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Report on Business New York private equity giant invests more than $100-million in Ottawa supply chain software pioneer

Private equity giant Warburg Pincus LLC has invested more than US$100-million in Ottawa enterprise software firm Assent Compliance Inc., the latest in a string of large-scale corporate financings this year for Canada’s teeming technology sector.

Assent has quickly established itself as a leader in helping global companies keep up with regulatory and ethical standards – ensuring neither they nor their supply-chain partners buy minerals from conflict zones, violate human rights or run afoul of anti-corruption or product-safety and sourcing regulations. Assent’s cloud-based subscription software allows firms to upload documents and data that track and automatically report on the compliance of their supply chains on a standardized platform.

“This is an enormous market and we’re in the really early days of adoption,” Justin Sadrian, Warburg Pincus’s managing director, said in an interview. Mr. Sadrian will join Assent’s board along with his colleague Sam Lipsick after the firm made a successful, unsolicited offer to invest. “Companies have a growing recognition they have a problem that’s difficult to manage. A lot of big corporations have a bunch of people trying to run around and keep track of things in spreadsheets and Word documents with faxes going back and forth.”

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Assent has no real competitors other than “mom and pop” companies that specialize in compliance in specific areas, Andrew Waitman, chief executive of Assent, said in an interview. “Our thesis is you need to [cover] the whole landscape," he said. “[Customers] have been handling five to 10 of these issues individually and now it’s 15 to 20. They hit a tipping point where they can’t handle it themselves any more.”

The Ottawa firm, founded by two boxers in 2005 and featuring an Olympic-sized boxing ring in its offices, has grown rapidly under Mr. Waitman, a former managing partner of Celtic House Venture Partners and previously CEO of Ottawa IT services firm Pythian Group Inc. He joined Assent four years ago after learning of the opportunity from his sparring partner at a local gym, Assent co-founder Matt Whitteker, an organizer of the 2012 charity boxing match between future Prime Minister Justin Trudeau and Senator Patrick Brazeau.

Mr. Waitman invested $1-million of his money in the 25-person company in 2014; Assent now has more than 400 employees and has been increasing its revenue at almost 100 per cent a year. The company targets companies with $100-million or more in revenues in a wide swath of sectors, from aerospace and defence to industrial equipment, retail, and oil and gas. It has also hired several global compliance experts in such areas as “conflict minerals” and product toxicology to fortify its market position.

It’s the third time in less than three years that Assent has tapped big U.S. venture financiers to fund its growth. Assent raised $40-million last year in a deal led by Maryland-based venture capital firm Greenspring Associates and $20-million in 2016 led by Boston’s Volition Capital. Mr. Waitman wouldn’t disclose exactly how much of the Warburg funds was invested directly into the company, how much was used to buy out existing investors or the percentage size of Warburg’s stake. He said only that the new capital injection into the company exceeded $40-million and the company would use the proceeds to hire another 100 people in the next year and expand sales efforts into Europe.

He also declined to disclose the company’s annual revenue, but said it would take the company at least two years to hit the US$100-million level at its current growth rate. He said the company is likely to consider going public once it hits that size.

Assent is the fifth private Canadian software firm to raise $100-million or more in venture or private equity financings this year – following Coveo Solutions Inc., ecobee Inc., Sonder Canada Inc. and Hopper Inc. – and the first private software firm in Ottawa since Shopify Ltd. went public three years ago to raise nine-figure equity financings. Globally, there is little sign of waning interest for funding the tech sector, with an abundance of private capital looking for investments in the early-stage technology sector. That has left some to worry about overheating values.

New York-based Warburg Pincus, with more than US$45-billion in assets under management and investments in 165 companies worldwide, has been an active private equity investor in Canada, with most of its deals focused in the oil patch. Last year, Warburg invested an undisclosed amount in Cambridge, Ont.-based cybersecurity firm eSentire Inc. “We hope these are the first … of many [technology] investments in Canada,” Mr. Sadrian said.

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