Exclusive: PlanGrid raises $18 million from Sequoia to digitize construction blueprints

May 13, 2015, 5:00 PM UTC
Construction At A PulteGroup Inc. Housing Development Ahead of Earnings Figures
A contractor operates a nail gun while working at the PulteGroup Inc. Sage housing development under construction in San Jose, California, U.S., on Tuesday, July 22, 2014. PulteGroup Inc. is expected to release earnings figures on July 24. Photographer: David Paul Morris/Bloomberg via Getty Images
Photograph by David Paul Morris — Bloomberg via Getty Images

A few years ago, two recent college graduates noticed big inefficiencies in the use of paper blueprints in designing and planning new buildings. For one job, a bound set of paper blueprints could cost an astonishing $23,000. It was as if the digital age had never reached the construction site. So they set out to create a company, PlanGrid, that lets architects, construction workers, and their bosses access building plans from a mobile device and edit them like a group document.

Today, Fortune has learned exclusively that the company has raised $18 million led by Sequoia Capital. Sequoia’s Doug Leone will join PlanGrid’s board. Other investors in the financing include investor Ron Conway, and Yammer founder and former PayPal COO David Sachs.

Tracy Young and Ryan Sutton-Gee, two construction engineers, founded PlanGrid after growing frustrated with the huge amounts of money spent on blueprints and time wasted using them. They realized that blueprints were one of the few things that had yet to be digitized.

Besides the cost, full-sized blueprints — usually around 42 by 30 inches — are heavy and cumbersome to carry around. Furthermore, minor changes in a building’s design required printing a new set of paper, which could take weeks for complex projects.

Initially, Young and Sutton-Gee worked on a blueprint app as a side project. They recruited software engineer Antoine Hersen, and Pixar engineer Ralph Gootee (Young’s husband) to join the fledgling startup in 2011.

With PlanGrid, blueprints can be uploaded to a mobile app, edited, viewed, and marked up for discussion. It is essentially productivity software for the construction industry that made massive files easy to zoom in on and tweak.

Users can also access and collaborate on different versions of the same document within the app to see how designs have evolved and changed. It’s basically a Google Docs for blueprints.

While the team bootstrapped the company with their savings, they knew they would have a better chance of succeeding if they had support from a startup accelerator that serves as a sort of nursery school for new companies. PlanGrid was accepted into Y Combinator, a prestigious Silicon Valley incubator, in 2011.

But the news was bittersweet. Herson was soon diagnosed with a rare form of cancer and passed away not long after the team started the program. Despite the setback, Young, Sutton-Gee and Gootee plowed ahead with PlanGrid and recruited another engineer, one of Herson’s friends, Kenneth Stone, to join the founding team.

While still in the accelerator program, PlanGrid decided to get an early version of its software into users’ hands as a way to test whether the construction industry would actually use an iPad instead of paper. Team members used their personal credit cards to buy a dozen iPads for potential clients at Bay Area construction companies.

Within three months, all these guinea pigs started paying PlanGrid for the software. Around that time, the startup raised a small initial funding round of $1.5 million from current Y Combinator President Sam Altman, Gmail founder Paul Buchheit, 500 Startups, and Google Ventures.

While the company had a handful of paying customers, it still needed to be scrappy to bring in more business. Young and her co-founders would go to construction trade conferences and pitch any company they could meet with. While PlanGrid faced some rejection, it got enough customers to become profitable. Since 2012, despite barely spending money on marketing or sales, the company has landed over 10,000 paying customers.

Plangrid offers four tiers of software that range from free to $100 monthly, based on the number of blueprints customers want to upload. Currently, over 200,000 building projects have been built using PlanGrid, and 19 million blueprints uploaded to the app. High-profile clients include the construction company that builds all U.S. stores for Target and another that works for Nordstrom.

While Young and her founding team enjoyed bootstrapping the company, they also knew that they needed more money to hire a bigger staff. Ultimately they chose Sequoia, an early investor in companies like Google, despite the fact that the firm insisted on a lower valuation for PlanGrid than others. The team decided that it was worth it because Sequoia and Leone shared a similar long-term vision.

Leone said he knew right away that he wanted to invest in PlanGrid. In fact, they reached a deal and issued a term sheet within a matter of days, which is rare for the firm when making a large investment decision.

In an interview with Fortune, Leone said PlanGrid was a rare success in terms of a new company building a product that caught on so quickly. He also pointed out that at the time of Sequoia’s investment, around eight of ten major building projects in downtown San Francisco were using PlanGrid’s software.

“There are not a lot of companies that would be willing to gamble on an unknown startup’s products,” he said. “It has to fulfill such a major pain in a customer’s mind.”

William Hoop, an executive at Lend Lease (US) Construction, in Chicago, and an early PlanGrid user, explained that using the service makes the building process more efficient. Construction managers don’t constantly have to wait for new blueprints to be printed when plans change, which happens often.

“PlanGrid is a game changer for us,” Hoop said.

Eventually PlanGrid has ambitions of being a platform for not just blueprints but all construction information and project management.

For more about Sequoia Capital, watch this Fortune video:

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