A Better Way to Build
February 1 2013 by Jennifer Pellet
You’ve spent 19 years in the oil industry succeeding in senior positions at the likes of ExxonMobil, Amoco and BP. Now, you’re ready for a change. A former colleague, who made the leap from Fortune 500 executive to startup CEO, urges you to do the same. He introduces you to a venture capitalist who, in turn, offers up the CEO spot at Project Frog. Er, Project what? The oddly named company turns out to be a nascent player in the pre-fab construction business sorely in need of the marketing firepower to commercialize its “frogs”—energy-efficient, user-friendly commercial buildings that can be assembled in a fraction of the time conventional construction would require and at the same or a lower price tag.
By the time Ann Hand took the helm as Project Frog’s CEO in 2009, the five-year-old company had already proven its mettle by offering a more palatable alternative to the problematic portable structures being used by schools and in disaster relief situations—think FEMA trailer. Several of its high-performance, energy-efficient buildings constructed from pre-engineered components were in use at a handful of sites.
Still, despite its promise as a fast-track solution that could also bypass the budget-busting endemic of traditional construction, San Francisco-based Project Frog often found itself battling potential customers’ pre-existing notions around the quality level of pre-fab. In fact, Hand had to overcome her own skepticism before agreeing to lead the company. “Fortunately, they already had buildings up, so I got to look at them and kind of kick the tires,” she says. “When I did, I thought of times at Amoco when we were under time pressure and our only option was these brown modular boxes. I realized I could have delivered this beautiful Frog building in the same amount of time—and with 35 percent to 50 percent lower utility bills. That really changed my mindset about prefabrication or modular.”
Rather than simply move the construction component of building to a factory, as traditional modular companies do, Project Frog focuses on optimizing designs for precision fabrication and employing lean manufacturing techniques that reduce waste. “We have more in common with Boeing or Toyota than with modular construction companies,” explains Hand. “We take an optimal-design building for a certain use and break it down into component parts, each of which is manufactured in a high-precision fabrication environment so that those parts have very tight tolerances and bond together easily on site. It’s an erector set, in the simplest sense.” Because the parts are flat-packed and shipped ready for assembly, structures that might have taken up to two years to build can be constructed in less than a month.
Brought on board to expand the company’s construction footprint, Hand initially looked to leverage the company’s early foothold in education-oriented structures. In 2008, Project Frog had made a splash at the Greenbuild Expo by putting up an energy-efficient classroom in just six days. (That structure would later become part of a three-classroom building the company created for the Watkinson School in Connecticut.) Sadly, the idea of replacing the proliferation of ugly trailers across school campuses in California with energy-efficient, eye-catching “Frogs” hit a wall when the national economy took an overnight tumble. “After that, we found ourselves slogging it out at a time when education funds were turning on and off like a valve,” recounts Hand.
At the same time, Hand found herself waffling on the first big change she had planned to make as CEO—rebranding the company with a more serious name. “I thought, I could not with a straight face say, ‘Hi, I’m Ann from Project Frog,’” she says. “So I decided that the first thing I would do when I joined the company would be to change the name.”
On the name front, fortunately, Hand was savvy enough to poll her existing customers before taking the rebranding leap. She soon discovered that the company’s oddball name had led to sort of a branding anthropomorphism. Customers actually seemed to harbor a pet-owner-type affection for their new buildings, which they all called “frogs,” as in “I love my Frog. I want another Frog.” And that warm and fuzzy feeling also extended to Project Frog employees, who customers dubbed “Froggers.”
What’s more, the moniker made Hand’s relatively unknown company stand out in an industry dominated by bland, vanilla names akin to “XYZ Construction.” “When I asked San Francisco Redevelopment about it,” she recalls, “they said, ‘Are you kidding? In the stack of RFP responses, we thought, ‘Who are these Frog people? It piqued our interest.’” Hand continued to noodle around with the rebranding idea for a while, even calling in a hot shot naming guru; but ultimately, she decided to embrace Project Frog.
Addressing the challenge of the cash-strapped education sector, however, did demand major change. Hand opted to tackle that issue by pursuing what she dubbed “programmatic spenders” or customers whose businesses required that they continue to build new structures regardless of the economic climate. “These are companies in industries like retail and healthcare who have to get a certain number of buildings out each year just to maintain market share,” she explains.
Perseverance paid off and today Project Frog has deep relationships with companies and organizations that build steadily, with the bulk of its business in health-care construction. “This year, we inked a deal with one of the largest national health-care providers that is three times the size of any purchase order we’ve done historically,” Hand reports. “And we have two more in the pipeline that are double that one. As a result, the company has gone from doing $1 million to $2 million on a job to between $5 million and $7 million.”
Better still, over time, Project Frog’s customers have become its best marketers. Early on, when Hand approached large construction or architectural firms, responses were tepid at best or, at worst, downright hostile. “They would say, ‘We’ve been doing it the same way for hundreds of years, thank you very much,’ or they would be worried about what piece of their pie we’d be taking,” she explains. “Now, we have some large health-care and retail customers who are telling their architects and construction partners, ‘Hey, we like these frog buildings.’”
Targeting the health-care sector also proffered an unanticipated side benefit: hospitals and health organizations tend not to be proprietary about successful cost-savings measures—in fact, quite the reverse. “Health care is a funny industry; they really share their innovations,” explains Hand. “Our large health care provider talks about us pretty consistently at industry conferences. Rather than [keeping us] a secret as a competitive advantage, they feel it’s their job to push the whole industry forward.”
In September of 2011, Project Frog landed $22 million in funding from General Electric and several of its VC partners (Claremont Creek Ventures, Greener Capital Partners and RockPort Capital) in the Ecomagination Challenge. The funds enabled the company—whose revenues are currently somewhere in the $10 million to $35 million range—to expand the size and type of buildings in its repertoire and the number of projects it can take on. The funding relationship also incorporated construction of a Project Frog building at GE’s high-profile Crotonville Learning Center. “The size of our pipeline has grown exponentially,” says Hand, who adds that the company’s purchase orders have tripled in the last year. “We’re talking about bringing $20 million of potential deals to $400 million.”
Looking back, Hand agrees with the former colleague who urged her not to be intimidated by the leap to an entrepreneurial CEO seat. At the same time, she has found elements of the experience daunting. “It hasn’t been the challenge most of the VCs I spoke with believed it would be,” she says. “But what has surprised me is that I feel lonelier than I did running much bigger teams at BP because there I had a system of profit-and-loss owners. As a CEO, you are trying to protect the troops, so you almost have to be careful about leaning on them.”
Accustomed to the timelines of typical corporate financial reporting, Hand also had to adjust to the unrelenting pace of a startup. At BP, she was measured by quarterly and annual performance, whereas at Project Frog it became “literally day, week, month,” she says. “It ups your adrenaline, forces you to make calls faster and pivot on strategy, but it kind of wipes you out at the end of the day. I’ve had to get comfortable with that, but it’s also great because it’s developed a new skill for me that I now know I can do.” —Jennifer Pellet