Ottawa supply-chain management software startup Assent Compliance Inc. has landed its second significant financing in just more than a year, raising $40-million in a Series B financing led by American venture-capital firm Greenspring Associates on the strength of some of the strongest early results in the subscription "software as a service" (SaaS) business.
Twelve-year-old Assent – founded by two boxers and featuring an Olympic-sized boxing ring in its offices – sells cloud-based software that collects data for large corporations about their suppliers' compliance with a range of requirements and laws in such areas as ethical practices, health and safety, corruption and human rights.
The company has expanded quickly to 225 people from about 20 when chief executive Andrew Waitman joined. The former managing partner of Celtic House Venture Partners and previous CEO of Ottawa IT services firm Pythian Group Inc. learned about the job from his sparring partner at a local gym, Matt Whitteker, an Assent co-founder and organizer of the Fight for the Cure charity boxing matches, including the 2012 fight between future Prime Minister Justin Trudeau and Senator Patrick Brazeau.
"I was super impressed they had not taken a single dollar of outside money, that they had Tier 1 companies" and were profitable, Mr. Waitman said. "I was intrigued, I was impressed, and when I got into it, I realized for them to move to the next phase they needed to move fairly quickly."
Mr. Waitman invested nearly $1-million of his own money in the company, then secured a $20-million Series A financing in spring 2016 led by Boston's Volition Capital – one of the largest early stage financings of the year in Canada.
Assent's revenue has more than doubled on average in each of the past three years and are running at an annualized pace exceeding $10-million (U.S.). Meanwhile, the company generates an unusually high ratio of "lifetime value" of revenues per customer to the cost to acquire them. For a typical SaaS company, "if you're above three, you're in a really good position; above five is extraordinarily high," Greenspring partner John Avirett said. Assent's ratio exceeds 10, largely because its customers tend to renew and expand their business with Assent – and refer their supply-chain partners to the software firm.
"That's a pretty unique thing to have a network effect within a SaaS business, it helps you to acquire additional customers in a very capital-efficient way," Mr. Avirett said. "Most of their metrics are best in class." The company has about 200 customers who pay tens of thousands to hundreds of thousands of dollars per year, including CAE Inc., R.R. Donnelley & Sons Co., Autodesk, Inc. and Imax Corp.
The company also benefits from a lack of competitors: many of its customers have previously collected and stored the information themselves in spreadsheets and word-processing documents, and choose Assent because it cuts their costs and complexity. Its mostly smaller competitors focus on gathering only certain types of information, such as anti-corruption data, and aren't as broad-based as Assent. As a result, Mr. Waitman says the company is winning "almost all" the contracts it is bidding on from large corporations. Still, says Mr. Avirett, "I'd say it's still early days of technology penetrating this."
Mr. Waitman said much of the financing will go into marketing and "evangelizing" the software to potential customers. "Companies just don't know there's a full platform capability" on the market, he said. "So part of the money is for air cover and [to build] awareness."