A few weeks ago, Michael Gokturk, CEO of privately held, rapidly growing fintech company Payfirma, huddled with his investment banking team at Dundee Securities Corp. The company closed on a $13-million Series A financing back in May, bringing in a number of Canadian institutional investors, such as AGF Management Ltd.
But as with any startup, the next capital raise is never too far off, and Payfirma is planning acquisitions, which means it will need more capital sooner or later.
"Hey, should we go public?" Mr. Gokturk asked his bankers. "They're like 'No, no, no!' ... They don't want us to go public and get a massive haircut."
The Canadian IPO market has come off the boil. Earlier in the year, it was buoyant. Optimism was high and equity markets were rising. Now, uncertainty is rife and trading is choppy.
On Oct. 1, Canadian real estate investment firm Tricon Investment Partners Inc. pulled its IPO, failing to raise enough money to see it through. A week later, U.S. credit card maker CPI Card Group Inc. slashed its pricing expectations, before finally listing on the Toronto Stock Exchange in a downsized public offering. Tricon and CPI cited market turbulence as the chief source of their travails.
Mr. Gokturk's bankers at Dundee told him to wait a good six months to see if sentiment improves before thinking about an IPO. Dundee, too, has skin in the game. Investment bankers Mark Attanasio and Donato Sferra are shareholders in Payfirma, as are others at the bank.
"Our interests are quite aligned. Whereas in most financing cases, the interests are not aligned," Mr. Gokturk said.
If fintech seems like the flavour of the month, it's not to Mr. Gokturk. He founded Vancouver-based Payfirma in 2011. Payfirma's financial technology allows businesses to process credit and debit card payments using the company's in-store mobile terminals – the kind you see people walking around with in Apple stores. The company's platform also allows customers to turn their mobile phone or laptop into an on-the-go payments-accepting device. Payfirma takes a cut on every transaction and is generating around $2-million a month in revenue.
Payfirma is mixing it up with the likes of Apple Pay and Square in the viciously competitive payments space, and Mr. Gokturk knows the company needs to grow exponentially to survive over the long term. He also knows the dangers of taking a startup public too early.
Versapay Corp. was Mr. Gokturk's first kick at the can. In 2010, he brought the nascent payments company public on the TSX Venture Exchange. Versapay was taking in only about $5-million in revenue a year at the time. Instead of focusing on growing the business, Mr. Gokturk spent much of his time at road shows, trying to get people jazzed-up about the stock. "There was no attention because it was too small for anyone to care about," he said.
Mr. Gokturk said he should have waited until Versapay was much bigger before taking it public, and he is determined not to make the same mistake twice. A Payfirma IPO – if it happens at all – is likely a year out.