Thursday, March 29, 2007
Not every company starts by selling software to Mennonites, but that's how Kitchener-based Covarity was born.
Now, the company is applying six years of experience and 2.5M in fresh funding to take their commercial credit monitoring and management solution to Canada's largest lenders.
Red Canary sat down with Rod Foster, Covarity's CEO, to talk about its unique origin and current direction.
Tell me about Covarity's genesis.
"If you took Canada's credit unions and put them together they'd be the second largest lender to small business in the country"
The organization got its first [Venture Capital] funding in October of 2003. Tech Capital Partners gave some seed money to the original founders and that blossomed into an opportunity to work with the Credit Union Central of Canada - and through them - 500+ credit unions. In 2005, we signed just shy of 20 credit unions.
Where did that early funding go?
$2.5 million in funding from BDC Venture Capital, GrowthWorks and VentureLink says you're ready to grow. Where is Covarity headed?
Tell me about the transition from pitching to Credit Unions to selling into banks.
Is your web-based solution an easy sell to credit unions? What about banks?
Can you elaborate on that?
The difference in selling to the larger banks - because of the visibility that they have - is that they are very interested in security and disaster recovery, they are very much process driven. You spend a lot more time on that front as opposed to a credit union.
Are you looking at moving into the less regulated and more fragmented US banking market?
How many people do you have working at Covarity?
Do you outsource?
One of the things we're going through right now is 'what do we want'. We're lining up a couple of significant deals...what I have to figure out is "how much can we absorb internally and how much of it will we look to outsource". I would suggest we're going to come out of 2007 with another 10-12 people.
Why is that?
"You've got infrastructure, you've got great talent with two universities feeding it -- and you've got a group of people who aren't afraid to share ideas and help each other grow"
How is Covarity going to change with the signing of Laurentian and possibly other major banks?
What's your background? How did you find your way into Covarity?
I found my way to Covarity through Andrew Abouchar of Tech Capital Partners Andrew was an investor in Ironside and Tech Capital was an early investor in Covarity.
Your organization was founded in 2001, a very dark time for software companies, and now you're selling into challenging markets. What's kept the company afloat and what advice would you give to a fledgling organization?
We made very sure to get some good first customers. We treated them very well and they've treated us very well. That's worth more than its weight in gold.
"We went through a hand-to-mouth time, we learned our lessons - and what got us through is that we're very focused on sticking to our priorities and not getting sidetracked."