A nine-figure series-C round is the next big step in Assent Compliance’s quest to dominate its industry, the Ottawa-based firm’s CEO told OBJ on Tuesday.
Assent, which develops software to help companies maintain compliance across their supply chains, will receive $160 million from U.S. private equity firm Warburg Pincus. It’s the third round of venture capital for the east-end firm in the past three years, bringing its total funding to more than $190 million. BDC Capital, Greenspring Associates, OpenText Enterprise Apps Fund and Volition Capital all remain investors in the firm and the company’s management will retain an ownership stake.
The company wasn’t actively courting investors, says CEO Andrew Waitman, but was fielding a number of inbound offers from private equity firms such as Warburg. While the company might have started looking into more funding this fall, he says didn’t even have an investor deck prepared for a series-C round.
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“With all humility, I was inundated. It was ridiculous, the amount of interest in our company,” Waitman says.
Warburg Pincus managing director Justin Sadrian tells OBJ that Assent Compliance has been on the firm’s radar for three years. The private equity firm invests from a fund of $13 billion and manages a portfolio of 28 tech firms; in terms of deal value, Sadrian says the $160-million Assent financing is roughly mid-range.
Waitman declined to disclose how much equity stake Warburg will receive for the investment, but says he still feels fully in control of the company’s future, noting that the pre-existing investors all chose to remain and accepted a diluted share in order to bring Warburg onboard.
Owning the compliance space
Waitman says equity firms were all looking to get a slice of the firm because of Assent’s technology, a software that “automates the arduous” – simplifying regulatory requirements and reducing risk across enterprise firms’ supply chains. While the company doesn’t disclose its customers, Waitman says it’s working with some of the largest companies in the world in markets such as aerospace and defence, electronics and medical.
Assent’s software can handle the historically manual job of centralizing compliance data, giving the company a first-mover advantage in a field full of potential.
“It’s not whether they’re leading the category, but in our view they essentially created the category,” Sadrian says.
Warburg’s investment is not only about scaling the firm’s sales reach and entering new markets, but also maintaining the quality of Assent’s technology. As tempting as it can be to take a viable product to as many markets as possible, Waitman says it’s a common mistake that can make companies complacent.
“You have to assemble the right amount of investment with the right amount of customer traction. And if you don’t regulate those two things, if you put too much investment that does not pay off, then obviously that’s a vicious cycle,” he says.
“A lot of folks don’t get that product-market fit before they over-invest in other areas, and hence, they never really get the flywheel working.”
One of the ways Assent maintains its position in the market is through its human resources. The firm actively courts top professionals in the compliance space to inform its product development.
“We’re trying to get so far ahead with the product that nobody ever could catch us.”
To that end, while Waitman says the company isn’t focusing on acquisition opportunities, Assent is targeting a few “mom-and-pops” that have relevant expertise in the space. What’s best for developing the product, he says, is organic growth and top-tier hires with the occasional M&A play to scoop up the best talent at firms across the world.
“We’re trying to get so far ahead with the product that nobody ever could catch us,” Waitman says.
Apart from Assent’s market-leading technology, what gives Sadrian and his team confidence in the firm’s performance is its management team.
Waitman joined the company as CEO four years ago after a six-year stint as chief of Ottawa’s Pythian and eight years as managing director at Celtic House Venture Partners. At that time, co-founders Matt Whitteker and Rob Imbeault, both Forty Under 40 recipients who remain with the company, had brought the decade-old firm to profitability and 25 employees.
Sadrian says the combination of Waitman’s pedigree with Imbeault and Whitteker’s original ideas sets the firm up for long-term success.
“We’ve got a CEO in place whose seen real growth and scale who is teamed up with founders who had the vision at the outset.”
While he may have been inundated with requests to invest, Waitman says the relationship that slowly developed between Assent and Warburg, alongside the private equity firm’s knowledge of the product and market, made the term sheet more attractive.
“There’s just the right chemistry between the folks because it’s a firm and it’s people and you’re looking for both,” he says.
“When you pick a spouse, it’s like, do they really get you?”
Opening the Ottawa VC channels
Assent was a geographic fit for Warburg as well. Sadrian says the private equity firm has lately been pushing into Canada through Vancouver and Toronto, with the Assent investment marking its first inroads in Ottawa.
The focus above the border is a strategic play for Warburg – in short, it’s about directing investment to where other equity firms aren’t looking.
“We couldn’t help but notice there was no shortage of folks who look just like us running around the Valley chasing the latest shiny object,” Sadrian says, adding that only two investments in Warburg’s SaaS portfolio are companies based in San Francisco.
Assent has attracted venture capital from the U.S. out of necessity, Waitman says. Funds in Canada don’t have the pocketbooks to readily drop $20 million or $40 million investments, let alone $160 million.
Assent’s deal is the first nine-figure private investment for an Ottawa-based firm since Shopify raised a $100-million series-C round in 2013. While Waitman agrees the e-commerce giant has helped to put Ottawa on the map, he plainly states that it’s not enough.
“Shopify is a wonderful company, but we need diversity as well as we need Shopify,” he says.
One of the things separating Ottawa from the Bay area is the collegial nature of the city’s tech firms, Sadrian says. Successes such as Shopify are often celebrated as a win for the community, rather than a threat to any one firm in the market.
“Culturally, we like that dynamic,” he says.
Now that Warburg has rooted itself in Ottawa through Assent, Sadrian says he hopes to continue poking around the nation’s capital for investment opportunities. In the past Warburg has embedded itself in communities through its portfolio companies and gotten on the radar of other firms in the city to set up future connections.
Waitman says the enormous funding round will lead to more hires in Ottawa, where the 400-person firm has a headcount of just below 300, as well as around the world. He says he’s committed to growing Assent Compliance globally, but that’s always good news for home base.
“Even though this money – and this investor – doesn’t come from Canada, it allows us to hire more Canadians, it allows us to establish a global company but headquartered in Ottawa.”