It’s not as though Carol Leaman needed money to keep building Axonify.
The workplace-training software platform, which Leaman co-founded in 2011 at the Communitech Hub, had already grown organically to profitability, with customers in 160 countries, 210 employees and “tons of cash in the bank.”
Its solid financials and big-name clients – Walmart, Levi’s and Bloomingdale’s, to name a few – had also sent a growing parade of private equity investors to Leaman’s doorstep in recent years – but one in particular stood out.
That investor was Hollie Moore Haynes, founder of Luminate Capital Partners in San Francisco. Haynes had previously spent close to 20 years at Silver Lake, one of the biggest private equity players in tech.
An initial conversation between the two women last fall led to another this spring, culminating in news this week that Luminate had acquired a controlling equity stake in Waterloo-based Axonify, reportedly in the range of US$250 million.
For Leaman, who will stay on as Axonify’s CEO as part of the deal, this is the fourth time she has grown a company and set the table for a successful exit. But, while it’s not her first rodeo, she says it will be her last as a scale-up CEO.
After news of the Luminate investment broke on Tuesday, Communitech News sat down with Leaman for an interview.
Q – This is getting to be a bit of a habit for you; build a company, get it up to a nice size...
A – Lots of people say to me, ‘Oh, is this always your objective?’ But, you know what? You build a great company and good things happen, and I’m not fussed about how that goes, just as long as it’s really good for everybody and it’s the right thing to do. And you know in the moment whether it’s the right thing to do.
This is a really, really amazing financial partner, and I just love her [Haynes].
As it happened, we had an investment group of three who have been with us for a long time. As funds go, they all want a return at some point. Our oldest investor invested his first round in 2013, so that was eight years ago. At some point an investor’s going to want out, so this gave us an opportunity to refresh our financial partner and it just happened to be with a fantastic one.
Q – What led up to today’s announcement, and why was now the time for this transaction to happen?
A – I have been inundated for probably two years now – like, five times a week – with meetings with private equity firms who all want to pre-empt any opportunity on a next round of funding. And to be quite honest, we have tons of cash in the bank. We don’t need a lot of capital to operate the business; we need no capital to operate the business, actually.
I’m always open to entertaining those conversations just because it’s great to build relationships in the community if you ever do want to do something. It just so happened that Luminate was one of those that learned about us and wanted to understand the business better.
So, I had a first conversation with Hollie Haynes in September or October. She talked to me about their fund and how they do it and it struck me as very different than just a typical private equity firm. They're just real people trying to do good things, as simple as possible, no complication.
She is a long-time partner investor at Silver Lake, which is a massive private equity firm. She started her own firm five or six years ago at Luminate. And she said to me, in all her career, they’d never seen a company like ours get as big as we are and basically bootstrap it the whole way and not use invested capital – which is essentially what we did, which is why we still have lots of cash in the bank.
She gave me several comparable examples of companies that they had looked at that were the same size as us, but were significantly deep into capital usage and burn. And you know what? I’ve seen tons of companies that do the same thing – raise $100 million and spend $100 million to get to $20 million [in revenue], kind of thing. So we were very like-minded in terms of that approach.
I had a great conversation with her and then she came back in the spring. And I said to the [Axonify] board, ‘Listen, I can tell you right now that I could easily spin up five conversations with private equity and get you guys all a return tomorrow, if that’s what you want. The market’s hot, the tech market’s hot, learning is hot in the corporate space, so there’s every opportunity if you’re looking for a return at this stage of the game.’ And they said to me, ‘Go for it.’
I had another chat with Hollie and, in the end, decided that was the partner we wanted to have in the business. Part of that was, I’m not leaving; [my co-founder] Christine [Tutssel] is not leaving.
I want to work with somebody I want to work with, if we’re going to grow this thing to the next level over the next three to five years. I want the partner I want. It’s not just about the money.
And so, all the stars just aligned. We didn't have to do it, but we took the opportunity because the market is hot and we had lots of inbound [interest] and our investors were at that stage of getting returns. All of those things coalesced around ‘now is the right time to do something.’
Q – In the foreseeable future, what changes at Axonify and what doesn’t change?
A – From a day-to-day practical level, very little is going to change. People-wise we’re just going to continue to grow as we have. The only thing that will change, in my view, is that I think Luminate is going to come with a little bit of a different strategic lens on where they see growth opportunities, and that’s going to open up possibilities for us.
We’ve got a very strong organic growth path. We just bought a competitor a couple of months ago, and [Luminate’s] perspective is, ‘Hey, if you’ve got another few [acquisition targets] that you think are interesting and accretive and you want to take a look at those, we’re open to that.’
Just from a strategic direction point of view, there are multiple paths we could go down, so I think they’re going to bring some really good thinking to that.
At a practical level, very little is going to change. I can tell you that for us, this is a great, fantastic outcome. It couldn’t be better for investors. We’re now just in it for the next growth level.
This is not the big victory lap where we all go, ‘OK, we all just made a pile of dough.’ It’s not the end by any means, it’s just the start of the next phase.
I'm still here, I’m still doing the same job. We all are. We just have a new, fresh perspective being brought to the table.
Q – What does that next growth stage look like to you? Is it expanding into more geographic markets, building out your tech or a bit of both?
A – It’s three things actually. One is, we are going to apply more resources to Europe. We see some really good growth opportunities in Europe and we already have a team of four people there, so that is an area we could expand in.
We also have some new markets we’re going to go after, so we’ll be bringing muscle to some new market approaches – same technology but new markets.
At the same time there’s a lot of technology expansion, and our product roadmap can be accelerated, so we’ll just build more stuff quickly. That will then allow us to go get new markets as well.
We’re all good on those kinds of fundamental areas of the business.
Q – Where is your headcount sitting right now and where do you see it a year or two from now?
A – We’re at about 210.
It’s hard to know what the next year or two holds. With COVID still being what it is, are we going to add 20 people this year? Are we going to add 40 people? It’s going to be dependent on the market and the business.
We’ve been extremely capital efficient in the sense that I don’t just spend money and plow people in for the sake of going, ‘If we do that, we’ll have more bodies around and are somehow magically going to grow.’
For me, it’s always got to be up-and-to-the-right, up-and-to-the-right, up-and-to-the-right, and you add people to support the growth of the business. So, it’s just so hard for me to predict what the end of this year is going to look like.
We will grow, but we’re not going to add 100 people.
Q – So, you’re not going to just hire because there’s money to hire people; it’s got to make sense.
A – Yes, and I've never done that.
It’s part of the reason companies get themselves into trouble – they raise a pile of money and they justify the raise by saying ‘we’re gonna hire 100 people,’ but then the business doesn’t catch up and, before you know it, they’re laying 50 people off.
It’s just not the way I manage a business.
Q – What’s the geographic reach of the company right now?
A – We are in 160 countries, actually. We’re in over 60 languages. Most of our business is U.S.-headquartered multinational operations.
We have a strong presence in every major area of the globe.
Q – What about employees?
A – We have four in Europe, 11 in the U.S. and the rest are here.
Q – I read the Globe and Mail piece on the announcement this morning. At the very end of that piece, there were some candid comments from you about not wanting to take part if Axonify’s investors decide to take the company public.
A – It’s actually a joke around Axonify and I say it all the time. Running a public company has just never been a personal desire of mine.
All the props in the world to people who have that genuine desire to run a public company; it just doesn't have to be my thing. Why? I worked for a public company many years ago and, in my view, for the CEO, everything you do and think about becomes your stock price, and often what you do as a business bears no resemblance to what’s reflected in the stock price. You’re either a bum or a hero and there’s very little in between.
That’s just not the way I want to grow a business, so I’m quite content not doing it that way, but for anybody else, have at it.
I am thrilled to be on the board of Magnet Forensics which is IPO’ing. I am beyond thrilled for [Magnet co-founders] Adam [Belsher] and Jad [Saliba]; I love those two men and I’m so happy for them that they’re going down that route. It’s just not my thing.
Q – Axonify is not the first company you’ve taken from startup toward exit through some kind of acquisition or big investment like this. Is this something you want to keep doing throughout your career, notwithstanding the fact that you have no plans to leave Axonify?
A – This is my last rodeo. If I can stay and do this for a few more years, I will be more than happy. And then, I’ve got personal investments in a bunch of local companies and I help them. I will be so happy just to do that and not start over and do this again.
Could I? Sure. And I will always work, there’s no question about that. I’m never going to just fully retire, but if I can ride this and do another three to five years, that will be it.
Q – What has it meant to your company’s success to be located here in Waterloo Region as opposed to somewhere else?
A – One of the keys to our success has been the Waterloo environment. You can grow a company here without some of the pressures that exist in Silicon Valley and some other places where it’s a big competition about who can raise more than who and who can grow faster than who.
Waterloo’s just such a safe place and a good place and a supportive place to grow a business, and I think if you’re starting a company, this is one of the best places you could be, without a shadow of a doubt.
And you know what? You can have a great lifestyle. Life is good here for a tech entrepreneur.
