A Saskatoon software company has clinched one of the largest venture capital investments in prairie tech sector history.
Vendasta CEO Brendan King says a $40-million cash injection from private investor groups will allow the company to more than double in size in three years, to 650 employees from 285.
“We’ll have to recruit, definitely, outside of our borders. We’ll have to look outside of Canada. But we’ll look to bring people back who have left Saskatchewan.” King said.
It’s the most growth funding ever invested in a Saskatchewan tech company, in an industry that’s just begun to boom in the Prairies.
‘A hard slug’
Vendasta’s online software gives companies that don’t have their own sophisticated digital platforms access to services such as marketing, human resources and accounting.
Vendasta has sold its products to more than 16,000 mid-size companies with a combined total of around 12 million customers.
The company has plans to dramatically increase its customer base, which is largely in the United States.
King and six buddies started the technology company in his Saskatoon garage in 2007. They had previously created Point2 Agent, a software that helps real estate agents advertise properties online.
Like most fledgling startups, it relied on tax breaks, interest free loans from the Government of Canada and smaller venture capital investments to reach a point that it could land significant venture capital growth funding.
In its new deal, Vendasta clinched $25 million from the Canadian Business Growth Fund and $15 million from Comporium Inc. and Saskworks Venture Fund Inc. in partnership with Vanedge Capital LP and BDC Capital Inc.
Most venture capital deals in Canada put money into companies in Toronto, Montreal and Vancouver. There were nearly 400 such deals in 2018 totalling $2.8 billion. Two-thirds of those were in the information and communication technology sector.
King says investors who are used to dealing with tech companies in major North American cities are often skeptical of a Saskatoon-based tech company.
“It’s been a hard slug,” King said. “We do have pressure to open offices in other places, to get access to talent and customers. But we’re happy to stay right here.”
At the moment, three-quarters of Vendasta’s staff were born or educated in Saskatchewan. It also has a sales office in Toronto with 30 employees.
King says computer science programs in Saskatchewan are turning out skilled engineers and designers, but that he’s had to look outside the province and country for senior staff.
7shift CEO Jordan Boesch, whose company is also in Saskatoon, is familiar with that challenge.
About 10,000 restaurants use his company’s software to schedule their employees. Boesch’s goal is to grow his customer base to a million restaurants and expand to include hiring, training and paying restaurant employees.
“It takes some courage for companies to stay here [in Saskatchewan],” Boesch said. “To understand you’re going to have to do some training. People are super ambitious, and they’re smart, and the only detriment is, ‘Oh, you’ve never done that before.”
Boesch has 90 employees at the Saskatoon office. He opened a satellite office in Toronto to recruit senior staff and experienced salespeople. It has about 30 employees.
“Senior talent, I think, is a big thing,” Boesch said. “There’s not as many tech companies [in Saskatoon] as there are in Toronto, or Vancouver, or Silicon Valley or New York, where’s there’s a perpetual cycle where people have been through that before.”
His company attended a career fair in São Paulo, Brazil to woo experienced software engineers and designers, and helped five people relocate to Saskatoon.
“I see a bright future here,” said Alex Andrade, a Brazilian software developer who moved to Saskatoon with his family in Februrary.
“Saskatoon is amazing city. My commute every day is 5 minutes walking, My two daughters go to school by themselves. This is a dream.”
A booming industry
Vendasta’s chief strategy officer Jacqueline Cook says being headquartered in a small prairie city may have been a disadvantage in the company’s early years, but she believes it will now work in the company’s favour, attracting employees who want to escape cities that have higher costs of living.
“You can have a fantastic job and career that is growing, but you can also afford to have a home, and to travel and to not spend 3 hours in a car everyday to work,” Cook said.
Cook moved to Toronto from Saskatoon after graduation to build a start up tech company. She sold five years ago and returned home to work for Vendasta.
With the oil and gas industry in a downturn, and a drought dashing hopes for a bumper crop, the boom in the tech industry has become a rare good news story for Saskatchewan’s economy.
“It’s pretty far out to think that a technology company is Saskatchewan’s exporter of the year,” Cook said, referencing a recent award from the Saskatchewan Trade & Export Partnership.
“This [venture] funding will allow us to globalize our platform and take it to even more countries around the world.”