Blackline CEO Cody Slater, left, and co-founder Brendon Cook.Brendon Cook
THE CHALLENGE
In 2004, Brendon Cook and Patrick Rousseau started Blackline GPS, a Calgary provider of vehicle tracking and employee safety products.
Their original idea was to design and manufacture a series of consumer-based global positioning system (GPS) devices for cars, motorcycles and boats that included a tracking service. The pair initially found success by selling through retailers such as MoTec and BestBuy, but they soon discovered consumers were fickle, keeping their monthly tracking service contracts active for just five or six months.
This high customer turnover made it extremely difficult to grow the business without significant and continuing investments in advertising. As they were running out of their initial funding the challenge for Mr. Cook and Mr. Rousseau was to find customers who would stay long enough to value Blackline's end-to-end solution, and a GPS provider to take ownership of problems when anything went wrong.
THE BACKGROUND
Mr. Cook and Mr. Rousseau were working for a GPS manufacturer when they came up with the idea of strapping one to a motorcycle to see if they could find the black line for a racetrack. "Our idea of a black line being the fastest route ... any faster and you would lose control of your motorcycle, creating black lines on the track. That's also how we came up with the name Blackline GPS," Mr. Cook says.
The pair took their product idea to their employer's management team, which had no interest in pursuing their idea or supporting them to bring it to market. In November, 2004, Mr. Cook and Mr. Rousseau were convinced their idea had merit and they left to create Blackline GPS.
Within 12 months they raised nearly $1-million from friends, family, and a few angel investors, and they began to develop a motorcycle tracking product that would measure and record a race driver's performance using precision GPS and then display it on a map. Mr. Cook and Mr. Rousseau soon realized the vendor they had chosen to develop key tracking technology could not deliver, so they started doing it on their own.
"We learned a very valuable lesson that day: Don't let outside vendors rule your destiny. From that point on we decided to build an end-to-end solution that we could control and would prevent finger pointing should something go wrong in the future," Mr. Cook says.
For the next three-and-a-half years, Mr. Cook and Mr. Rousseau did not take a salary as they perfected the technology and developed an end-to-end GPS tracking and security solution that included the hardware, mapping data, and tracking software. Life on the consumer side of the GPS market was challenging. Even with retailers such as MoTec and BestBuy, the high turnover rates made it almost impossible to grow the company without significant marketing expenses.
By the fall of 2009, Blackline GPS started to run out of money, and it was looking for the next round of funding. Mr. Cook was introduced to Cody Slater, founder of BW Technologies, who successfully sold the company in 2005. Mr. Slater liked the fact that Blackline had control of an end-to-end product and that its core technology could be applied to commercial and industrial markets.
Mr. Slater became an investor and the company's CEO in 2010, and he was challenged with finding a more profitable market for the solution developed by Mr. Cook and Mr. Rousseau, who decided he preferred the startup life and chose to leave the business.
THE SOLUTION
BW Technologies was in the employee safety market, and it turned out that several of Blackline's existing customers were using its solution for employee safety. For example, Mr. Slater discovered Enmax Power had replaced an old-school safety check-in system with a custom solution that Blackline had developed. This solution featured an emergency button, man-down detection, and GPS tracking to detect and communicate safety incidents for Enmax's meter readers.
So in December, 2010, the decision was made to leave the consumer GPS market and focus solely on the industrial GPS market with a focus on employee safety monitoring and covert safety products. "When we decided to leave the consumer market we relinquished our sales force and pulled out of retail chains such as BestBuy in order to focus on the industrial market," Mr. Slater explains. "It was a pretty risky move because at the time 85 per cent of our revenue was consumer based."
In February, 2011, Blackline GPS worked in collaboration with Calgary-based Lightyear Capital to raise $5.3 million, enabling the company to develop a full suite of products for its new core markets: lone worker safety and asset tracking.
"We used part of the funding to develop a series of products that had a common look and feel, making it easier and therefore safer for people to use when they needed assistance. One example is our method to enable an employee to request help through an intuitive emergency latch – just like pulling a fire alarm," Mr. Slater says.
"This common look and feel also makes it a lot less expensive for end customers to train users and maintain the solution."
THE RESULT
In the past year industrial sales have increased by 38 per cent and now represent 85 per cent of Blackline's revenue. Customer retention has increased to almost two years and gross margin increased by 107 per cent.
Blackline is now a publicly traded company on the TSX Venture (BLN-X) and it has 35 employees, with nearly half of them in research and development. Its customers include Enmax, Air Liquide, Waste Management, Alberta Environment, AltaGas, Praxair, Rogers, and Ryder Transportation.
"We continue to build out our product suite – which includes satellite, cellular and a soon-to-be-released beacon-based solution that can be implemented where GPS coverage does not exist, such as inside buildings and tunnels. This means that no matter what applications our customers grow into, we can meet their needs and keep them as a customer," Mr. Slater says.
Craig Elias is the founder of Shift Selling Inc. and an entrepreneurship instructor at the Haskayne School of Business at the University of Calgary.
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