As sexy as startup life might seem for young entrepreneurs these days, there was a time not long ago when youth was a distinct disadvantage; when investors were more suspicious than supportive.
Successful Waterloo Region tech founders like Desire2Learn’s John Baker and Nuvation Engineering’s Michael Worry can certainly relate.
So can Adam Zimmer, who with Michael Neame founded Arius Software in 1999. The company writes account-opening software for the financial services industry.
“The biggest thing was to never tell people your age,” Zimmer told me recently. “That was one of those things you learned the hard way.”
Of course, Zimmer has learned much more than that on his journey at Arius, which took a fresh turn last April when it was acquired by Doxim Inc., a leader in document processing for financial institutions.
Zimmer’s title has since changed to Vice-President, Product Development and Chief Technology Officer for Doxim, but he also provides oversight of the Kitchener operation which currently operates as Arius Software, a Doxim company.
That’s where Zimmer sat down with me recently to talk about the challenge startups face in maintaining focus, the decision to join Doxim and the “hard work and discipline” required to build a lasting enterprise.
Q – What does Arius Software do?
A – We write account-opening software for firms that are looking to automate the process of bringing a client on board. That typically involves gathering information, generating documents, checking business rules, and then proceeding through a workflow where the account is approved and then sent out to, typically, a back-office system that handles the accounting and things like that.
Q – Would these typically be bank accounts, things like that?
A – More brokerage accounts, though we recently have been doing things in the credit union space, now that we’re part of Doxim.
Q – How did Arius come into being?
A – Michael Neame and myself were both students at the University of Waterloo, doing a co-op placement. We decided we wanted to try something different from working for a larger firm, and set up our own firm to deal with some opportunities we had at the time for contract work.
And then, as we finished up school, we converted it into a larger company and went from there.
Q – What year would that have been?
A – We started in 1999, and things really got moving when we graduated in 2001.
I was in computer engineering; my partner Mike was in computer science.
Q – Startups are all the rage now, and all kinds of young people are starting companies while still in school. Back then, I’m guessing it was a bit more rare.
A – Yes.
Q – What was it like for you to be a young person and deciding you weren’t going to work your way up in a company before starting one of your own?
A – Well, the biggest thing was to never tell people your age. That was one of those things you learned the hard way.
Other than that, I grew up in a family where there was a farming business, so I was pretty familiar with economics and things like that.
Having said that, it was important to have good advice.
We always went with good legal advice and good accounting advice, and that sort of started us off on the right road as well.
One of the challenges in starting a small firm when you are in school is not necessarily being formal enough with some of those things. And, in some cases, you can see with Facebook or what have you that it has come back to haunt the person years later.
Q – So you grew up on a farm. Was it around here?
A – South of Woodstock, yes.
Q – Software development is a bit of a departure from agriculture, I’m guessing.
A – Yeah, well each time period has industries that are in expansion and industries that are in sustain mode, and in some cases, that are shrinking. In that time period, computer programming and the internet were starting to gain significant momentum, and that certainly attracted our attention and made us aware of the opportunity.
I was down in Miami a few years ago and there was a mansion there that had been owned by one of the technical innovators a hundred years ago. I think he was a farm machinery magnate. But back then, that was emerging technology.
Now it’s very different, of course.
Q – Walk me through what’s happened for the company from 1999 through to today.
A – Well, we grew beyond two people fairly quickly, probably in 2000, and we raised some financing at that point from a group of angel investors.
We grew to about 12 people in 2000 and then did work for larger clients in Canada and the U.S., and then, as the years progressed, we developed more of a core product offering as opposed to just doing contract development.
Around 2003, we launched our Open Advantage product that helps out financial firms in the client onboarding process.
Q – What led you into this particular area of software development?
A – We’d been doing a lot of consulting work in the financial services area, and one of the biggest challenges they identified was the low quality of data that they have on their customers.
Initially we’d done a lot of work around reporting on that data to try to assess customer profitability and things like that, but our efforts were always stymied by data quality. And unfortunately, you can’t go back to someone after five, 10, 20 years and say, you know, ‘How do you really spell your name?’ You either got it right to begin with, or it’s wrong.
So, the idea was to go back and start things out on the right foot.
It’s very complicated; that’s why it’s one of the areas that’s been so difficult for firms to automate.
Typically, you’d gather up to 1,000 pieces of information and probably have a couple of hundred business rules, potentially up to 150 different forms that you could use to open a brokerage account in Canada.
Q – Was anyone else jumping into that space at the same time, or were you blazing a new trail?
A – Well, we always have had two classes of competitors, one being larger, back-office players; they would be the ones that write mainframe software. And typically, the challenge they’ve always faced is, it’s very difficult to make that flexible or configurable. It tends to be that you write it once and they either like it or they don’t, and if they don’t like it, well, tough luck.
And the other form of competition, and probably the one we face most today, is firms attempting to write it themselves.
That is reasonable for some of the largest firms in the country, but it certainly is not a viable option for many people in the regional space, where they’re big enough to want something better than the out-of-the-box solution, but not so big that they have a staff of 1,000 people to implement whatever they dream up.
Q – What would you say were the biggest obstacles you had to overcome as an entrepreneur?
A – I would say focus is the toughest thing.
There is a constant stream of things that you could, and in many cases, should be doing, but you can’t do all of them, and so you’re forced to constantly prioritize and in some cases, that means something isn’t getting quite enough attention, but the alternative is that something even more important gets missed.
So, you’re constantly juggling priorities to make sure that the customers come first, and of course, your employees. And sometimes yourself is at the bottom of the list.
Q – We often hear it can be tough to balance the need to focus with the ability to step back and be nimble enough to change course when necessary.
A – Well, it doesn’t matter how fast you’re going if you’re going in the wrong direction.
Q – What led to the acquisition of Arius by Doxim in April, 2012?
A – We identified other players in the marketplace that we were in, and I wanted to really provide more of an end-to-end solution, because one of the things that we find fairly frustrating is, each customer has different systems they want to use. And while that’s great for very large customers that are willing to take the time to integrate with this and that, there’s a segment of the market – once again, the regional players – who are looking for kind of a turnkey solution.
Through account opening, as I mentioned, we generate a large number of documents. By the same token, those documents need to be stored somewhere, and that’s where Doxim came in.
They had a mature, cloud-based enterprise content management product that could store those documents, and they also had the ability to handle distribution of those documents, either electronically or physically out of their facilities in Vancouver and Toronto. We also wanted to go SaaS and they had the infrastructure and experience to make this happen relatively easily, based on skills and knowledge they had built up over a decade or more. Running a successful SaaS infrastructure like Doxim has is not a trivial task.
Q – Did they come calling to you?
A – Pretty much. We met them at a kind of CEO networking event and realized we had pretty similar clients, and they indicated that part of their strategy was trying to provide that end-to-end solution.
It made sense from our perspective to handle the creation as well as the storage and distribution, and they had a strategy – and still do – of growing their business very rapidly.
Q – Is it a tough decision to have to make, to essentially take what you’ve created and hand over control to a new owner?
A – It’s never an easy decision; however, you’re always acting as a steward for the interests of your shareholders, your employees, and of course, yourself.
In my mind it was the right thing to do, for the reasons I’ve mentioned, in the sense that either we would have to build all of that ourselves, which is a non-trivial effort, or we had to find someone who we could work with and provide a superior offering to our customers.
The biggest validation for us was talking to our customers after the merger and having them say, ‘Wow, that’s neat.’
Q – How many employees are you up to now in Kitchener?
A – We have 30 or so; the number changes as people go on maternity leave and so on and so forth.
Q – Can you give me an idea of the scale of your customer base?
A – We have thousands of people using our product. The number of institutions is small, because there just aren’t thousands of banks in Canada, or brokerage firms for that matter. But, we deal with most of the regional firms and that’s a pretty exciting space in the market for us.
Q – Mainly in Canada, then?
A – We do have a number of U.S. customers, but certainly over the financial crisis they were probably more impacted than Canadian firms. As a percentage, it’s lower than it was a couple of years ago.
Q – What factors led you to start and keep your company here in Waterloo Region as opposed to going somewhere else?
A – Waterloo Region has a couple of advantages. One is, it’s fairly well-known.
It’s got a strong educational base, and certainly that played a key role when we were in school, and also, we hired full-time and co-op employees from there over the years.
Aside from that, it had reasonable proximity to Toronto; it’s not like you’re in Thunder Bay or something, so that’s helpful given that Toronto is a financial centre. There are, of course, firms out of Montreal and Vancouver, but a large number of them are headquartered in Toronto.
It also is able to provide the services you would need but not necessarily some of the costs you would get if you wanted an office set up on Bay Street in downtown Toronto.
Q – Obviously you’ve been busy running a business, but how have you seen the region’s tech sector change and evolve since you got into the game?
A – Certainly the rise and changes at RIM have had an effect throughout the sector. That’s brought more talent into the area and it’s also brought some volatility, as we’ve seen recently.
That’s probably one change I’ve seen over the 10-year period.
In addition to that, the infrastructure has improved. For many years that was, in some cases, a limiting factor, just getting easy access to Toronto.
We’ve got GO trains going now and a number of things that weren’t there 10 years ago, and that’s pretty exciting for me from a regional perspective, because I know that allows people to live here and work there and vice-versa.
Q – What role has Communitech played since your company’s founding?
A – I would say personally I was most involved with Communitech in the earlier years as a CEO. They provided a variety of mentoring services.
As things got busier, I started to branch out and attend more Toronto-based events and things like that, but Communitech continues to be utilized by my staff, in many cases, for professional development through the peer-to-peer groups. That would probably be the area where we use it most.
Q – Waterloo Region is now home to more than 400 active startups. What can they learn from your experience as a grizzled veteran?
A – I think the toughest thing to do is realize that there are external factors that have a definite impact on your business, whether it’s the financial sector crisis of 2008 or it’s the rising lease prices due to RIM’s expansion a couple of years ago.
There are things that you can’t necessarily control, but what you can do, of course, is focus on your business and ensure that you’re doing the best with the opportunities presented.
In some cases, that may mean you’re doing all the right things and, you know, a customer goes bankrupt. That’s not something you can do a lot about.
In other cases, it may be relocating to take advantage of some of the infrastructure that’s developed and getting better access to your customers.
They’re all things you can’t change, but you can look at how the environment is presenting itself and determine how you can utilize that to your advantage.
There’s some quote I remember years ago, ‘Recognize the things you can’t change and don’t try to change them; figure out what you can do and focus on that.’
It’s not an easy thing to do, and there are obviously sensational examples you occasionally see, where it’s a little bit like somebody wins the lottery. They put in a very little bit of time and things just magically work out, and that’s great; people win the lottery too, but in the end, a lot of it is just hard work and discipline, and that’s not easy. You can’t just wave your wand and make that happen.
Q – So for you going forward, is it just full steam ahead?
A – Pretty much. We really have a vision of providing our customers with a superior integrated offering, and taking our existing technology and applying it to a wider customer base, and taking some of the new technology we got as part of the merger and applying it to our existing customer base.
That’s a pretty tall order, but we’ve got a really good team we’ve built up and that’s pretty exciting.
Q – Anything else you’d like to say?
A – I guess the biggest thing that I have found helpful in the area is the entrepreneurial culture, and that allowed us to develop a team that was willing to work with us. Because, in the end, the software is so complicated that one person couldn’t just write it; they’d be working on it for, I think I calculated, 150 years.
So, you need a lot of people working together. And really, if we’ve succeeded – and I feel we have – it’s been because of the team we’ve built.
It’s not a single person; it’s not even the 30 people here. It’s all the people who have worked with us over the years, both our employees and our customers, to get us where we are today.
