One of Ottawa's emerging business-to-business software stars, Klipfolio Inc., has scored a vote of confidence from its early backers, raising $12-million for its latest round of venture funding entirely from existing investors.
Chief executive officer Allan Wille said that soon after he began meeting with U.S. venture capitalists last fall to seek financing for Klipfolio's rapid expansion, the company's earlier investors, including OMERS Ventures, BDC Capital and Ottawa-based Mistral Ventures, made a compelling pre-emptive offer: They wanted to fund the company's entire Series B round themselves, following its $1.4-million seed-financing round in 2014 and OMERS-led $6.2 million Series A round in 2015.
"The story was resonating and the board intended to get an outside investor" for Klipfolio, Mr. Wille said. "Then the insiders called and said, 'What if we put an attractive offer for an insider round?'" Mr. Wille said the offer, made at market terms, allowed management to save time and stay focused on the business.
OMERS Ventures managing director Damien Steel said "the venture business is generally about picking winners and what's very important to maximize returns in the long run is having the ability to double down on your winners." He acknowledged it's rare for existing investors to completely finance a follow-on round without bringing in new investors, but said Klipfolio had "hit every target," had a quality management team and "an enormous … easily monetizable market segment."
Mr. Wille co-founded Klipfolio in 2001 to sell "dashboard" software to large corporations, enabling them to have ready computer access to a myriad of real-time corporate data ranging from sales leads and accounting spreadsheets to Google Analytics and social media, all presented in easily digestible form on screen. Despite winning business from corporations such as Intel, EMC and H&R Block, self-financed Klipfolio struggled in the early years, with Mr. Wille and co-founder Peter Matthews paying themselves just $20,000 and frequently skipping paycheques.
The company hit upon a winning idea in 2011 by adopting a cloud-based subscription software model, targeting small and medium-sized businesses (SMBs) with its dashboard offering, unlike most competitors focused on larger organizations. At the time, Klipfolio had about 10 employees and generated less than $1-million in annual revenue. It ended 2016 with 68 employees and earned between $5-million and $7-million in revenue from more than 7,000 SMB customers in 84 countries, up from 4,000 a year earlier. The company offers a range of options and prices to users, from less than $30 a month to more than $115, depending on the number of users and number of dashboards per account.
Klipfolio plans to hire another 40-plus people this year and is quickly growing out of its rented space in a four-story building in downtown Ottawa. "We're very bullish about the next couple of years," Mr. Wille said.
While many growing Canadian startups struggle to recruit seasoned talent from their local markets, Mr. Steel said Klipfolio benefits from the fact Ottawa was home to business-intelligence (BI) software firm Cognos Inc., purchased in 2008 by giant IBM Corp. More than 10 Klipfolio employees, including chief marketing officer Mychelle Mollot, previously worked at Cognos/IBM. Mr. Steel said the "high-quality management" at Klipfolio is "really senior for a company at this stage. … You have this underbed of BI talent in this space in the city."