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Carol Leaman president and CEO of the employee training firm, Axonify, in her Waterloo offices on Oct. 21, 2015.

The Globe and Mail

A San Francisco private equity firm has bought control of Waterloo, Ont., training software provider Axonify Inc., one of Canada’s most successful private technology companies founded by women, for close to US$250-million.

Luminate Capital Partners bought out earlier backers JMI Equity, Harmony Partners and BDC Capital, whose combined stake totals about 70 per cent, in a transaction that valued Axonify at around US$350-million. That’s about three times Axonify’s valuation when it last raised funding in 2016.

Luminate has also reserved additional capital to fund acquisitions by Axonify, after its recent purchase of rival Atlanta-based digital-learning platform MLevel.

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“The plan is to go on the acquisition trail … we’ve been working on a list of potential [targets], it’s probably 20 companies long,” Axonify’s chief executive officer and co-founder, Carol Leaman, said in an interview. “There are a number of assets on the market now that I think could be quite accretive to us.”

Axonify Inc., which provides software used by large companies to remotely train workers, has returned to form after a challenging pandemic year. The 10-year-old company originally received a rush of requests from customers for content about COVID-19 to help rapidly educate their work forces on preventive health measures, and CEOs of large organizations such as Foot Locker began using the company’s online platform to communicate regularly to their vast, dispersed employee bases.

But Axonify, which has more than 225 customers, including Walmart Inc., Merck & Co, Inc., Levi Strauss & Co. and new client Dollar General Corp., saw the pace of sales growth slow during the middle of the year. That was an experience common to many vendors to large enterprises last year given the long sales processes, typically including in-person meetings, to sell to big customers was interrupted by COVID.

Business improved in the fall as some lockdowns eased, and Axonify ended up expanding revenue by 25 per cent for the year, falling short of its 45-per-cent target prior to the pandemic but still better than feared in the early days of the health crisis. Ms. Leaman said. The company, which is generating revenue at an annualized rate of roughly US$35-million, is already well ahead of its annual sales plan for 2021.

“Carol’s leadership has created a powerful and endearing culture at Axonify that will last for a long time in and around Waterloo,” said Matt Emery, general partner at JMI Equity.

With the investment, Luminate will appoint four directors to the Axonify board, including managing partner Hollie Haynes, replacing departing representatives for each of the three selling funds. Ms. Leaman and her co-founder and chief revenue officer Christine Tutssel will remain board members.

Axonify has “created a really substantial business in a short period of time,” Ms. Haynes said in an interview. “They’ve a lot more growth ahead. We really like the product and team and think it’s a big market.”

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She added that Axonify has “been super capital-efficient,” burning through little of the US$22-million that investors have put into the company through previous funding rounds. That is “almost unheard of” for a venture capital-backed company of Axonify’s size, she said. The company is also profitable, a rarity for a growing software company of its size and scale.

Ms. Haynes added that even without acquisitions she expected Axonify could expand revenues to US$100-million annually within five years. “Organic growth is what our focus is. That’s what Axonify is doing and why we’re interested.”

Ms. Leaman reiterated her long-standing aversion to leading the company should the board decide it should go public. “I’ve been asked and asked about a million times in the last six months” if Axonify would go public, she said. “It’s just not my gig and has never been on my bucket list, ever. If that’s the direction Luminate wants to go, I will not be staying around.”

The deal is expected to close by midyear.

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