One of Toronto’s most successful software entrepreneurs, Kirk Simpson, is stepping down as CEO of Wave Financial Inc., the company he co-founded 12 years ago and sold to H&R Block, Inc. for US$405-million in 2019.
Mr. Simpson, 47, said the decision was “100-per-cent mine” and comes shortly after Wave, now a stand-alone small business software unit of the American tax giant, notched $100-million in annual revenue for the first time.
“It seemed like a perfect opportunity to transition out and bring someone on who could lead it through its next round of growth,” said Mr. Simpson, who will take a few months off and has plans to start another company. He declined to share details about his next startup.
Mr. Simpson will be replaced by Zahir Khoja, who recently served as general manager of North America for Australian buy-now-pay-later e-commerce consumer finance giant Afterpay Ltd. “After a thorough search for Kirk’s replacement, we were thrilled when we met Zahir who has an entrepreneurial spirit, is a leader in the fintech industry, and is ready to guide Wave’s future success,” H&R Block chief executive officer Jeff Jones said in a statement.
“The pandemic showed us that small businesses are crucial to the health of the economy and our local communities,” Mr. Khoja said in a release. “They are a group worth fighting for and more of them need the financial management tools that Wave provides.”
Wave was an important company in the Canadian technology startup sector in the wake of the 2008-2009 recession. At the time, the domestic sector was reeling from the demise of Nortel Networks, while BlackBerry Ltd. was losing its early lead in the global smartphone race. What was left was largely capital-starved companies at risk of being picked off by foreign buyers for bargain prices, branch plants and a smattering of tiny startups with names such as Shopify, Hootsuite, Lightspeed – and Wave. Tech companies accounted for just 1 per cent of the S&P/TSX Composite Index.
Wave had started out in 2009 by offering free, cloud-based accounting and invoicing software for small businesses, amassing users quickly and inexpensively. Mr. Simpson originally intended to make money by selling advertising on the platform but that proved to be a challenge. In the early 2010s, the company began offering financial services such as bank transfers, online loans, invoicing and payroll services through the platform to clients. It was early to the practice of offering what are known as “embedded financial services” – now a key value driver for companies that sell digital business operating system platforms to small businesses, including Shopify, Lightspeed Commerce, Clio and Jobber.
When pension giant Ontario Municipal Employees Retirement Systems became the first Canadian institutional investor to return to venture capital investing postdownturn in 2011, it made its first investment in Wave. OMERS initially invested as part of a $5-million financing led by Charles River Ventures (now called CRV), which also made Wave one of the first Canadian companies of the era to draw backing from a big U.S. venture capital firm.
“It’s very common these days for Canadian startups to attract U.S. investment,” said Damien Steel, global managing partner of OMERS Ventures and a former Wave director. “It was not common back then. It was a huge accomplishment at a time when the Canadian technology market was very small.”
Wave raised US$77-million in venture financing and had set out to do another financing in 2018 but ended up selling a year later to H&R Block – a significant “exit” that enabled OMERS to roughly quintuple its $10-million investment.
Wave’s “freemium” model – which typically sees a minority of free customers sign on for paid services – has helped ramp up the company’s revenue growth, which has roughly doubled since the 2019 acquisition by H&R Block, and the company has increased employment to 370 people, from 260. Wave, with 300,000 paid and unpaid customers, mostly in the U.S., is not yet profitable but Mr. Simpson said “there is a defined path” to get there, declining to share details.
While many tech companies have seen their valuations pummelled in recent months, Wave has been shielded as H&R Block’s New York Stock Exchange-listed stock has jumped by 36 per cent in value in the past year.
Mr. Steel credited Mr. Simpson for not leaving right after the acquisition but sticking around to “complete his vision.” He added, “I can’t wait to see what Kirk does next. I would literally give him a blank cheque for his next adventure if he chooses.”
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