Earlier this summer Forbes profiled Gearflow, highlighting its recent $3 million seed round, and its innovative marketplace approach for the heavy equipment parts market. We examined the Gearflow value proposition through a supply chain and B2B marketplace lens, and are proud to have co-led that round with Watchfire Ventures. Here’s why:
The Gearflow.com platform addresses the expansive market for heavy equipment parts, which has several sub-segments: Agriculture, Industrial, Material Handling, and Construction. The construction parts market — where Gearflow is currently focused — is estimated to be $20-25B conservatively in the U.S. alone, with adjacent parts markets conservatively estimated at $10-20B each. Despite the size of these markets, the processes to purchase and receive these specialized products are antiquated, opaque, and inefficient. In the current environment, a customer who needs a part typically calls or visits their “local-guy” supplier, who utilizes outdated software and printed catalogs to determine the needed part and inventory availability. Often, the best-case scenario results in the customer having to travel to pick up the part in person. In the worst-case scenario, the part is unavailable or the wrong part is supplied.
Gearflow has updated this process for over 100 suppliers and 1,000+ unique customers by using a modern ecommerce platform — tailored to the needs of buyers and sellers within this highly specialized industry — and complete with branded storefronts, search/discovery, and checkout and payment abilities. It offers parts suppliers an opportunity to increase sales, reduce the costs and friction of selling, and improve customer satisfaction. For parts customers, the platform provides greater selection and availability, lower prices/costs, faster fulfillment, and reduces costly job-site downtime.
Gearflow’s vision to modernize the heavy equipment industry is one that speaks to NVP’s B2B marketplace and supply chain investment theses, which recognize that the global supply chain is ripe for digitization and industry is hungry for tools that strengthen user experience at all levels, through increased visibility, flexibility, and analytics. Combined with the market opportunity, the product/market approach, the traction to date, and its stellar founding team, we saw — and continue to see — Gearflow as an exciting seed-stage investment.
Luke Powers and Ben Preston, cofounders of Gearflow, sat down with NVP to talk about their inspiration, their strategies, and what comes next for Gearflow. Take a read below.
NVP: What initially attracted you to the parts/equipment market?
GF: While working for our family’s construction equipment dealership, I (Luke Powers) was struck by the sheer number of suppliers in the industry that contractors rely on ― from parts to rentals to equipment ― that were mostly locked offline. And of those that did have an online presence, most lacked the features that today’s buyers have grown to expect, including inventory availability or the ability to purchase on their sites.
Knowing that about three-quarters of B2B customers start their buying process with an online search, it became apparent to us that there was a tremendous opportunity to better surface these businesses and their products.
As we started developing Gearflow’s marketplace, we soon realized that the problem we needed to solve went far beyond simply aggregating suppliers. After hundreds of conversations with customers, we found that there was a massive underlying productivity problem stemming from the pains that come from parts procurement. By solving this problem, we would be putting money back in the pockets of contractors everywhere.
It is energizing to us that we get to solve major pains for real people doing real work that adds significant value to their bottom lines.
NVP: How did you link up as cofounders, and what’s the origin story for Gearflow?
GF: We originally met in Chicago in 2015. In early 2018, we went to a bar to talk about the original idea for Gearflow, and we knew we had an opportunity to create something special with our complementary backgrounds in digital marketing and the construction equipment industry.
At the end of 2018, we launched an outsourced test site to prove that there was demand.
Not only was the interest from suppliers overwhelming ― so much so that it crashed the site ― but we also learned from our customers that their biggest problem was equipment downtime. We heard over and over again that when construction equipment breaks down, it is the single largest cost for a contractor.
However, the process to procure the equipment parts to get that equipment back up and running is a major headache and drain on productivity.
Contractors can spend hours on the phone each week trying to track down parts, only to then spend additional time driving to the local dealer to pick them up. Meanwhile, their entire job can come to a screeching halt.
We believe this is a major contributing factor to the larger productivity problem that exists in construction. While the rest of the economy's productivity has increased over 300% in the last 30 years through the use of technology, productivity is down 23% in construction, according to McKinsey & Company.
The fact that we are less productive in the construction industry today than we were 30 years ago was just astounding. So we decided to go all-in by bringing parts procurement into the digital era in order to address this lagging productivity.
We raised a pre-seed round in late 2019 in order to rebuild our site from the ground up with this focus in mind, launching our replatformed marketplace in 2020. Our goal is to enable equipment owners to quickly find the parts they need from suppliers they trust so they can get back to work.
NVP: How did COVID impact/accelerate your startup?
GF: The pandemic made the need for Gearflow more urgent than ever before.
Contractors and suppliers were forced to face a radical digital transformation of their businesses that had been happening only incrementally in the past. E-commerce has just exploded during this time.
Meanwhile, Amazon Business has grown 3x faster than Amazon's retail side — and suppliers know they are coming for construction. But suppliers want a marketplace solution they can trust and is built for them — and that's exactly what Gearflow offers.
NVP: You guys recently raised a $3M round. What was the biggest challenge in fundraising? What will that funding go to?
GF: Our first two engineers have built everything from scratch. They have done an amazing job in building the technical foundation we need in order to scale. However, it became very clear they needed support — we got to a point where we could not keep up with the demand on our business without scaling our engineering team.
We raised the $3M-round in order to evolve from a two-person engineering team to a product-led organization that can quickly deliver the tools that both our suppliers and buyers are asking for to streamline parts procurement through Gearflow.
Our biggest challenge in fundraising was twofold. First, we are operating in a complex space that is not well understood. However, once investors realized the significant role that parts procurement plays in the major productivity problem that all contractors face, the opportunity became obvious.
Second, we were looking for investors that were willing to work with us on the product side to catch the technology up to the demand of the business. We are fortunate to have a great group of investors and partners that are all aligned on taking advantage of this opportunity we have in front of us and dedicated to help us accelerate product development.
NVP: The construction industry has been slow to adopt tech in some ways. How do you sell an old-school contractor or parts supplier on the Gearflow value? Why would a customer use Gearflow versus "their guy"?
GF: We think there can be resistance to embrace new technology when contractors feel like something is being forced on them that’s outside their comfort zone, instead of truly listening to their problems and meeting them where they are at.
For instance, though contractors want options to help them reduce the pain of equipment downtime, they still desire that personal connection. That’s not a bad thing, so Gearflow doesn’t seek to eliminate that. Parts and service go hand-in-hand, so we are building a marketplace platform that strengthens existing service relationships, instead of replacing them.
As an industry, we need to integrate digital solutions that work with, not against, the established supply chain. It’s not about asking a contractor to choose procurement on our platform vs. “their guy” — we simply ease the facilitation of that relationship.
And the benefits work both ways. Not only do we enable contractors to order parts and get equipment back on the job site in a more productive, reliable, and efficient way, but we also provide suppliers with an entirely new pathway to customers wherever they may be located.
It’s a win-win all around.
NVP: How are you different from other marketplaces out there today?
GF: First, when it comes to equipment parts, Gearflow is the only transparent marketplace built for the construction industry.
The marketplaces that are out there today are attempting to fit the construction industry into a marketplace designed for retail. However, there are so many nuances in parts procurement that make a traditional retail marketplace ineffective.
In reality, the industry needs a marketplace that fits construction. At Gearflow, we needed to rethink how supply is distributed, how orders are managed, and how customer relationships are facilitated to make it truly work for the customers we serve.
NVP: Gearflow is focused on construction for now, but is that the end? Would you plan on going into other industries like manufacturing or agriculture?
GF: We are focused on solving the needs of the construction contractor because the pains stemming from parts procurement are the most prominent in construction due to the heavy reliance on the uptime of their mixed fleet of equipment.
However, those pains are also felt in ancillary industries, such as agriculture, forestry, landscaping, distribution, and others where they depend on equipment, so there could be a natural path towards these industries.