Brazil-based startup Oico, a B2B marketplace for construction materials, announced on Thursday that it has raised $5.5 million in a seed round led by Valor Capital Group. Tiger Global and the investment arm of Brazil’s national steel company CSN, as well as angel investor Jonathan Wasserstrum, CEO of SquareFoot, and existing investors Maya Capital and FJ Labs, also participated in the fundraising.
Oico, whose name comes from oikos, or ‘home’ in Greek, launched in 2020 with a pre-seeding of 8.5 million reais ($1.54 million). The idea of the founding entrepreneurs Pedro Dellagnelo and Pedro Rocha was to ease the purchase of materials for construction companies.
Oico’s platform bridges the gap between suppliers and contractors and manages the sale until the delivery of the material at the construction site, which is done in partnership with transport companies. The idea was to make a business like Rappi, but focused on B2B and the construction market niche.
“We saw that before, delivery was a time-consuming and unreliable task, and the order was already invoiced. It was a very old experience if you compare it to what you have today with the marketplaces for individuals,” said Rocha.
With the proposal of a one-stop-shop, which concentrates the payment in a single environment, Oico promises faster delivery. “And also cheaper, if you think about the expense of labor time. One day that the work is stopped because you don’t receive the material is a very big loss,” he said.
Oico earns a commission on each transaction made on the platform.
“Pedro, Upon this Rock I Will Build”
Oico’s focus is on fast works, from small and medium-sized developers who do renovations or small constructions. The platform only operates in São Paulo and has 100 clients. “These clients have a lot of recurrence and volume of purchases, so there is no need to have many clients to continue growing sales in an accelerated manner,” Rocha said.
First-time entrepreneurs, the ‘Pedros’ also ventured into the construction sector for the first time. Rocha spent the last decade working with agriculture and had experience in startups. Dellagnelo, on the other hand, worked in procurement technology.
In 2019, they began working with contractors to understand the procurement process and how to add technology to help. “I have clients today that operate over 50 construction sites at the same time and place dozens of orders a week. If you multiply the purchasing inefficiency by the volume of purchases that this customer makes, it is a huge amount of lost time. And we saw that the retail space is very large and the industry was very fragmented, with 50,000 independent suppliers. When there are too many suppliers, they can’t develop technology to improve the UX. And we were able to bring the two ends together,” said Rocha.
It is the same business carried out by Indian company Infra.Market. The Mumbai-based startup also has Tiger among its investors. According to Rocha, investors are paying attention to B2B marketplaces, which he believes are “the new frontier of e-commerce”.
“We see that companies that know this industry know the size of the market and the size of the challenge and the need for innovation. That is why we have, for example, CSN investing in us, because they see the need and the future that this market has.”
Since the beginning of its operations, Oico has seen 30-fold growth. The new financing round will be applied in infrastructure for a better buying experience, and in hiring people for technology and operations. Today, the startup has just over 40 employees.
“We want to bring in top talent, who wouldn’t necessarily be attracted to this market. It is not a super sexy market for outsiders,” Rocha said.