When Vancouver-based Jordan Menashy and Ian Crosby launched tech startup Bench, it was to revolutionize bookkeeping for small businesses by offering cloud-based accounting services accompanied by live bookkeepers.
Their vision was to break into the market in North America and then internationally. But as they started looking for investors, the pair soon hit a wall in the Canadian venture capital market.
“In Canada, there’s ultimately a lack of venture capital compared to the U.S.,” says Mr. Menashy. “The amount you can raise and your valuation tends to be much lower.”
Because of this, the founders were advised to reduce the scope of their vision.
Their highest investment offer by the end of 2011 was $500,000, a figure too low to fund their long-term goals.
Both graduates of the UBC Sauder School of Business, Jordan Menashy and Ian Crosby co-founded Bench in early 2011.
“After Sauder, Ian worked for Bain & Company as a strategy consultant, and I did product management for Blackberry,” says Mr. Menashy.
When the friends caught up, they found themselves discussing the inefficiencies of manual bookkeeping. Eventually, they decided to pool their accounting and tech skills to automate the process.
“We realized that only large organizations could afford the high-end technologies that automate bookkeeping processes and that there was a huge opportunity to bring these efficiencies to small businesses by delivering it to them through a bookkeeping service online,” explains Mr. Menashy.
By early 2012, Bench had built a core team and set out on its fundraising journey. But without sufficient venture capital it seemed their vision would be severely compromised.
Not content with the limited funds the Canadian venture capital sector offered, Mr. Menashy and Mr. Crosby, along with their two other founders, Adam Saint and Pavel Rodionov, decided to try fundraising in the U.S.
To do this, however, they knew they needed more direction and support. So they applied to several business technology accelerators and were accepted by one of the top two in America: TechStars.
“It was extremely competitive to get in, and we were thrilled when we got accepted into the New York program,” explains Mr. Menashy. “We were this out-of-leftfield company from Vancouver that broke through.”
From March to June 2012, Mr. Menashy and his co-founders received intense coaching on how to navigate the challenges of a startup, from development to acquisition.
They were paired up with mentors including Barry Silbert, CEO of Second Market, and were connected with influential tech journalists and investors.
“We ended with what they call Demo Day – a big unveil of our product to an auditorium of over 500 investors and members of the media from across the U.S.,” says Mr. Menashy.
This propelled them into the start of their official fundraising process in the U.S.
The TechStars accelerator program led to an investment round that generated $2.1-million for Bench – four times more than the amount offered by Canadian investors.
“Raising this sum enabled us to move out of the beta phase of our company and focus on product market fit before scaling up,” says Mr. Menashy.
After spending a year and a half building their U.S. network, Bench decided to move back to Vancouver, B.C., where they found it much easier to hire and retain great talent.
“We still work with our community in New York, and retain our network, but also get enjoy the benefits of being based in Vancouver,” says Mr. Menashy. “It’s the best of both worlds.”
Since re-launching their service in July 2013, Bench has grown 30 per cent month over month, and has processed more than $160-million in bookkeeping transactions for small businesses across North America.
“Our goal and vision was always large scale, and we’re glad we stuck to our guns,” says Mr. Menashy. “Hopefully Bench will transform the way accounting can be done for millions of small businesses across North America and eventually the world.”
Jeff Kroeker is a lecturer in the accounting division at the Sauder School of Business at the University of British Columbia.
This is the latest in a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Report on Small Business website.
Follow us on Twitter: