Saskatoon-based software startup Vendasta has secured $119.5 million CAD in funding as part of a change in plans that will see the company put its IPO on hold.
The round, which consisted entirely of primary financing, was led by New York’s Lugard Road Capital, and saw participation from Nicola Wealth, the Canadian Business Growth Fund (CBGF), and a group of other undisclosed existing investors.
The financing represents the largest ICT VC round in Canadian Prairie history.
The financing represents the largest information and communications technology (ICT) venture capital round in Canadian Prairie history, breaking the startup’s previous record raise of $40 million in 2019, from CBGF, Comporium, Saskworks Venture Fund, Vanedge Capital LP, and BDC Capital’s IT Venture Fund.
“We are thrilled to be partnering with the Vendasta team as they continue to revolutionize how SMBs discover, access, purchase, and ultimately interact with software to better their businesses,” said Doug Friedman, partner at Lugard Road Capital.
The fresh venture funding also comes just over two months after Vendasta filed to go public on the Toronto Stock Exchange (TSX) on March 16. The startup priced its IPO on March 22, aiming to raise $100 million. However, on April 7, The Globe and Mail reported that Vendasta was struggling to sell its offering amid a recent cooldown in investor demand for Canadian tech IPOs.
A company spokesperson confirmed with BetaKit that Vendasta has “no imminent plans” to go public following this round. Vendasta said it plans to use the new capital to accelerate its sales growth.
Founded in 2008, Vendasta offers a cloud-based commerce software for companies who provide digital products and services to small and medium-sized businesses (SMBs).
The Saskatchewan startup’s platform connects over 50,000 channel partners to over 5 million SMBs, helping those businesses find and buy software.
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“The majority of SMBs are struggling to purchase, implement, and use technology solutions,” said Brendan King, Vendasta’s CEO and co-founder. “Our platform is quickly becoming the de facto operating system for both small businesses and the technology providers serving them.”
In an interview with BetaKit, King noted that Vendasta saw significant growth during 2020 and 2021 as the pandemic “accelerated the adoption of digital technology by small businesses.”
Following this growth, King said that late last summer, Vendasta was initially looking to raise private funding. “We originally were looking at a private raise and we got some conflicting advice at the time, some folks that said, ‘hey, stay private, do a private round,’ and other folks that said ‘you should go public,’” said King.
The CEO said Vendasta filed to go public to keep its “optionality,” because it would still allow the company to do a private raise. According to reporting from The Globe, after filing to go public and looking to raise $100 million at $14 to $16 per share, Vendasta faced difficulty filling its order book from institutional investors amid a decrease in demand for tech IPOs.
As a result, Vendasta opted to stay private and raise more VC funding than it was looking to raise through its IPO. King declined to share the valuation the latest round gives Vendasta, but said the company is “extremely pleased” with it.
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King said liquidity wasn’t a factor in the decision. “We’re trying to build a long-lasting tech company in Western Canada, and for us, the private route at this time just seemed like exactly the right way to do that,” said the CEO.
According to Vendasta’s prospectus, the startup pulled in revenues of $42.6 million in 2020 and $34.5 million in 2019. Last year, the company saw a 19.6 percent year-over-year increase in software revenue and a 36 percent increase in partner solutions revenue. In 2020, Vendasta lost $14.8 million, compared to its $9.1 million loss in 2019.
King said Vendasta aims to use its new capital to double the number of SMBs and channel partners it serves over the next three years.
The CEO added that in the process, Vendasta is also trying to build a tech ecosystem. “If you find any tech company in Saskatoon that’s got more than 10 employees, someone is from Vendasta, or has worked at Vendasta in the past,” said King.
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“Those folks sometimes lead and start their own companies, and they hire people and train people who end up coming back to us, and it’s a net benefit for everybody,” said King. “We’re super excited to be a part of that.”
Vendasta currently employs more than 500 people and plans to leverage its funding to hire up to 150 new employees in the coming year.
“There’s a boom that’s coming in the next couple of years, and it’s going to be fantastic for anyone that services small businesses,” said King. “And quite frankly, it’s going to be fantastic for small businesses.”
UPDATE (05/27/21): This story was updated to include comments from Brendan King, Vendasta’s CEO and co-founder.
Photo of King, courtesy of Vendasta