Ottawa-based FigBytes, which helps companies track and report environmental, social and governance data on issues such as climate change, has been sold to Irish software company Advanced Manufacturing Control Systems.
Terms of the acquisition, which closed last Friday, were not disclosed.
FigBytes co-founder and CEO Ted Dhillon said his company, which has landed more than US$20 million in venture capital over the past two and a half years, sees a “massive market opportunity” in the burgeoning ESG space and believes that joining forces with its much larger European counterpart will give it the financial and marketing muscle it needs to make inroads across the Atlantic.
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“We just felt that the timing was right, we felt that the fit was right,” said Dhillon. “While we had other companies also showing interest, I think just from an alignment perspective, these guys were the best.”
FigBytes has spent nearly a decade developing a software platform that helps customers track everything from how much energy their operations consume, to how their workforce demographics match up with diversity targets.
The system analyzes information on metrics like carbon emissions and water consumption that was often previously stored on disconnected spreadsheets, giving users a “big-picture” view of where they stand in relation to their targets in real time. It then generates reports for regulators and shareholders that show exactly how closely an organization is living up to its promises and legal requirements.
The firm has nearly 50 customers, including automotive giants Ford and Toyota, and its recurring revenues have been rising between 100 and 150 per cent annually for the past several years as ESG reporting entered the corporate mainstream.
Thanks to two major fundraising rounds, FigBytes was “very well-positioned” financially before the acquisition, Dhillon said. It had enough cash on hand to carry it through the next 24 months, by which time it was expected to start turning a profit, the CEO added.
But management felt the company, which has 57 full-time and 37 contract employees, needed additional resources to make a significant mark globally.
That chance came about four months ago. AMCS, which specializes in software and fleet management technology for environmental, utilities, waste recycling and resource customers, was looking to expand its ESG reporting capabilities and put out feelers to FigBytes about a potential merger.
The Ottawa firm, which had retained professional services firm EY as an M&A adviser, received offers from multiple suitors.
But it liked what it heard from AMCS, which has nearly 5,000 customers in more than 80 countries yet still has “an early-stage startup mindset” focused on continued growth, according to Dhillon.
FigBytes is the Irish company’s 20th acquisition since it was founded two decades ago. AMCS dipped its toes into the ESG space last year when it acquired German company Quentic, which helps companies manage their ESG and workplace health and safety requirements, and Dhillon says the addition of FigBytes will position AMCS as a global leader in the field.
“We had great sales in North America, and we just started to have a presence in Europe, but nothing like what these guys have,” he explained. “That excited me a lot. That was the kind of scaleup (opportunity) that we were looking for.”
The deal comes as the European Union is poised to implement sweeping new legislation aimed at standardizing how tens of thousands of companies report ESG-related activities in areas like pollution and corporate conduct. The new rules are scheduled to go into effect on Jan. 1, 2024.
Dhillon is confident that many of those companies will turn to FigBytes to help them adhere to the new regulations.
“It’s like a land grab,” he explained. “It’s a multimillion-dollar market sort of unfolding in front of us, with just about three or four per cent of it that’s been addressed. The balance is there for the taking. I saw this as a great opportunity to get FigBytes to the pole position in the sustainability software space.”
Dhillon, who grew up in India and came to Canada in the early 2000s to study at Western University’s Ivey Business School, dismisses fears that FigBytes will become the latest in a long line of local tech startups whose intellectual property has ended up in foreign hands.
He noted his company was officially acquired by AMCS’s Canadian subsidiary, which was established when AMCS acquired Cambridge-based Trux Route Management Systems in 2020.
The National Capital Region’s deep talent pool was a major drawing card for the Irish firm, Dhillon explained, and he said AMCS intends to keep expanding FigBytes’ local workforce.
“As somebody who creates IP, you want it to go global,” Dhillon said. “And ESG is a global market, so that mindset has to be there. From an IP perspective, it still remains Canadian.”
For his part, FigBytes’ founder said he’s happy to remain on board under the firm’s new ownership as “director of everything ESG-related” at AMCS.
“It’s going to be fun,” he said with a smile. “I’m pumped.”