Tasmanian startup Varicon has raised $2.25 million in a Seed round for its construction cost management software.
The round was led by Sydney VC Black Nova, supported by Andrew Sypkes, Galileo Ventures and Artesian, as well as strategic industry players Slattery Construction chair Josh Slattery, Tidal Ventures co-founder Murray Bleach, Aconex co-founder Leigh Jasper, and the founders of BlackCap Construction Group.
The fresh funds – the startup raised $440,000 from Galileo Ventures, Spykes and others 12 months ago – will underpin national expansion plans to serve medium-to-large construction firms across sectors, including civil contractors, public infrastructure developers, property developers, roads and transport, and demolition contractors.
Co-founder James Baker hopes the software platform will save construction firms billions through cloud-native cost management and real-time analytics.
A veteran construction project manager Hobart-based Baker, along with co-founders Siddhant Shrestha and former Aconex strategic partnerships lead Ofer Assor, designed Varicon for smartphones to help reduce financial risk and simplify on-site cost management.
“Complex projects are being managed by using emails and Excel spreadsheets, exposing contractors to major financial risk – and providing very little visibility over project budgets,” Baker said.
“The construction industry has a dismal record with financial management, highlighted by a series of recent high-profile insolvencies.”
He said the frustrating experience of working with ineffective cost management tools in his past roles led him to develop Varicon, which he launched in 2019.
Baker wanted to address to key issues in the sector: misquoting on projects (builders either undercut themselves or over-budget and lose out to competitors) and mismanaging spending so that companies bleed out during construction.
By tracking actual costs versus budget in real time using Varicon, contractors can identify and address cost overruns on the day, rather than months later. It also creates a feedback loop that allows estimators to evaluate how projects actually went compared with the estimates in order to improve future tenders.
Black Nova managing partner Matt Browne said even though the construction industry runs on tight margins, it has been slow to adopt platforms that can’t show an immediate cost-benefit.
“Varicon fundamentally supports construction businesses to improve their margins through sophisticated cost management and does so by automating industry best practises,” he said.
“We believe the time is right for this product, and initial industry feedback has been overwhelmingly positive. The team are industry insiders and set up to build a category-defining business.”