Could TestFit Become a Dallas ‘Unicorn’? Investors are betting on it

Creating real estate development plans typically takes weeks of iterations and back and forth between developers and architects. TestFit Inc.’s proprietary algorithms complete the job in minutes.

Co-founder and CEO Clifton Harness compares the technology to the Chipotle app, which allows users to add each item to their burrito step by step. Instead of rice, beans, and meat, TestFit’s software combines building design, construction, and financing and immediately adapts to changes.

“There are a finite number of ways to resolve a terrain. We allow users to customize how it is resolved, and we do this in real time,” Harness said.

The Dallas-based startup’s time- and money-saving technology attracts $20 million in funding, despite a tightening market for startups seeking backers.

TestFit’s Building Configurator combines building plans and financial statements, instantly adjusting to changes.(TestFit Inc.)

Parkway Venture Capital, located in New York and Winter Park, Fla., just invested $12 million in the company after investing $2 million in 2020. Along with other undisclosed investors, TestFit’s funding now stands at $22 million.

TestFit is Parkway’s fourth largest investment, joining climate disclosure and carbon management software Persefoni, luxury online furniture retailer Burrow and Sandbox AQ, a spin-off from Google parent Alphabet. Inc.

Parkway Venture Capital was co-founded in 2019 by Gregg Hill and Jesse Coors-Blankenship after the pair worked together at Frustum Inc., a generative computer-aided design company that Coors-Blankenship started and sold to PTC for $70 million in 2018. TestFit is also in the generative design space, with a focus on real estate rather than industry or mechanics.

Venture capitalists like Hill spend their lives chasing a unicorn — a startup that reaches a valuation of $1 billion or more. Much like their elusive nickname, unicorns are hard to come by, but Hill thinks TestFit will hit the mythical billion-dollar mark.

“Honestly, this is a huge win for Dallas because they’re a unicorn in the making,” Hill said. “In the [architecture, engineering and construction] space, they are definitely becoming a household name.

New money from TestFit will go towards research and development, hiring more employees, increasing the sales budget, building a physical office in Dallas, and strengthening the balance sheet.

The team of 17 employees plans to grow to 50 people and Harness wants to hire locally.

“Dallas is the strongest real estate market,” he said. “A lot of our customers are here in Dallas.”

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TestFit has over 200 clients – architects and property developers – who use the program to generate site plans, income statements and construction budgets with just a few clicks..

Looking ahead to becoming a unicorn, Harness said TestFit could hit a $1 billion valuation, but he’s more concerned with creating technology that brings valuable insights to developers and architects.

“It’s within the realm of possibility,” he said. “But I’m more pressed by the weight of the need to execute meaningful innovation for the housing and architectural markets.”

Harness started out with big dreams of becoming an architect, but during his internships and work experiences, including at Streetlight Residential in Dallas, he realized the industry demanded innovation.

“The whole tech stack we were using was a fax machine, literally, tracing paper, pencils and Excel. Email was kind of the newest and most amazing technology,” he said “We were making these investment decisions for $40 million to $100 million assets on the back of envelopes, and it was a big risk.”

Harness took that risk and turned it into an opportunity. He asked Ryan Griege, his roommate from the University of Texas, to help him create software for developers and architects that could solve feasibility problems without Excel. Today, TestFit co-founder Griege is the startup’s chief technology officer.

The duo want to put problem solving before money.

“We’re not here because we thought we’d make a lot of money,” Harness said. “We are here because we believe we can solve important problems and do something useful with our lives.”

One of the problems that Harness thinks he can help solve is the current housing crisis.

“Essentially, our goal is to enable capitalism to be more efficient by eliminating the deals that don’t work and accentuating the deals that work,” he said. “In order to realize housing, we have to respect the fact that housing must bring in money and be profitable. Design-wise, that’s what we’re trying to do. We try to create realistic, economical building designs that scale well. »

As interest rates rise and recession fears loom, venture capital funding isn’t as easy to get as it has been for the past decade. The value of deals in the first half of 2022 fell to $144.2 billion from a record $158.2 billion in the same period last year, according to the National Venture Capital Association-Pitchbook. Startup founders told the Wall Street Journal that venture capitalists were negotiating tighter deals and lowering valuations. Even though funding is getting harder and harder to come by, TestFit still managed to secure a deal and attracted the interest of several interested investors..

“Venture capital is not immediately affected by recessions. There is a trend in the market right now to generate better value deals. I think in this case we struck a really good balance with the business,” Coors-Blankenship said. “Ultimately, the business continued to grow exponentially even though there were headwinds in the market.”

Meanwhile, demand for real estate in Dallas-Fort Worth has been booming since before the pandemic, especially for residential properties. Riding this wave, TestFit unveiled a single-family housing estate setup tool last week. The company also offers multi-family, commercial and industrial development tools.

Despite record mortgage rates, mutterings of a housing bubble and a local decline in home construction, Parkway remains bullish on TestFit.

“We think the total addressable market is huge for TestFit. There’s always demand for it, and there’s always growth, especially in the Sunbelt, even during a recession,” Hill said. still a lot of advantages right now.”

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TestFit is not the only player trying to innovate in the property development market. Competitors like Australia-based Archistar and Norway-headquartered Spacemaker are also causing a stir.

Parkway partners chose TestFit over the competition because of its North American regional expertise and the founders they believe in.

“TestFit is a real game changer for property developers. If someone doesn’t have it, they’re at the mercy of the company they’re working with,” Hill said.

Harness said TestFit has a leg up on its competition.

“It took us five years for the founder to work intimately on the commodity to get a product market fit for housing, the most expensive typology we have,” he said. “I don’t think anyone is lucky. We are in 60 months. We’ll see who can catch up.

As a 31-year-old whose company just received a $20 million injection, Clifton’s confidence is still mired in disbelief at TestFit’s growth.

“I am absolutely honored to be here. If you told me that someone The Dallas Morning News would write something about me one day, I’d say ‘uh-huh,'” he said with a mischievous nod and a deadpan look. “We owe a lot of success to the team that is here with us.”

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