Building World-Class Companies
The Story of Wave from a VC Perspective
By Peter Misek
The story of Wave is one that will likely be written about for some time in the Toronto tech community. It is a fascinating journey of passion, humility, resilience, and most importantly, a story of purpose.
I had the pleasure of meeting Kirk Simpson in the summer of 2015 when I visited the Wave offices as a Venture Partner for DN Capital. Having just moved back from NYC, Kirk immediately impressed me with how well he understood his business and the people Wave aim to serve: The Entrepreneur. That singular vision was very attractive. We spent weeks getting to know each other and meeting more of the team, diving into the numbers, and frankly finding out if we could partner.
For an investment to be successful, we believe a common Purpose that aligns the organization is critical in the path towards success. These are not just words, but rather the energy that drives an organization and aligns everyone around the “why”. Why are people working late nights and on weekend? Why do people have such a high sense of urgency?
Our experience tells us that without Purpose, an organization can never scale. Without Purpose, we think is nearly impossible for a Startup to generate the energy required to truly create the only real sustainable competitive advantage: Speed.
So why did we invest?
The decision to invest in Wave involved a mix of factors we have observed in world-class companies. Clearly, a large market is required, for context, there are almost 33M SMBs in North America, of which the vast majority are managed out of a shoebox. Amazing technology is also a must. In Wave’s case, the ability to automatically ingest bank feeds and categorize a large percentage of transactions was unique and differentiated. In addition, world-class unit economics have to be present. Wave at that time had just started monetizing using payments, and was experiencing sub 3-month paybacks and customer lifetime value to customer acquisition of over 5x.
But in spite of those factors, others had passed, and some even tried to discourage me from investing. However, we at Framework believe we should never be followers. Framework should always let a combination of data, talent, and our own hard work dictate the quality of an opportunity. Kirk and his team were a unique opportunity. He and his cofounder James Lochrie had imbued Wave with an immense sense of Purpose. They had aligned their teams and they had focused all their resources around a cohesive and meaningful Purpose.
So, what was missing?
Over the past 20 years, we have observed certain common elements across companies that become world-class. These include factors such as: talent, purpose, luck, speed, data, and alignment.
Kirk and James had attracted unbelievable talent, but it was stretched; so recruiting would be critical. Les Whiting owned the financial services products and was literally a visionary. Mani Fazeli had mad skills in programming and product. But overall, more was needed. To that end, the amazing Ashira Gobin was brought on board to radiate Kirk’s vision and Purpose throughout the organization while recruiting world-class talent. The extremely underrated (I only say this because US VCs usually want to do a search and find a Valley based COO) but world-class Paul Marshall was recruited as COO. Paul’s attention to detail, organization, and world-class ground game would be fundamental to explosive revenue growth. Finally, world-class CTO Ideshini Naidoo was recruited from South Africa to turn vision into reality and join Mani as a dynamic duo in removing technical debt and creating accelerating development and business cycles.
Clarity and Purpose
As a Board member there are times of clarity: this was one of those times. The talent at Wave was exceptional, it was aligned and it was beginning to show results. However, there were things still missing: more products to monetize and more capital to go for it. Having experienced roughly 5x revenue growth since we invested, we estimated $100M more would be required to build a multi-billion world-beater. As a consequence, we began a fundraising process, but being totally convinced we had a world-class opportunity in our hands, we pre-empted the round. Other more competitive term sheets emerged and so we stepped aside. The offer to acquire the company was unsolicited and began a frenzied and incredibly smooth process shepherded by the unbelievably experienced Peter Carrescia. So, having believed, led 2 rounds of financing, and been the biggest cheque in a third, we had to say goodbye.
It is always emotional when a portfolio company is sold, this has happened to me many times. But this time was way more difficult. You may ask why? Simple: Wave is simply put a company with Purpose that serves their customer with world-class focus and execution.
Kirk and team, I have been honoured to have been able to invest and work with you. The Team at Wave will literally dent the universe.
