Procore Focuses on Biggest Contractor Customers for Growth – Will It Work?

With Copilot, Pay and Precon, Procore’s growth strategy is centered on a bigger spend from its biggest contractor customers. Our data suggests it just might work.

In last week’s quarterly earnings call, Procore CEO Tooey Courtemanche kicked off his remarks with a fairly extensive debrief on a recently held gathering of the company’s Executive Customer Advisory Board that brought 30 of Procore’s largest customers to its Carpinteria headquarters, calling it “the standout event of the quarter.” Courtemanche went on to reference the “ENR 400” four more times in his introductory remarks - it’s a far cry from the speech he gave at BuiltWorlds back in 2015 when Procore was less than one tenth the size it is today. That day nine years ago, Courtemanche talked about hosting 300 contractors in Carpinteria to gather their user insights.

While focusing on the largest contractors may feel like a departure from the mission “to connect everyone in construction on a global platform,” it may be a logical move for Procore from a business standpoint.

Customer Growth is Decelerating

In their S-1, Procore presented a picture of new customer acquisition that had been growing at approximately 40% per year annually between 2017 and 2019. With hundreds of thousands of contractors in the U.S. alone, it was easy to extrapolate to the point where Procore could be adding ten thousand or even tens of thousands of customers in a single year. Presumably, that would fuel robust continued growth, especially if the average customer size were to remain constant.

More recently, however, new customer acquisition has decelerated significantly. Procore executives were not available for an interview, however a company representative, when asked about this point, said its “customer count is skewed by the number of SMB logos, and therefore it is not necessarily a key metric that we manage the business to.”

A Focus on Efficient Growth in Revenue Points To Bigger Customers

Procore charges customers based on the customer revenue. So, if the company is more focused on revenue growth and efficiency, as opposed to customer count growth, it could be a lot more efficient for Procore to focus on expanding its revenue within the industry’s largest firms that can best take advantage of their full suite of offerings and can most easily afford to pay for them.

Surveys of BuiltWorlds members, which skew to the larger contractors in the ecosystem, already show that Procore has a commanding position with those firms, both in terms of usage and satisfaction. Procore has also made gains in our surveys in usage for business intelligence and data analytics and appears poised to make gains in payment management and preconstruction as well. This more complete suite of offerings might give Procore more entrees into larger firms, as those firms prioritize different areas of their tech stacks for upgrade.

Will Existing Customers Pay More For Procore?

We asked Procore if this focus on gaining more revenue growth from larger customers would mean higher prices for those customers, and the company representative referred us to its 2023 Investors Day Presentation. Combing the deck for clues, slide 54 references a plan to “expand existing customers” via a combination of “upsell via additional construction volume” and “cross-sell via new products.”

So, without the benefit of a clear answer from Procore, it does appear that the company anticipates seeing its customers pay more for the service as customers’ own revenue grows and also as they buy more of Procore’s products. Procore is not viewed as cheap in the market, and Courtemanche acknowledges that Procore is a “premium product.”

BuiltWorlds member-provided data indicates that Procore does have consistently high satisfaction ratings relative to competitors. Also, many of Procore’s new products could displace products its customers are already buying from rivals such as Oracle and Autodesk. So, in this regard, Procore could argue that it is not asking customers to spend more as much as to switch providers. If Procore can maintain its generally higher satisfaction levels as it rolls out new offerings, it can potentially win over its customers and get them to pay more for more. Of course, the more systems customers adopt, the higher the cost of switching also becomes which may also help Procore extract more dollars from existing customers.

In some respects, as Procore pursues this path of growth through increasingly sophisticated offerings for larger firms, it may be a disappointment for some in the market. With its Southern California Malibu mystique, its big tent marketing campaigns, and the embracing launch of its own app marketplace, Procore felt in its earlier years, to some, like a much more populist project management application than the older ERPs like Viewpoint, CMiC and Oracle that were market leaders before the advent of the Apple store.

At our meeting back in 2015, Courtmanche referenced that his product, available on the app store, was something Procore wanted a company to be able to download and put to work in hours and days, not weeks and months. While Procore may well be able to keep its customers happier than some of the competitors it was able to unseat, it may also now have to work to avoid some of the potential pitfalls that the younger Procore once exploited.