Building Blocks ⎟ Cloud Manufacturing Reshapes Construction Supply Chain

February 21, 2025

Saudi startup BRKZ raises $17M for their construction materials marketplace, triggering a fascinating convo about cloud manufacturing vs managed marketplaces & how capital efficiency works in emerging markets.

Patric Hellermann

Building Blocks ⎟ Cloud Manufacturing Reshapes Construction Supply Chain

tl;dr

Saudi startup BRKZ (Bricks) secures $17M Series A for their construction materials marketplace

Cloud manufacturing vs managed marketplaces as competing strategies in construction supply

Emerging markets like Saudi offer unique opportunities for construction tech

Working capital efficiency is key to scaling marketplace models profitably

The familiar founder story of "I built a house and discovered industry inefficiencies"

Tech integration challenges with GCs remain a persistent scaling problem

After Kareem's exit to Uber, I bought a family house in May 2020 and faced the inefficiencies of the construction supply chain, lack of visibility and material selection, uncertainty around the whereabouts of goods and price volatility.

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Saudi startup BRKZ (Bricks) secures $17M Series A for their construction materials marketplace

BRKZ, the Saudi-based construction tech platform, has closed a $17 million Series A funding round. We're looking at an interesting case study with this funding announcement. The company has actually raised $22.5 million total, including previous rounds, and is showing impressive growth with 4x year-over-year revenue growth.

What caught our attention is their approach. BRKZ connects contractors directly with factories and suppliers, enabling them to procure essential building materials. They've quickly expanded into 40 cities across Saudi Arabia, processing RFQ (Request For Quotation) volume from 770 million to 350 million.

The timing aligns with Saudi Arabia's significant construction ambitions. The country is embarking on massive building projects with compressed timelines, creating bottlenecks in material supply chains. This creates ideal conditions for a marketplace solution – high demand, constrained supply, and need for efficiency.

Their founder story follows a familiar pattern we've heard before. Ibrahim, a former executive at Kareem (which was acquired by Uber), experienced construction inefficiencies firsthand when building his family home in 2020. This personal frustration became the catalyst for starting BRKZ. It's a story we've heard repeatedly from construction tech founders, though that doesn't invalidate the approach. Renovating or building a home is indeed one of the highest-touch interactions non-industry professionals have with construction.

What's particularly notable is that they're highlighting "positive unit economics" in their announcement. This suggests their contribution margins after marketing and sales are positive – a crucial achievement that many similar marketplaces have struggled with. This accomplishment likely stems from their pivot toward serving general contractors directly rather than retail or hardware shops, which enables better margins.

Cloud manufacturing vs managed marketplaces as competing strategies in construction supply

BRKZ appears to be operating as a managed marketplace rather than a cloud manufacturer – an important distinction in the construction supply chain world. Let's break down these two models.

In a managed marketplace, the platform acts as the supplier on record, taking the risk of delivery to customers. This approach is often essential in emerging markets to gain scale with building materials. By guaranteeing delivery and quality, they can overcome trust issues that would otherwise hinder adoption.

Cloud manufacturing takes a different approach. Like managed marketplaces, cloud manufacturers are the supplier on record, but they focus more on supplier concentration rather than supply-side liquidity. They aim to buy more capacity from fewer suppliers for better terms. This means taking on the risk of guaranteeing factory utilization – if they can ensure high utilization, they get better pricing in return.

BRKZ's approach leans toward the managed marketplace model, citing 1,100 suppliers in their ecosystem. This suggests they're building supply-side liquidity rather than concentrating on fewer suppliers for deeper relationships. While this approach might not yield the same competitive pricing advantages as cloud manufacturing, it provides other benefits like reduced dependency on any single factory.

The cross-border component is particularly interesting. BRKZ mentions their ability to source materials from outside Saudi Arabia when needed, white-labeling these goods for the local market. This strategy can work especially well in markets with supply constraints – by introducing new pools of supply from foreign markets, they can provide value that domestic suppliers alone cannot deliver.

For managed marketplaces like BRKZ, a key metric is typically GMV (Gross Merchandise Value), which reflects actual transaction volume. Interestingly, BRKZ highlights their RFQ volume instead, which represents quote requests rather than completed transactions. This creates some ambiguity about their actual conversion rates and transaction volumes, though rising RFQ volume is generally a positive leading indicator.

Emerging markets like Saudi offer unique opportunities for construction tech

Saudi Arabia represents an intriguing market for construction technology. The region is characterized by optimism and ambition in construction – two factors that can generate significant momentum for innovation adoption.

What makes Saudi particularly attractive for marketplace models is the combination of high demand and supply constraints. The country is undertaking massive construction projects with aggressive timelines, creating natural bottlenecks in material supply chains. This environment is ideal for marketplace solutions that can efficiently match demand with supply and introduce new supply pools.

Emerging markets like Saudi often lack the consolidated, efficient supply chains found in Western markets. This creates opportunities for platforms that can aggregate fragmented supply or introduce cross-border suppliers to meet domestic demand. In Western markets, the supply side is typically more consolidated, making it harder to find these same opportunities except in specific categories like data centers or grid reconstruction.

The rapid expansion of BRKZ into 40 cities suggests they're pursuing an aggressive city-by-city land grab strategy. This approach, common in marketplace businesses like Uber and Kareem, aims to establish market dominance quickly. While not the most capital-efficient strategy, it can help secure market position before competitors emerge. Their ability to raise significant funding ($22.5 million in two years) has likely enabled this approach.

What's also noteworthy is the regional momentum beyond just Saudi Arabia. The UAE is experiencing its largest annual sales of apartments and properties ever, suggesting strong construction activity throughout the region. This broader regional growth creates additional expansion opportunities for construction tech platforms.

Working capital efficiency is key to scaling marketplace models profitably

One of the most fascinating aspects of BRKZ's funding announcement is the structure: $8 million in equity and $1 million in debt. This mixed capital structure offers insights into how sophisticated marketplace models can scale efficiently.

In building materials marketplaces, working capital can become a powerful growth engine when deployed strategically. By injecting working capital into the supply chain, these platforms can extract better prices from both suppliers and customers, increasing their spread and profitability. If managed correctly, this creates a virtuous cycle where working capital generates outsized returns.

The key metric here is the contribution margin generated on working capital. If a platform can generate an annualized return exceeding 25% on working capital (our internal benchmark), then it makes sense to deploy as much working capital as possible. In these scenarios, debt financing becomes more attractive than equity because it's cheaper and doesn't dilute ownership.

The duration of working capital deployment matters significantly. If a platform holds working capital for 30 days before recapturing it, that capital can be turned over 12 times per year. This means $1 million in debt financing could potentially drive $12 million in GMV annually if managed effectively.

For construction marketplace founders, this capital efficiency can lead to remarkably capital-efficient growth trajectories. In the most optimized models, later funding rounds might achieve as little as 5% dilution – a stark contrast to typical startup funding dynamics. This is possible when the working capital engine becomes highly profitable, allowing the business to grow predominantly through debt financing rather than equity.

However, debt financing carries risks, particularly for unprofitable businesses. Unlike equity, debt must be repaid and can drive a company into insolvency if mismanaged. For this reason, debt financing works best for marketplaces that have achieved profitability and can control their growth relative to debt obligations.

The familiar founder story of "I built a house and discovered industry inefficiencies"

The origin story of BRKZ follows a pattern we've seen repeatedly in construction tech: a successful professional from outside the industry builds or renovates a home, experiences frustration with construction inefficiencies, and decides to start a company to solve these problems.

Ibrahim, BRKZ's founder, previously worked as an executive at Kareem before its acquisition by Uber. After purchasing a family home in 2020, he encountered the "inefficiencies of the construction supply chain, lack of visibility and material selection, uncertainty around the whereabouts of goods and price volatility." This frustration became the catalyst for starting BRKZ.

While we might smile at how frequently we hear this particular entry point into construction tech, it's actually a valid pathway. Building or renovating a home represents one of the highest-touch interactions that professionals from outside construction have with the industry. It provides a visceral, personal experience with the pain points that exist.

This pattern reflects a broader observation about construction technology: some of the most successful innovations come from outsiders who bring fresh perspectives from other industries. They see problems that industry insiders might have normalized after years of exposure, and they can apply solutions that have worked elsewhere.

In Ibrahim's case, his background in marketplace businesses like Kareem and Uber likely informed BRKZ's approach to solving construction supply chain challenges. The marketplace model – connecting buyers and sellers while adding value through trust, logistics, and financing – has proven effective across various industries and is now being applied to construction materials.

What's notable about BRKZ's evolution is that they appear to have pivoted from their original focus. Initially, they positioned themselves between suppliers and retail/hardware shops, but they've since shifted toward serving general contractors directly. This pivot likely stemmed from realizing where they could extract the most value and achieve the positive unit economics they now highlight.

Tech integration challenges with GCs remain a persistent scaling problem

One of the persistent challenges in construction technology is integration with general contractors' workflows. Each GC tends to have slightly different processes, making it difficult for technology providers to scale without customizing their solutions for each customer.

Many general contractors select technology based on how well it fits into their existing workflows. However, since these workflows vary between companies, technology providers often find themselves building custom solutions for each client rather than deploying a standardized product at scale.

This customization requirement creates a fundamental tension for construction tech startups. On one hand, accommodating each customer's unique needs improves adoption and satisfaction. On the other hand, extensive customization limits scalability and can transform software businesses into service-heavy operations with diminishing margins.

The integration challenge has even led some GCs to reject solutions from major tech companies because they're perceived as too rigid. These larger platforms typically offer less flexibility to adapt to specific contractor workflows, creating an opening for more nimble startups that can provide customized implementations.

However, custom integrations come with significant costs. As integration expenses rise, the cost-benefit calculation of adopting new technology deteriorates. At some point, the implementation costs may outweigh the efficiency gains, making it harder to justify the investment.

This dynamic has created software fatigue among some general contractors. Many are now saying they won't purchase additional software until they've reduced complexity, integrated their existing systems better, harmonized their data, and improved data flow between systems.

This integration challenge represents both a problem and an opportunity. For technology providers who can solve the integration puzzle – connecting disparate systems while maintaining scalability – there's significant untapped potential. Some emerging solutions focus on creating APIs that connect various construction software platforms, enabling them to communicate seamlessly without requiring wholesale system changes.

The ideal solution would provide standardization and scalability on the backend while offering flexibility and customization on the frontend. Finding this balance remains one of the central challenges facing construction technology providers today.