On the morning after announcing his company would be acquired for US$108 million, Corry Flatt didn’t sleep in, go shopping for a boat or hop a plane to the beach.
Instead, Flatt secured a lease on more space in Kitchener’s Tannery building, so that his six-year-old software company, Bonfire Interactive, can accelerate its growth in the heart of Waterloo Region’s startup community.
That might not be the typical response of a suddenly flush tech CEO, but then, this is no typical acquisition.
Instead of being absorbed, dissolved or otherwise erased by its acquirer, Bonfire – whose software helps governments streamline purchasing – will not only continue to burn brightly, but it will join with five other distinct govtech companies to form a publicly traded entity with a mission to radically improve the way publicly funded agencies do their work.
Calling the acquisition an “on-ramp” rather than an exit, Flatt is gearing up to double his 87-member team over the next nine to 12 months, drawing on the considerable resources of GTY Technology Holdings, the “special-purpose acquisition company,” or SPAC, that on Wednesday announced agreements to buy Bonfire and the five other companies.
The six companies, dotted across the U.S. and Canada, will operate as distinct business units under a single umbrella company that GTY expects to launch on the public markets in January.
On Thursday morning, Communitech News sat down with Flatt to talk about the deal, what it means to his company and local investors, and what the Waterloo Region tech community has meant to Bonfire.
Q – How are you feeling today?
A – I’m good. I’m excited. It’s big news, obviously, and I have been anxious to share it with the team.
It’s easy to hear the words “acquisition” and “merger” and think of the worst-case scenario. This is such a different thing and, I think, a lot more positive than what those words typically mean.
We’ve been working on the deal for a couple of months now and we’re relieved that we can talk about it. Now the world knows and it’s exciting.
Q – Tell me more about that, about how people hear “acquisition” or “merger” and see it as the death of a company. Why is this a positive thing and how is it different from what people might assume?
A – The usual pattern is, there’s a bright spark that’s the startup, and then there’s this dark storm cloud – some large, corporate acquirer – that’s going to absorb the spark and the spark goes out. That’s the typical story and this is just so different from that.
Bonfire remains a distinct business unit. The team, the leadership, everything stays the same. We have substantial equity in the combined company moving forward. We get to create this combined company with the other govtech companies and this seasoned management team.
It’s more that we’re a foundational part of this new creation. It’s the joining together of a bunch of bright sparks instead of the typical story, where everything changes.
We shared with the team a little graphic that was like, ‘Typically, you lose your name, you lose your culture, you lose all these things.’ We wouldn’t be doing the deal if that was happening.
The company wasn’t for sale. We’ve had in the past lots of acquisition interest and we always said no, but this was this great balance of the two where we can continue the mission, continue the team and continue Bonfire, but with a lot more resources, on a bigger stage and, ultimately – it’s a cliché, but – change the world.
Bonfire CEO Corry Flatt. (Communitech photo: Sara Jalali)
Q – I’m guessing there’s a lot of world-changing to be done in the field of public sector tendering, right?
A – Yes, and it’s so interesting, because the people working in these jobs want better tools, they really do. But the complexity that comes with the public sector has to be figured out. It’s way more complex than a typical enterprise or SMB situation.
So, these people are hungry for new tools, they’re passionate about doing their jobs, but there’s been a real lack of investment and focus in this area for a long time.
Now what we’re seeing is this shift, and part of it is generational, but a lot of it is just driven by the fact that tools like Bonfire can exist. We couldn’t do what we do in software 10 years ago.
What’s really interesting is that we’ve had to build this really powerful, flexible software to handle the complexity and sheer, raw volume that government procurement departments produce. And it turns out that that’s actually a really great product on the [private sector] commercial side, too.
We’ve kind of done it on hard mode, you know what I mean? We solved the worst, most complicated part of this [on the government side] and that means that we can handle almost everything on the commercial side, too.
Q – As you’ve said, this deal is not typical. How did it come together?
A – We get approached literally daily by private equity firms, and other CEOs I talk to in the region do, too. There’s this huge [private equity] push to try to acquire companies.
On top of that are the potential acquirers in your space who are constantly trying to talk to you and “partner” with you, these kinds of things.
We’ve always resisted these approaches, and we just don’t have time.
Initially I was kind of skeptical, but another CEO in the space said, ‘Hey, there’s these guys; they’re putting together something really interesting. Do you want to talk to them?’
I said my classic thing, ‘We’re not for sale,’ and he said, ‘No, no, this is different.’
So, from the very first conversation, it was clear that these guys had this missional quality. They are absolute, world-class, successful guys. They could be on the golf course or on a boat or whatever, and instead, they’re putting together this thing and they’re going to focus it on this super-high-impact area where, if we and these other companies can help our public servants and public agencies modernize, the impact is crazy. It touches more of our day-to-day life than anything else.
That visional alignment, right from the first conversation, was extremely clear and exciting.
The other part of it is that these guys have an extremely successful track record of essentially bringing companies in, letting them operate independently or distinctly, and just letting them grow.
That was very different. These guys really know how to let founders and people who know their space just thrive.
So, you have these conversations and you really get to know these guys and you start realizing all of the opportunity that this arrangement provides – continuing upside, huge resources. We’re not talking living hand-to-mouth through VC rounds. We’ve had amazing VCs and would be excited about that path, but this is hundreds of millions of dollars of resources and guys who are trying to change the world and want to build Bonfire into a huge company.
I’ve personally never heard of a deal remotely like this, both from the govtech angle and from combining six companies but letting them run as independent stallions. There’s just so much that’s unique here, and exciting.
Q – Were your acquirers familiar with the Waterloo tech scene before this deal came together?
A – Actually, yes. Given these guys’ track records and long careers, they’ve acquired Waterloo companies before and so they knew our deep tech pedigree, and that’s part of what really excites them – that we can stay in Waterloo, that we can keep growing.
It’s the best of both worlds. It’s good for the region; we’re going to be doubling our sales teams and product teams. But at the same time, how great is it to build a company here versus Silicon Valley?
I wouldn’t say it was attractive just from a cost perspective, but from an opportunity perspective. It’s easier to build a big company in Canada these days.
Q – What does this deal mean for Bonfire’s operations here in Waterloo Region?
A – I was talking to a CEO friend last night, locally. There’s a friendly competition; we’re all trying to recruit the same people. And I joked, ‘Hey, if you think this takes us out of the talent war, you couldn’t be more wrong. If anything, we’re going to be even more aggressive and have even more resources to deploy.’
Right now we’re 87 people. We’re going to double our go-to-market teams, some of the client teams and then the product team. (The overall team) probably will be double in the next nine-to-12 months.
From there, we’ll see. It’s a huge market that has a really clear need. We’re the leading solution. We have the resources and our growth is really capital-constrained, so we’ve got to walk before we run – or run before we sprint even faster – but that’s the plan.
Q – The question that arises every time an acquisition happens – especially when a Canadian company is acquired by a U.S. owner – is, why did you decide to sell instead of building a huge Canadian company? How do you answer that question?
A – To be honest, I respect the patriotism behind it, but I think it’s frankly out of touch with the reality of building large tech companies to some degree.
If you look at almost all the thriving startups here and around here, most of the successful ones are being primarily funded by VCs from the U.S., and they’re amazing VCs. The Canadian scene is great too; there are some great funds like iNovia, of course.
But generally speaking, the idea that you’re only truly a Canadian success if you’ve only raised money from Canadian investors and only hired Canadians and have kept everything in Canada, I just think that’s short-sighted.
The path to building a great company should be based on what gives you the best opportunity to do that.
Now, if we were being acquired and moved to Florida or something ... I think that is an important element of it. When we left Y Combinator, we could have easily based the company there – and we had very large investment offers on the premise that, if we based the company in Silicon Valley, it’s a done deal.
We said, ‘No, we’re going to go back to Waterloo, because we think that’s the best place to build a big tech company, period.’ It’s not about Canada, it’s not about the U.S.; we just think that’s the best place.
And now, armed with these resources and being part of this overall group, that’s the plan.
We’re fiercely pro-Canada and pro-Waterloo, but I think it’s important that we’re clear with what being Canadian means, and it’s not just about where the money comes from and the corporate ownership structure.
I realize not everyone agrees with that perspective but, especially in the tech community, I think there’s a bit of hypocrisy when you look at the funding approach. Most of our clients are south of the border. Most Canadian startups’ clients are south of the border.
It’s wise for us to celebrate Canadian successes like Shopify that have found a way to do it completely that way, but I do not think we should be making moral judgments about this Canada-U.S. thing – or even putting those ideas into the next generation of entrepreneurs’ heads, frankly.
It’s hard enough to build a company, to find a market, to thrive, to grow as quickly as we’ve grown. Thank goodness someone didn’t sit me down three years ago and say, ‘Don’t go to Y Combinator, that’s selling out to the Americans.’
Bonfire CEO Corry Flatt. (Communitech photo: Sara Jalali)
Q – You have several local investors whose names are familiar in the Waterloo tech community – Garage Capital, Marc Morin, Mike Stork and others. What will this exit mean for them and for their ability to further invest in local startups?
A – Here’s the thing I want to communicate. There is liquidity for some of the investors, and I’m proud of that. But it’s not an exit; it’s an on-ramp. Nobody’s cashing out and heading for the hills here. That’s not what this is about.
I’m really proud of the fact that we can inject a large amount of cash back into the investor community locally because I think, generally, that the first stage of funding is the one that’s hardest and the one that we, as a region, have struggled with recently the most.
U.S. VCs know about us, Canadian VCs are getting better and better, and at Series A and beyond, it’s a lot healthier of an ecosystem. But at that seed stage, I’m really proud of the fact that we are going to help the next generation by doing this.
But I just have to emphasize – you know, LL Cool J said Don’t Call it a Comeback – don’t call it an acquisition, don’t call it an exit. It’s an on-ramp.
Legally I understand that’s what’s going on, but even the structure of the deal means the party is just getting hotter. We’re not shutting it down.
Q – So this isn’t a case where you get acquired, sign a paper saying you’ll stay with the company for a couple of years post-acquisition, and can’t wait to get out and do something else.
A – Exactly.
Q – And the newly merged entity will be publicly traded, is that right?
A – Yes. That process takes some time, but in January a new corporate entity will be relisted, with a new name and identity that’s made up of these six business units, and led by these absolute titans.
It’s not like there’s a year where everyone just kind of rests and vests. It’s the complete opposite. We’re just building the next phase.
Q – Vidyard was the first local startup to go to Y Combinator and then return to Waterloo Region to build the company, setting an example that others, including Bonfire, have followed. What has being located in this region meant to Bonfire?
A – So listen, we’re standing on the shoulders of giants at every stage. And I’ll go back to the very beginning – having a conversation with (Communitech CEO) Iain (Klugman), where Iain’s like, ‘Dude, start the company. Why not? Take the risk; if [it doesn’t work out], you get to work with these other cool companies.’
That was six years ago. And why were there so many good companies? It’s because there was the Accelerator Centre, it’s because there were angel investors, it’s because I had a great experience at Miovision and some of the other places where I worked.
So, right from the get-go, the ecosystem gave me a good set of cards to start with.
Then, we look at [Vidyard CEO and co-founder] Mike Litt and the Garage Capital guys helping us get into Y Combinator, being the first to go there and come back, to run interference with YC, where that was presumably not the traditional path. But they broke the mould in that way.
That allowed these companies not just to return, but to continue doing so well, attracting serious, top-tier VC interest while still working with great Canadian VCs, too. They’re just absolute tent-pole companies.
Then, I go to YC and come back and they’ve made that easier. I go to raise our Series A and people know about Waterloo, people know about Vidyard, people know that Google has its largest engineering office here outside of the Valley. People just know.
The ability for me to even say, ‘Look, I’ve got a lot of heavy interest from all these different funds; hey Mike, you’ve worked with some of them and know all of them; what advice would you give to me?’
The value of that is incalculable, the fact that there’s this cohort of companies that are really just separated by a few years but that are blazing the path ahead of us and that we can learn from. It’s just absolutely a huge part of our success, and I expect that will continue.
What we’re doing is a different path than some of these other guys have taken, but in terms of growth trajectory and plans, we’re following the same trajectory that these guys have been successful in.
And the opportunity for us to do that the other way, for up-and-coming startups, I love the idea that I – while I certainly don’t know everything – can help other earlier-stage startups. I just love that, and we’ll do more and more of that as we grow.
People have been betting against this company since the beginning: ‘You can’t do it in Waterloo. Procurement is so boring; you won’t attract investment. And public sector procurement? Get out of here.’
Then it was like, ‘You won’t be able to get into YC.’ OK, we got into YC. ‘But you’re not a sexy-cool B2C company and you won’t be able to raise a seed round.’ OK, we raised a seed round. ‘Oh, you’re going back to Waterloo? It’s going to be really hard to grow a company there.’ We did it.
At every stage, people were betting against us, and we just continued to prove them wrong.
Even now, people are going to bet against this move. They’re going to call it an exit and call it an acquisition and that’s fine. We’ve proven the haters wrong and I just can’t wait until we get to do it again in this phase.
As thankful and appreciative and warm-sounding as a lot of my comments here are, I think with being a Waterloo startup, there’s a true grit that you develop. You’re used to people betting against you. You’re used to investors maybe being less receptive. And that just makes you better, it makes you harder, and that is ultimately a real blessing.
We’re not coddled here in Waterloo. We have to earn it.
For me and for the team, this is one of the things we really pride ourselves on: having true grit and not doing it the easy way.
