Versature, which provides cloud-based VoIP communications for Canadian businesses, raised $1.15 million in seed funding. Versature will use the funding to expand its marketing and sales operations and target new strategic markets.
“Our product is feature complete, there’s always new stuff you can add. But we’re in a good spot in that really what we have to do is scale. We just have to use the money to get more sales and marketing going,” said Paul Emond, CEO of Versature.
$750,000 in total was secured from BDC Capital through its Growth & Transition division in the form of subordinated debt financing. As a result of the BDC Capital financing, and the subordinated nature of the funding, RBC is providing $400,000 through its SaaS financing solution to Versature, which is scalable as Versature’s Monthly Recurring Revenue (MRR) grows.
“We’ve done a lot of innovation in the area of computer – telephone integration. So for example, connecting your phone to your computer for Salesforce or developing a chrome plugin that’s acts as a click-to-dial or an incoming call screen-pop that works in Chrome and Salesforce,” Emond said. “It’s the integration of services that you’re already using on your computer and telephone that’s one of our strengths.”
Emond said that it’s also the company’s customer service and onboarding process that separates it from competitors — it’s an important distinction, as many of the businesses Versature works with are older businesses working off of outdated infrastructure that can no longer be updated, and they rely on Versature to help them bring their tech up-to-date. “Getting into VoIP can be scary for customers, so we really for customers so we really guide them through the process.”
Securing this funding was almost an accident — while having a conversation with his bank manager, technology banker Nick Albright, Albright suggested that he should try to get funding from BDC Capital, and RBC could provide funding on top of that through its SaaS financing solution. “I’m not a corporate finance expert but I think it was the smart to do in that we didn’t have to give up any equity, and we could leverage BDC funding to get more funding from RBC,” Emond said.
“SaaS is rapidly becoming the dominant method of software procurement. Historically, SaaS companies have sourced the majority of their growth and working capital from equity investors but market dynamics have shifted,” said Albright. “A growing number are now leveraging their recurring revenue streams by introducing bank debt solutions.”
Though the company launched in 2003, Emond’s hesitation to seek venture funding until now stems from his early experience struggling to get venture financing, and being pushed to bootstrap the company and pay for expenses out of the company’s growing monthly recurring revenue.
“I did that for a bit and I was hesitant about taking venture capital or private investment because you have to give up equity,” said Emond. “You get to a certain size and you get to a certain size and wonder if you need the money — yes I would really like to grow faster, but I don’t think it’s worth it to give 20 to 30 percent away from the company. That’s a lot of future reward for very little of what they’re giving.”