Elastic Path to revisit capital raise in next twelve months, CEO says
Elastic Path, a Canadian provider of e-commerce revenue solutions for brands that include Google (NASDAQ:GOOG), Virgin Media (NASDAQ:VMED) and LVMH (EPA:MC), expects to look for another capital raise within the next year to follow up on its recent CAD 5.35m equity financing, CEO Harry Chemko told this news service.
The Vancouver-based privately held company has raised about CAD 15m since July of 2013, including an equity raise of CAD 4m and a follow-up debt financing of CAD 5m.
On 10 September, the company announced its most recent equity raise, which was led by BCD Venture IT Fund and included Yaletown Venture Partners along with individual investors.
Chemko said he expects the company to seek more financing - whether through debt or equity – in "around 12 months" as it continues to execute on its growth strategy. This would be a more "typical B round" financing that would be larger than previous raises, perhaps in the double-digit range, he said.
Chemko would not reveal the company's annual revenue, other than to say it is above CAD 10m. But Profit Magazine's 2011 ranking of the 200 fastest growing Canadian companies lists Elastic Path's 2010 annual revenue at CAD 15.1m, up from CAD 2m in 2005. In the company's news release announcing the latest funding, it said bookings had grown 100% year-over-year for the last two years.
The latest round of financing will be used to help grow its roster of global partners, which are mainly interactive agencies and advertising agencies that work with end-user customers to configure Elastic Path's software, Chemko explained.
Currently, Elastic Path has about 15 such partners, including MRM/McCann, a global digital and direct marketing agency which is part of the McCann Worldgroup. Increasing the number of partners will help "scale up" the company's operations more quickly than by working with the end users directly, Chemko said.
Elastic Path is well established in North America and Western Europe, and has made inroads in Latin America, especially Brazil. Chemko said the company is looking to "fill in" geographical regions it already operates in, and is also looking to expand into the Asia-Pacific region.
Some of the money from the capital raise will be used for R&D to build out its software offerings, which requires additional "people power" in the form of engineers and other staff who can build newer versions of the company's software platform and incorporate new features such as emerging wearable technologies that are becoming a factor in e-commerce.
Asked about how the proceeds from the next financing will be used, Chemko said it would depend on what the company's biggest opportunity for growth would be at that time. Raising debt capital would make the most sense for financing geographic expansions and to build sales momentum in a new region. An equity capital raise, as in its most recent financing, better supports investment in R&D and creation of new software.
The company has not used financial advisors to secure financing in the past, but Chemko said he would entertain approaches, especially from those who have expertise in e-commerce. Elastic Path's accountant is Ernst and Young, while its legal advisor is Fasken Martineau.
Chemko said that in 2013, Elastic Path helped 200 customers generate USD 6.5bn in sales through its ecommerce platforms.
Founded in 2000, the company currently has about 150 employees, and growth was self-funded from cash flow until 2013. Because of its new growth strategy, the company is no longer cash flow positive, but Chemko said he expects the company will be profitable within the next year or two, as its new initiatives take hold.
Going public through an initial public offering is a possibility, but that is likely far off, said Chemko. An IPO can be an expensive process and also means having to withstand the rigors of the quarter-to-quarter scrutiny from the financial markets. By staying private, especially when one can raise money at "decent valuations," a company such as Elastic Path can focus more on the "long term," Chemko said.
by Zena Olijnyk in Toronto