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Can an Estonian startup solve the construction worker shortage?

Tallinn-based blue-collar hiring platform Werk has raises $1.3m in pre-seed funding as it looks to solve one of the construction industry's main pain points

By Kit Gillet

Many industries are going increasingly hybrid, meaning companies are looking for easy solutions to hire, manage and retain employees working remotely.

But it’s not so easy for the millions of workers who don’t log into a computer every day — especially those in the construction industry.

That’s exactly the demographic that Estonian startup Werk is targeting. The Tallinn-based company, founded in 2020, claims to be the first hiring and relocation platform for skilled migrant construction workers and has raised $1.3m in a pre-seed round led by Change Ventures.

In recent years Ukraine, Belarus and Russia supplied the majority of blue-collar labour workers for European construction sites. The paperwork, visa documentation and negotiations involved in relocating these workers have never been systematised or automatised, causing headaches for both workers and employers. Add onto that the labour shortages exacerbated by the pandemic and the war in Ukraine — and it is a nightmare. 

Constructing a new business

Werk is aiming to bring transparency to the world of cross-border blue-collar contracting; supporting workers relocating to other countries by automating paperwork and visa documentation, and only working with companies that guarantee they will provide workers with the same payment terms, treatment and protection conditions as they would if they were a local.

“What we essentially do for construction companies, our clients, is we find the person and vet them in-house and then we relocate them from the worker’s country to do the work. All the paperwork, visa, tax numbers,” says Martin Kalamees, Werk’s cofounder and CEO.

Gabrielė Poteliūnaitė, a senior associate at Change Ventures, says that so far no one has really cracked this hiring space.

“45% of European construction firms have had to limit their production due to labour shortages”

“It was the team that drew us to this company,” she says. “Early on they got very senior hires in the industry, people that know the construction space super well. Their main target market was Finland and they lured one of the top heads of one of those construction companies from Finland to their team.

“Another relevant part is the fact that the team actually speaks Russian and some of the languages the supply markets of the workers are coming from.”

Unscrupulous middlemen

Labour challenges in the construction industry are nothing new.

“45% of European construction firms have had to limit their production due to labour shortages,” says Patric Hellermann, general partner at Foundamental, a global investor in construction technology and another of Werk’s backers.

Hellermann says that SMEs account for more than 90% of the construction industry. However, these are generally “incredibly resource poor, don’t have dedicated HR departments that most large multinational operators enjoy, and therefore do not have the means to source labour efficiently from other markets”.

While white-collar companies, especially those embracing a remote-work culture, have seen solutions enabling them to hire foreign workers frictionlessly — aided by startups like Californian Turing and Hamburg-based Localyze — Hellermann says the blue-collar segment has been overlooked.

“We’re having a lot of those working in Russia looking for new work”

At the same time, the process of hiring blue-collar workers from other countries has long been fraught, time consuming and complicated for construction companies. Skilled blue-collar migrant workers are often taken advantage of by unregulated agencies and contractors, some of which operate illegally.

“Since European governments are doubling down on their efforts to thwart illicit work and creating the necessary talent pools that European construction will need in the coming years to service European building stock, pushing contractors to find compliant solutions, the timing to solve this issue is now,” says Hellermann.

Ukrainian blues

Kalamees says the war in Ukraine has been a massive shock to the construction industry, since the country, alongside Russia, had been one of the biggest markets for blue-collar labour to the European Union. While Werk is still working with Ukrainians, they’ve pulled back from the Russian market.

“If you look at construction sites, most have at least one Ukrainian, so employers simply refuse to hire Russians because it’s going to cause problems between the two nationalities. Also the visa process is a lot harder for Russian citizens now,” he says. At the same time, migrant workers in Russia are trying to leave because of the uncertain situation. “We’re having a lot of those working in Russia looking for new work.”

It’s still early days for the company, which has been growing 20% month-on-month and is aiming to expand from a team of seven to twenty-five by the end of the year. However, there are promising signs. “We are seeing interest coming in from markets where we are not even in, companies from Denmark, for example, found us on Google search — we don’t even operate there yet,” says Kalamees.

At the same time, Werk just signed a partnership with the government of Uzbekistan, which will help it to source and deal with the documentation for workers from there. More partnerships are set to follow so that, in Kalamees words: “Whenever we get larger orders from Germany, or Sweden or Finland, we can pull a lever and release supply.”

Kit Gillet is Sifted’s eastern Europe correspondent. He tweets from @KitGillet

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