How Explorance Took Advantage Of A National Partnership Between Espresso Capital And RBC To Fund A Strategic Acquisition
“How Explorance Took Advantage Of A National Partnership Between Espresso Capital And RBC To Fund A Strategic Acquisition” is a contribution from CVCA members Royal Bank of Canada (RBC) and Espresso Capital.
In 2004, Samer Saab decided to take a leap of faith. He left his job as a product manager at a software company in Montreal and set out to start his own business. Explorance, the company he subsequently founded, quickly became a leading journey analytics provider to more than 750 organizations globally, including 25 per cent of the top universities in the world and one-third of the Fortune 100. With its headquarters in Montreal and offices in Chicago, Chennai, Melbourne, Amman, London and Amsterdam, today Explorance has clients around the world in academia, enterprise, consulting, and government. The award-winning company provides its customers with journey analytics solutions for their learners, employees, and customers to help them develop and grow their business.
Soon after founding Explorance, Samer made a conscious decision to minimize his use of external capital to grow the company. He was dead set on staying in control of his business and certainly didn’t want to suffer the dilution that would come with raising equity. “Being in charge of our own destiny and having a say in how the business evolved was always a top priority,” he says.
But in 2018, an opportunity arose that forced Samer to rethink his position. He suddenly had the chance to acquire Metrics that Matter (MTM), from Gartner, a business that provides learning and development data and analytics solutions for the enterprise market. What made the prospect of acquiring MTM so attractive was that it would allow Explorance to rapidly solidify its position in the enterprise learning space, with a leading and specialized solution. Of course, major acquisitions don’t come cheap. If he was going to move forward, Samer would need an injection of external capital.
The need to move quickly
While trying to finance the MTM deal, Samer faced a couple of hurdles. Not only was he very careful and patient with a decision that would entail dilution and bringing new players around the decision table, time was also of the essence. He’d need to secure financing in a matter of weeks to meet the short timeframe the sellers had imposed. Samer began weighing his options and made some interesting discoveries. For example, it turned out that traditional lenders just weren’t a great fit for such a swift transaction. He also quickly learned that many lenders still struggle with fully grasping the realities and opportunities of SaaS businesses. They haven’t figured out an adequate approach yet to supporting fast-growing SaaS companies like Explorance.
“Speed and audacity were definitely issues,” recalls Samer, “but so too was many investors’ lack of familiarity and comfort with the SaaS industry. Suffice it to say that we would’ve been hard pressed to close a favorable venture capital or private equity deal in such a short period of time. Besides, we wanted to partner with an investor that’s more fluid and that truly understands SaaS.”
Time was of the essence to successfully complete the acquisition. But time was also the biggest risk factor in denying Samer the support he needed to make the opportunity a reality.
Looking for other solutions, Samer spoke to Patrick Caden, Associate Vice-President, Technology Banking at Royal Bank of Canada (RBC), who was already providing senior lending to meet the company’s working capital needs. Knowing that Explorance couldn’t rely on senior lending to help fund its acquisition strategy, in July 2018, Patrick introduced Samer to Jean-Michel Domard, a director at Espresso Capital. The conversation Samer had opened his eyes to the benefits of venture debt and he soon signed on and received the capital he needed.
By working together, Espresso and RBC are able to provide best-in-class capital and banking solutions,” says Samer. “Not only that, they’re coupling that capital with industry expertise that’s helping them to support Canadian technology entrepreneurs at every stage of their growth journey. I know we’re just one of many companies that have reaped the benefits of that partnership.”
A great setup for the future
For Samer and team, Explorance’s acquisition of Metrics that Matter has been a boon, having already allowed the company to increase its value and impact considerably. “We have some work to do now to integrate our companies and solidify the strong value creation we have anticipated from the acquisition,” Samer explains. “But once we achieve that, we’ll be a much bigger company, with a much larger impact, and with a much higher valuation. That’ll be critical when we’re looking to attract additional financing in the future.”
Samer says that he’d definitely use venture debt again. “Venture debt was the perfect solution for us to fund the acquisition,” he says. “Our experience has been overwhelmingly positive and has really helped position us for the future.”
In 2018, Royal Bank of Canada (RBC) and Espresso Capital launched a national partnership to meet the unique banking and financing needs of Canada’s fast-growing technology sector. You can learn more about their partnership here.