and brand takes care of job ops and order intake, quoting, invoicing, cash collections and payments, “supplier on record” warranties etc.

To elaborate on the radical standardization: Imagine you are a rooftop solar installer company. The cloud installer model de-atomizes the installation process so granularly, that one job is to “carry the modules to the house” and another is “lay and screw the rails onto a pitched roof”. These granular processes become highly standardized in terms of steps AND in terms of which tooling and which components ought to be used. The workforce then gets trained on the smallest process level. A new hire will only get trained on one process at a time, then perform that process for weeks or months in the field, and if they do a continuously great job, be offered to upgrade to the next process.

This same concept can be applied to most trades and jobs in energetic renovation, new construction and logistics. (where it stops is where regulatory policies require a specific additional training, eg. connecting the solar installation to the grid by a certified generic electrician).

The cloud installer model undergoes different stages of maturity as well. You can find them in the market very much as a roll-up model (like 1komma5grad or many others), which I am less bullish on due to shortage of suitable M&A targets and painful integrations. Or you can find them more software-enabled as ed-tech models, where through an inhouse training concepts new talent pools get targeted, trained and offered the opportunity to become their own business owners.

When they become own business owners, enabled by the central software and standardization tech company, is when they have become cloud installers.

Seen applied to

I’ve seen this model in the US, Europe and India. It seems fastest growing in Europe for now, but I expect the US market to catch up and overtake quickly.

You can see it applied to:

• Insulation (VARM)
• Solar (Solarock)
• A range of green jobs (Forge)
• some stealth verticals that I keep to myself for now until we have a deal completed 😉

While it might be harder to apply to eg. heat pumps – because of a super technical installation process; more of a design and knowledge problem than a “muscle” problem.

If you are building a cloud installer firm fixing energetic upgrading, logistics or construction trades. I want to hear from you.