Mobify becomes Canadian tech company to watch after $10-million venture capital deal

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Two under-the-radar startup success stories in B.C. have joined forces for ‎a financing deal that establishes them as key players to watch on the Canadian tech scene.

Vancouver retail marketing software firm Mobify has raised its first venture financing in a $10-million deal led by Germany's Acton Capital.

Perhaps a better way of putting it is that a fast-growing, profitable mobile software company (ie Mobify) that has bootstrapped its way to 130 employees and $15-million in annual sales has attracted Boris Wertz's former business partner, Victoria-based Hannes Blum, as its lead investor (on behalf of Acton). More on Mr. Blum in a bit.

The company started in 2007 as a project by three local computer science university students, Igor Faletski (now CEO), John Boxall (chief technology officer) and Peter McLachlan (chief product officer), to develop a mobile app to tell Vancouver commuters when their next bus was due.

The app didn't get them far, but left them on the right platform at the right time, as developers of mobile messaging applications at the dawn of the consumer smartphone era. "These guys have always been at the cutting edge of mobile." said Brent Holliday, CEO of Garibaldi Capital Advisors, who advised Mobify on its financing.

The team developed mobile-first applications to help retailers reach customers with personalized messages about flash sales, for example. That was a harder sell five years ago when mobile accounted for a low single-digit percentage share of retail sales.

But as an increasing share of retail trade moved to mobile, retailers found Mobify's solution instantly connected them to many of their customers at key times in a more targeted way, enabling them to improve conversion rates and returns on investment from marketing campaigns. Mobify now has 100 customers, including Beyond the Rack, Crocs, Nordstrom, Carnival Cruise Line and British Telecom, and "we think our space is about to blow up," the Russian-born Mr. Falteski said.

When rival startup NewStore, Inc. of Boston raised $38-million (U.S.) last fall, Mr. Faletski says "the writing was on the wall. We needed to double down" and find outside growth capital.

Around the same time, Mr. Blum was establishing himself as a venture capitalist on Vancouver Island after a successful career as an e-commerce pioneer. In 1999, he and Mr. Wertz launched JustBooks, an online marketplace for rare and out-of-print books. They moved from their native Germany to Victoria to run AbeBooks, the company that bought their firm in 2001. Amazon bought AbeBooks in 2008; Mr. Wertz went on to become one of the most admired early-stage venture financiers in Canada, while Mr. Blum stayed on with the Seattle-based giant to run the business until last summer.

For years, Mr. Blum's early financier, German media company Hubert Burda Media, had courted him to join Acton, its venture capital arm that was later spun off. With his departure from Amazon, Mr. Blum agreed to become a North American venture partner on Acton's second, €180-million consumer Internet and subscription software-focused venture fund – on condition he could remain in Victoria, where he has raised his family and has established himself as Canada's top-ranked men's 45-50s singles tennis player. (He also hasn't ruled out running another company.)

Luckily, Mr. Blum only had to look as far as across the Strait of Georgia for one of his first VC investments. Mobify is at least the fourth B.C. tech investment for Acton, following AbeBooks, subscription legal software firm Clio of Burnaby, B.C. and Victoria-based online menswear purveyor Indochino.

Mr. Blum says he's "impressed with Igor as a first-time CEO," saying he's a good learner, talent magnet and manager whose firm "is really ready to scale. I'm excited I found a great investment in B.C. and it's a very promising one."

Mr. Faletski says Mr. Blum, who has joined the board, "stood out as someone who had amazing experience. That e-commerce customer voice is going to be really important for us to build mobile customer engagement products."

Mr. Holliday said the financing will help Mobify expand its staff, its presence in Europe and fuel more marketing. "It's picks-and-shovels kind of working capital" to grow the business, he said.