It is the perennial question for emerging technology firms. What is the right path to grow revenues and scale? For Trellis, the right path was a $1.5-million seed funding round to accelerate growth. For Lightship Security, there was a different path. Lightship recently agreed to be acquired by a Spanish cybersecurity firm that does business in 70 countries. Two Ottawa-based companies. Two very different growth strategies. OBJ publisher Michael Curran and Numbercrunch co-founder Susan Richards co-host this lively discussion about growth strategies for technology companies. This is an edited transcript of the first part of that conversation. For the full episode, check out the full video or the Spotify podcast.
OBJ: You’re in a really unique position in Ottawa because you’re running the firm, your virtual CFO, you’ve got great visibility into what Invest Ottawa is doing. So how do you think we’re doing in Ottawa? We’re hopefully at the end of a pandemic, so what are you seeing out there?
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SR: I still see lots of opportunities. There was a lot of money deployed in 2021 and arguably even 2020, we had great valuations, but of course, we still have a lot of uncertainty. Although I think we’re going into a season of feeling good personally from that standpoint, there are still questions about the future around that. And Certainly, with what’s going on in the world from a global standpoint with the war in Ukraine, that has a lot of uncertainty too. It’s going to continue to be uncertain, but we’re well-practiced in that. I think from that, there still come lots of opportunities. I think focused approaches are gonna continue to see great success there. So I feel very optimistic, but I think we have to be prudent.
OBJ: You’re not alone.
SR: I like to keep an eye on profitability and how far away that is for these tech companies. Growth is the number one target, an objective in the near term, but we can never get too far away from getting either cash flow neutral or EBIT. So I think that tempers us in our ability and factors into some of these decisions about how you’re gonna scale and what happens if you have a moment of uncertainty in the future, who are you better off with down the road? Is it a company that’s acquired you that has all that infrastructure to already introduce you to the markets without having to build that internally? Or is it a funder, an investor who’s interested in your space and is intending to be with you for the long haul? Those kinds of things are really key in a market like this.
OBJ: That’s some great context. And we should acknowledge that these are very complex questions. That’s why people need people like you. So we’re gonna explore both these paths here for about seven minutes or so, but it’s almost like you put the little asterisks, “You should speak to your accounting professional before making any of these decisions.”
SR: It’s true. There are things to keep in mind. I think doing a business model, we never know what we can predict, but you have to kind of build that case. How does it look financially over a three to five-year period, and how ready are you for due diligence? What is the type of information that a potential investor or acquirers are going to be interested in? Those two pieces are critical factors in making the right choice if you want to do a transaction.
OBJ: I should point out we did a show on that several months back, which is archived on the OBJ YouTube channel. So you should watch that one too, because before you make any of the two, take any of the two paths that we’re about to talk about here, you need to get ready. And that was the last show for sure.
SR: That’s right.
OBJ: We’re going to divide today’s show into, in kind of three key parts, and we’ll bring the agenda here on-screen path. The first part is how to use venture capital scale, and we’ll be talking to one of our local companies. Path number two is how to scale through mergers and acquisitions. So Susan, why don’t we make our first guest, our first case study. He is the co-founder and CEO of Trellis. Please welcome, Fahim Sheik. So I appreciate that a lot of these decisions are very private and that you’re willing to step into public here and answer some of these questions. So of course, we’re talking about potentially venture capital scale, but Fahim, give us an overview of Trellis.
FS: Sure. Trellis started back in 2019, and it’s an AI power demand generation platform geared at helping merchants that are selling on the marketplace, is like Amazon or Walmart, even having some of their products on Google Shopping by driving more traffic, more eyeballs to their listing, and really helping them grow their revenue in a profitable manner, right. We have a lot of automation and AI in our platform. And we have an awesome team here in Ottawa. So really, really excited to tell you more about Trellis.
OBJ: That sounds like the right idea at the right time.
FS: It’s been unbelievable. A lot of people suffered through COVID, but e-commerce has been growing tenfold since COVID hit. So knock on wood, it was a great time to start this venture, and we’ve just been seeing amazing month-over-month growth.
OBJ: A few months back, Fahim, you and your co-founders, executive team, board of directors and financial advisors made a decision to take some venture capital in a seed round. Tell us about why you did that.
FS: That’s a good question, and it’s a question on a lot of founders’ minds. I was fortunate to have spent some time with a few local startups prior to starting Trellis. And these startups had a product idea but were trying to bootstrap the development by taking on contracts. And I found in that approach that what happens is the team gets distracted. They end up spending a lot of time trying to bring in the revenue to fund the development, and what happens is you end up delaying your product-market fit. You kind of get spoiled, in a way, because you do have revenue coming in and it takes away the pressure from the revenue that you really want, which is the revenue for the product that you’re building. So I saw that in two startups. Many years went by, and they never achieved product-market fit. The growth wasn’t there in the vision that they had at the beginning. So we took a much different approach. My co-founder and I decided to take on some venture capital. We saw, again, because of COVID and how e-commerce was taking off, an opportunity and a lot of white space in the market. In order for us to become dominant in that space, we needed the funds to accelerate our development, and we needed the funds to actually fuel some of the growth. And that’s the reason why we took on venture capital.
This is an edited transcript of the first part of this episode of Techopia Live. For the full episode, check out the full video or the Spotify podcast.
