Every week, we will seek out expert advice to help a small or medium-sized company overcome a key issue it is facing in its business.
After it built its first iPhone application for a travel industry conference in 2008, Vancouver-based QuickMobile Inc. started to grow, and grow, and grow.
“The phone just started ringing, and, before we knew it, we were inundated with all these requests for [mobile]apps for trade shows and conferences,” says Patrick Payne, co-founder and chief executive officer of QuickMobile, whose applications for mobile devices make it easier for meetings and events participants to do things like manage their calendar, connect with other participants or find their way around a host city.
The company that started five years ago as a three-person operation now has 60 employees and is on track to increase its number of bookings by 500 per cent from last year, he says.
QuickMobile’s success has made it an attractive prospect for investors: Last month, it raised $2.3-million, and it is being courted by angel investors and venture-capital firms offering millions more, he says.
QuickMobile’s goal is to establish itself quickly as a global market leader. The next step in doing that is to enter Europe and Asia.
The Challenge: Should it do this incrementally, raising smaller rounds of financing, or grow aggressively, with a large infusion in the range of $10-million to $15-million?
“With angel money, we’ll need to take smaller steps, perhaps just hire one person each in Europe and Asia to build the market there, whereas, with venture capital, we can immediately open offices in those regions and staff them with experienced managers, and also grow by acquiring other companies,” Mr. Payne says.
THE EXPERTS WEIGH IN
Amit Monga, executive professor of finance, Alberta School of Business, University of Alberta, Edmonton
QuickMobile should capitalize on its current success and raise a large round of financing. Given its fast growth and leadership position in its space. QuickMobile is very well-positioned to command a high valuation.
In addition to acquisitions, QuickMobile should open its own offices in strategic geographies. This demonstrates to new investors that you are serious about going after geographies that will bring new business to the company. The mobile sector is going through explosive growth and there is an enormous demand and competition for talent. QuickMobile will need capital to provide cash signing bonuses for new employees and retention bonuses for existing employees.
QuickMobile needs to make sure it picks investors who bring smart capital to the table. This means that, in addition to capital,these investors are willing to share their Rolodex and help QuickMobile in building significant shareholder value.
Patrick Latour, senior vice-president for Western Canada and the Prairies, Business Development Bank of Canada, Calgary
With smaller investments, if you're the original investor, you would have less of a dilution effect, own a bigger piece of the pie and would have more control of your destiny. But this route would require more rounds of financing and would take more time and work to get organized. Potentially, more things can go wrong.
With larger financing, yes, there's more dilution of equity and the new investors would most likely have a bigger say in the direction of the company. But things are moving so fast in the technology market and the risk for QuickMobile is that, if it waits too long to expand, it will lose its market strength because new entrants will come into the marketplace. So at this point, the best option would be to expedite growth in new markets, potentially through acquisition, to gain bigger presence and scale.
Bob Elliott, owner, RJE Investments Inc., parent company of Fernbrook Springs, Halton Hills, Ont.
I would prefer to see slower growth financed through internal cash flow and perhaps supplemented with a working line of credit. This gives the company maximum flexibility to operate without the burden of liabilities from large debt and controlling debt-holders, such as venture capitalists.
For expansion, if this truly is a successful business model, I would roll out this plan to other Canadian cities, not foreign countries where there are many nuances – pricing strategies, distribution, competition – that must be understood.
I would also not grow through acquisitions due to the fact that I believe, in this business model, you would not be buying hard assets but intellectual goodwill. In reality, the companies you are looking at, their assets walk out the door everyday at 5:00 pm and can disappear tomorrow in this technology-based world.
THREE THINGS QUICKMOBILE SHOULD DO NOW
Stake its leadership in the market
QuickMobile needs to act fast and expand before its competitors do.
Find well-connected, experienced investors
Whether it chooses angel money or venture capital, QuickMobile needs to find investors who are well-connected in the apps market and have experience growing companies.
Have money on hand for signing and retention bonuses
To ensure it gets the best talent in its field, QuickMobile should be ready to pay signing bonuses for new employees and retention bonuses for existing ones.
Special to The Globe and Mail
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