New construction technology startup tackles the issue of prompt payment head on

TechCrunch, as the name implies, is a technology-oriented publication that, as a self-professed geek, I’ve been reading since former practicing attorney Michael Arrington started it so many years ago.

But now I find myself in an interesting position where more and more the tech-oriented publications I read also feature content on companies in the architecture, engineering and construction (AEC) industry. Here is a recent TechCrunch article highlighting yet another disruptive tech company that just so happens to be firmly centered on improving life for folks working on the built environment:

The invoicing and payments process in the commercial construction industry is broken. It takes a median of about 70 days to get paid, which means contractors are often stuck without enough working capital. Net30, a startup in Y Combinator’s current batch, wants to solve that problem.

The platform lets construction companies handle invoices and then make online payments to contractors’ bank accounts. This digitizes a process that is still mostly paper-based (some invoices are still faxed and most payments are made by paper checks sent through snail mail). Net30 also has a feature that calculates early payment discounts. In fact, Net30’s founders, former commercial construction project managers Casey Bell and Anthony Cirinelli, originally built it as an early payments platform.

As the two talked to contractors, however, they realized it would take more to fix construction’s payment problem. The issue is so severe that delayed payments are one of the main reasons construction companies fail.

From a risk management perspective, Net30 is going after a critical aspect of doing business in the AEC industry. Here’s why: By far, the overwhelming majority of projects that end up in litigation first realize conflicts related to prompt payment. The contractor(s) eventually stop work due to non-payment, and then of course the owner turns around and claims that they shouldn’t have to pay the contractor because the work was defective, delayed, or both. Both sides continue to dig in their heals until litigation becomes all but unavoidable.

Solving payment issues would definitely reduce the number of construction claims. That is, if payment issues could truly be solved — something easier said than done, I believe.