Venture debt was the perfect solution for us to fund the acquisition. We got the capital we needed, but without any dilution or loss of control of the business. Our experience with Espresso has been overwhelmingly positive and has really reshaped my opinion on raising 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 percent 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, in July 2018, Samer reached out to an old contact, Jean-Michel Domard, a director at Espresso Capital. The conversation they had opened Samer’s eyes to the benefits of venture debt. Samer learned that not only is venture debt a non-dilutive form of financing, it’s also fast, with companies able to secure funding in as little as two weeks.
Equally if not more important, Samer also came to the conclusion that Espresso would be a great partner. And that turned out to be true. Faced with a diminishing timeline, Espresso proved itself to be fast, informed, and nimble, working closely with Samer and his team to secure the financing they needed.
“We really appreciated Espresso’s efficiency, the fact that they took the time to understand our business, and that they actually did everything they said they would,” says Saab. “Whenever any issues did arise, the Espresso team was quick to resolve them and support us. Plus, given their deep SaaS expertise, we always knew that we could count on them to support us in our quest for ultra-growth and long-term value creation.”
A great setup for the future
For Samer and team, Explorance’s acquisition of MTM 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 seen as 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, who has reconsidered his views on taking external capital, says that he’d definitely use venture debt again. “Venture debt was the perfect solution for us to fund the acquisition,” he says. “We got the capital we needed, but without any dilution or loss of control of the business. Our experience with Espresso has been overwhelmingly positive and has really reshaped my opinion on raising capital.”