Constructor, the AI-powered search and discovery company, has bagged $25 million in Series B funding, just less than three years after announcing it had secured a $55 million Series A round.
Sapphire Ventures, a new investor for Constructor, led the round, and existing investor Silversmith Capital Partners participated, as well.
Eli Finkelshteyn, the company’s CEO and co-founder, said the raise came at a time when Constructor had not actively been fundraising. He said part of his job as CEO is to keep in touch with investors on a periodic basis, so that, in the case that Constructor needs to fundraise further, the company still has contacts.
One of his contacts in the venture capital industry was Rajeev Dham, partner at Sapphire, who asked Finkelshteyn to share more about Constructor with the rest of the investors at his firm. Constructor did not have an active pitch deck for investors, so Finkelshteyn shared a sales deck, thinking it would be good practice.
“The next morning, I woke up with an offer to invest and a term sheet in my inbox,” he said. “But then we had basically a hard decision in front of us—do you accept money just because you’re offered it? Just because we had the option to do it didn’t mean that we necessarily needed to take it, so we [said] we’ll accept the money because it’s good to have it as an insurance policy in case we ever have a bad year. But the goal is going to be essentially not to spend it.”
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Constructor works with enterprise-level clients like Birkenstock, American Eagle Outfitters, Target Australia and Under Armour. Finkelshteyn said because of Constructor’s work with Bonobos, the menswear company, has seen a 92 percent increase in purchases coming out of recommendations.
What makes the company’s technology different from competitors, Finkelshteyn said, is that AI has been baked into the business from the jump. Other companies, he said, have developed technology based on keyword-matching engines, which they then layered AI models on top of.
“It’s like you previously had a horse and cars become invented so you tie a car to your horse and you’re like, ‘OK, this is great,’” he said. “We had the advantage of being founded a little bit later, once there were more possibilities within what AI could actually do. So we were not built on a keyword-matching engine. We’re built on something that learns from clickstream, so essentially, it’s listening to users. It’s learning about their preferences, based on what they’re clicking on, what they’re adding to cart, what they’re scrolling right past [and more].”
With what little of the new funding the company plans to spend, Finkelshteyn said, it will add a minimal number of roles to its headcount, which has already grown by 45 percent year on year. The roles he does add will primarily be in Constructor’s R&D department, though the company may also add more roles to keep up with its growing presence in Europe, the Middle East and Africa (EMEA).
“Within R&D, there’s more experimentation that we can be doing. Right now with everything that’s happening within generative AI, I think that there’s a very good chance that the way that people shop online and the things that they can do will change,” he told Sourcing Journal. “And we want to make sure that as these things are happening, we’re at the forefront of it, because I think that’s what our customers expect of us.”
Over the course of the last five years, Constructor has been “profitable or borderline profitable.” That, Finkelshteyn said, is the reason the company has no other plans to follow this round of funding with a Series B-1 or Series C round—and why it can keep most of its Series B funding in reserve.
The company’s search and recommendation technology integrates with brands and retailers’ data management tools, e-commerce platforms and content management systems.
As it grows, Finkelshteyn said, his team continues to identify the ways it can amp the power of its existing systems, while also considering future-facing use cases its customers may find helpful.
Already, Constructor has launched a generative AI-powered AI Shopping Assistant (ASA) tool. Finkelshteyn said the company will continue iterating in the generative AI space, but will simultaneously hold true to its core value proposition. Though many companies have started to latch on to generative AI, behind-the-scenes technology like recommender systems, which may not be built with generative AI, can provide more value to many businesses.
“We want to make sure that we’re not just a vendor we’re a partner, and being a partner means pushing people towards things that are not just shiny but things that we believe are useful. [We’re] making sure that we’re testing that so…the things that we’re developing—[and] the things that we’re helping our customers develop with us—are things that pass that threshold of being useful.”