Ottawa IT services company Pythian has been acquired by a New York-based private equity firm in a deal that will help finance a new enterprise aimed at providing customers with secure “virtual office space” for freelancers and other remote workers.
Under the deal announced Monday, Mill Point Capital has gained a majority stake in Pythian, which is spinning off its cloud-based remote work platform business, called Tehama, into a separate company. Terms of the transaction were not disclosed.
Now at nearly 40 employees, Tehama was officially launched almost a year ago as a business unit within Pythian. Its subscription-based software is targeted at enterprise clients that rely on freelancers, remote workers and third-party vendors.
Using Tehama’s platform, employers invite off-site employees into virtual “rooms” where they can work on assignments from their own laptops and other devices but do not have direct access to databases containing sensitive or private data.
Tehama founder and CEO Paul Vallée likens the rooms to submarine airlocks that let passengers enter and leave without letting water in or air out. Tehama’s highly secure platform allows workers to see only the data they need to do a project, he explains, adding that the software significantly reduces the risk of employees stealing or leaking information such as bank account numbers and credit card passwords.
“Any system where a person can directly access data is misconfigured,” he said. “Stealing a hundred million records of data is not something you can do with your eyes.”
Tehama’s growing roster of more than 150 clients now includes big names such as Fox Sports, Giant Tiger, National Geographic and Upwork, a U.S.-based online platform that matches freelancers with employers. Vallée says about 2,000 remote workers are now using Tehama’s software, a number that’s growing 60 per cent quarter-over-quarter.
The fledgling startup has few competitors so far, he said, adding he believes Tehama’s first-mover advantage gives it a great chance to become the clear leader in what could be a massive potential market.
Vallée argues his platform makes it viable for remote work to become the norm even in industries with stringent security requirements such as banking and insurance.
“Human labour represents half of the world’s economy, and the overwhelming majority of that human effort right now is still done is close proximity without leveraging internet cyber-security technology,” he said. “I think that’s going to change.
“I really see a future where individuals could live and work where they decide and have equal productivity and career opportunity as people who decide that they would rather live in New York City or Toronto.”
Vallée, who helped found Pythian in 1997 and had been chief executive since 2005, is stepping away from his former job to focus on Tehama, although he will remain a member of the IT firm’s board of directors. Veteran finance executive and fellow Pythian board member Rob White, a former vice-president of IBM who later served as chief financial officer at rising Kanata-based tech star You.i TV, will bring additional experience to the young firm’s C-suite as its new CFO.
Current Pythian president Keith Millar will now oversee that firm’s operations. He said Monday the deal will allow Pythian to concentrate on its core business while providing Tehama with much-needed growth capital.
“With Mill Point’s involvement as an investment partner, Pythian can now focus on growing our data and cloud services business,” he said in a statement. “We’re thrilled to begin this new chapter."
Vallée said he and the board thought about seeking out VCs to raise seed capital for Tehama but decided to put Pythian on the market instead because they felt the well-established IT company was mature enough to attract the “meaningful capital” required to help the startup stand on its own two feet.
The process of finding a buyer for Pythian and spinning off Tehama was more complicated than he expected, Vallée conceded, noting he originally hoped to have the deal done by the end of last year. On Monday, he and his team celebrated the occasion by donning T-shirts emblazoned with Tehama branding on the front and the word “Founder” on the back.
“It’s an exciting day,” he said.
Still, Vallée knows there’s plenty of tough sledding ahead.
Ottawa’s “very tight talent market” is a roadblock to rapid growth for many enterprise software firms, he said. Meanwhile, funding required to scale up quickly isn’t easy to come by in Canada, Vallée noted, adding he’s already begun scouting out potential sources of venture capital.
“For us to find our market and continue to maintain that momentum over the course of the next year is our challenge,” he said. “We do have our work cut out for us for sure.”