Vendasta secures largest-ever venture-capital investment in a Saskatchewan tech companyJuly 23, 2019
Brendan King ran a clothing store in the 1980s, sold IBM computer clones in the 1990s and joined Canada’s top-ranked dot-com business in 2000. Now, he runs Vendasta Technologies Inc., which is on track to generate $37-million in revenue this year.
If you haven’t heard of him, it’s because 53-year-old Mr. King has done it all in his home province of Saskatchewan, a place best known for its wealth of natural resources and where the technology sector accounts for just 2 per cent of provincial gross domestic product.
That may be about to change. On Wednesday, Vendasta, a seller of software tools used by small businesses, announced it has raised $40-million in venture capital, the largest such investment ever for a Saskatchewan tech company. The deal values Vendasta at more than $200-million and exceeds what all startups in the province raised in 2017 and 2018 combined. The deal was led by the Canadian Business Growth Fund (CBGF) and backed by U.S. telecommunications provider Comporium Inc. and past investors SaskWorks Venture Fund Inc., Vanedge Capital Partners Ltd. and BDC Capital.
Mr. King “epitomizes all the qualities we’re looking to back in entrepreneurs – he’s ambitious, he’s smart and talented, and he’s trying to build this great business right out of Saskatoon,” said George Rossolatos, chief executive officer of CBGF, a $545-million fund backed by Canada’s largest banks and insurance companies. “We think the plan he’s built is very scalable.”
Vendasta is helping put Saskatchewan on the map in industries beyond farmland, uranium, potash and energy, cyclical sectors hit by lower commodity prices of late. That isn’t lost on politicians after the recent successes of Saskatchewan-founded online food-delivery service SkipTheDishes Restaurant Services Inc. and Solido Design Automation Inc., which sold to foreign companies, and venture-backed local software startups Coconut Software Corp. and 7shifts Employee Scheduling Software Inc. Since 2017, the province has taken measures to bolster the innovation economy by introducing a 45-per-cent tax credit for angel investors, opening a startup incubator and inviting startups to sell their wares to government. The province’s Conexus Credit Union is also raising a $30-million venture capital fund to invest locally.
Still, venture-capital investments in Saskatchewan in the past two years accounted for less than 0.5 per cent of the national total, despite Saskatchewan having 3 per cent of Canada’s population. “Trying to shift the mindset to invest in technology companies here has been our challenge,” said Innovation Minister Tina Beaudry-Mellor. She said Vendasta’s “ability to attract investment has been critical to changing the investor culture in the province.”
Mr. King, a native of Moose Jaw, earned a physics degree at the University of Saskatchewan but was an entrepreneur at heart, operating a computer-store business in the province through the 1990s. He joined Point2 Technologies in 2000, the year the marketplace provider for heavy-equipment sales was named the top e-business in Canada by The Globe and Mail. As chief operating officer, he shifted the company to build a global online real estate listings service before its sale in 2007. He and six Point2 colleagues then started building Vendasta out of his garage.
Vendasta first hit upon success building a tool that small businesses could use to assess their reputations online. The company sold through service providers such as newspapers and marketing agencies, developing other software products for small businesses. Another key product was a tool that allowed resellers to automatically generate detailed reports on business prospects assessing how they fared in online search results, review sites and website performance.
The company has since shifted its strategy to focus on selling a platform that enables its customers to offer a suite of software products, such as Google’s G Suite as well as Vendasta software, marketed under the resellers’ own brands, through one online portal with a single login. It sells to 14,000 brokers, including banks and telecommunications companies, which in turn have 105,000 monthly customers, mostly in the United States.
Growing the company in a metropolitan area of less than 350,000 hasn’t been easy. Finding talent and funding is hard enough for startups in Toronto and Vancouver. One interested Boston venture capitalist quickly bailed out when he found out how hard it was to travel to Saskatoon.
But Vendasta chief strategy officer Jacqueline Cook said several Saskatchewan expatriates including herself have returned home, drawn to the lower cost of living (the median two-storey house price of $388,000, is one-third the cost in Toronto) and short commutes. More than 75 per cent of the company’s almost 300 employees went to school in the province, and the company hires up to one-third of computer science graduates from the University of Saskatchewan.
Vendasta is open to expanding offices outside Saskatchewan – three of its nine senior executives are located out of province – “but we continue to find talent there,” said director Amy Rae, a principal with Vancouver-based Vanedge. “Honestly, I would have thought that we would have needed a second head office two years ago. But here we are – still in Saskatoon.”