Mark Suster, chief executive of BuildOnline, has had a tough year. As the outlook for online marketplaces becomes increasingly bearish, he has been working harder than ever to build the business and to raise additional funding for his e-construction start-up. The strain has taken its toll: "These grey hairs were earned in the last few months," he quips.

But at the beginning of April, the greying Mr Suster had a moment's respite when he raised £10m in third-round funding led by ETF, a Swiss-based venture capitalist.

"This is a huge signal to the market," says Mr Suster, "We have proved our credentials."

Findings by Jupiter, the internet researchers, support his view. Predicting that by 2004 some four in five of Europe's 500 exchanges will have failed, it puts BuildOnline on its list of 10 B2B markets most likely to succeed.

The company started out as a marketplace for e-construction but has repositioned itself as an application service provider over the past year.

Mr Suster thinks he has helped the business stand out through a more integrated approach which combines procurement with software solutions developed in-house.

"We are an ASP. We are not an exchange. We sell software, we sell it as a service over the internet and you can pay per project or you can pay per year depending on your total volume," he says.

BuildOnline has four services which it tries to sell to big companies: project management collaboration; tendering, to enable companies to enlist services, through competitive tendering or existing partnering arrangements; procurement, which allows buyers and sellers to trade online; and a supplier database.

James MacAonghus, analyst at Jupiter, thinks the company's strategy to develop a technology platform for the management of projects online is beginning to pay off: "They already have significant mass, obviously the more the better. There is a case of carry on as you are doing for BuildOnline."

Mr Suster recognises that getting key construction companies on board is particularly important in this fragmented industry where the largest 8 per cent of companies (with over 10 employees) account for more than 64 per cent of the total value of work done. Once you have attracted a few buyers, their suppliers will follow.

"You set up private systems for these companies to do business with the people they do business with. I don't need 50 per cent of the market to make a profitable business. I don't need everybody logged on," he says.

BuildOnline is currently running between 60 and 70 projects in total, which are worth nearly £125m. Projects to date have been worth more than £630m, according to Mr Suster. But, with Europe's construction market worth about £580bn , there is a lot more market to grab and the company is now working hard to bring some of the big construction companies on board.

Earlier this month, it struck up a strategic partnership with Balfour Beatty, the engineering and construction services group. It hopes to achieve annual cost savings of £20m within three years using BuildOnline's tools.

Transco, the UK gas pipeline company that demerged from British Gas last year, is another big customer running £100m of projects over BuildOnline's platform, according to Peter Roberts, head of transmission systems investment.

Mr Roberts, who manages about 25 per cent of Transco's capital expenditure of £1bn a year, is currently paying for BuildOnline's collaboration tool on a project-by-project basis and has four big projects - two pipelines and two gas compression gas pumping systems - running on the platform at the moment.

"We have project managers all over the shop and physically trying to keep a track of their files meant their cars were mobile filing cabinets," he quips. Now the documentation has been put online: "They can get into their projects anywhere in the country, and that is a great benefit to us". Mr Roberts says it is too early to comment on whether the software is saving money but he is confident that using web tehcnology to have a virtual team in constant contact is the "best way".

He also thinks the added efficiency will come down to the bottom line, although he is reluctant to be drawn on how much Transco could save by moving projects online. "Projects take three or four years. The indications are that we are working more efficiently and that should work through to the bottom line - not just for Transco but for the whole supply chain."