CEO of Reach Sam Ranieri in the company's headquarters in Calgary on March 14.TODD KOROL/The Globe and Mail
A Calgary company that makes it easier for e-commerce companies to sell globally is the latest startup in the city’s growing tech scene to tap venture capital funding.
Reach Ltd., a spinout of Calgary Foreign Exchange Ltd., or Calforex, has raised $30-million in equity and debt, led by Vancouver’s Vistara Growth and backed by Canadian oil and gas entrepreneurs Doug Hunter and Del Mondor, and U.S. venture capital firm Rising Tide.
It’s the first outside capital raised by Reach, which has built a beachhead in a fast-growing area of e-commerce by enabling cross-border transactions, which market research firms expect to account for trillions of dollars in global commerce later this decade.
With the funding, Reach joins a growing list of Calgary startups that have tapped outside capital during the pandemic, turning the traditional oil and gas centre into one of Canada’s most promising technology hubs as well. They include Rose Rocket Inc., Circle Cardiovascular Imaging Inc., Benevity Inc., Symend Inc. and Neo Financial Technologies Inc.
On Monday, small-business payments company Helcim Inc., based in Calgary’s Millennium Tower, is also announcing its first venture capital funding, raising $16-million led by Information Venture Partners and Aquiline Technology Group.
Reach’s platform handled $817-million in transactions last year, up nearly twofold since 2019, and revenue and gross profit were $36.8-million and $15.2-million, respectively, both more than double 2019 levels. Reach has 120 e-commerce merchant clients that use its platform to handle international sales, including apparel brands Revolve and Everlane, vitamin supplier Biovea, technology seller Native Union and Pura Vida Bracelets.
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Using Reach “has unlocked the ability to have a significant portion of our revenue come from international sales,” said Ryan Pamplin, co-founder and chief executive officer of Benicia, Calif.-based portable blender maker BlendJet Inc.
He said BlendJet’s non-U.S. revenue grew 78 per cent faster than domestic sales last year, accounting for more than one-fifth of the total. “Reach is an incredibly cost-effective, easy to set up way to take your business global. It drives amazing conversion rates for us.”
Buying and selling goods online across borders is a complex and often dissatisfying experience for merchants and consumers. Consumers are often presented with prices in the currency of the selling merchant rather than their own and payment options don’t always include popular local choices, such as Boleto in Brazil or UnionPay in China. Consumers are often stuck paying extra fees for duties, taxes and customs brokerage services. Many get turned down by their payment providers at checkout.
Merchants, meanwhile, face regulatory burdens and often have to pay expensive foreign-exchange fees. Many lack the resources to open subsidiaries in all markets they sell into, which “the big players like Amazon and Wayfair have figured out,” said Reach CEO Sam Ranieri.
Reach is one of several startups, including Israel’s Global-E Online Ltd. (part-owned by Shopify Inc.) and Uruguay’s dLocal Ltd., looking to help vendors catch up in global e-commerce with those online marketplaces. They act as middlemen, setting up subsidiaries in each of the markets they sell into. Reach has a local presence in Canada, the European Union, Britain and Australia, and it works with partners in Latin America, India, South Korea and the United Arab Emirates.
Reach’s subsidiaries act as “merchants of record,” taking over title of goods sold into those markets. That means when online shoppers, say in Germany, check out at San Francisco-based Everlane, they are actually buying from Reach’s European unit, not the California merchant.
Reach provides payment options that shoppers are used to in their home countries, and not just those familiar in North America. Prices are shown in local currency and shoppers see the fully landed cost at checkout with a breakdown including shipping, duties and taxes, which are fed to Reach from various data providers. (Retailers handle packing and shipping and maintain the relationship with buyers).
Reach also gets foreign-exchange rates that are one to three percentage points lower than other merchants of record because of the banking relationships it inherited from Calforex. “They have competitors, but they don’t support as many markets and the rates are nowhere near as competitive,” Mr. Pamplin of BlendJet said.
Vistara partner Noah Shipman said Reach’s offering helped e-commerce companies expand sales globally without having to pick and choose new markets, and deliver much higher authorized purchases by payment providers while “saving wildly on processing fees.” He added Reach has lost few customers: “If you are directly driving top-line revenue for your customers, they will be very reluctant to ever look for a different solution.”
The idea for Reach originated at Calforex a decade ago when Mr. Ranieri ran its corporate division. He persuaded owner Toni Treutler to fund development of the business and its underlying technology. By the mid-2010s, it was in operation. Reach grew fast, broke even, and in 2019 Calforex spun it out as a separate entity owned by Mr. Treutler, Mr. Ranieri and employees.
The 120-person company is also looking to partner with digital companies that offer payments-processing platforms to online merchants and to marketplace. That, Mr. Ranieri said, will increase Reach’s potential market “in a large way.”
Editor’s note: This story has been updated to say that BlendJet is based in Benicia, CA, not Concord as originally written.
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Sean Silcoff