Trilogy Software Raises $3.3M in Private Equity

Calgary-based Trilogy Software announced today that it has raised $3.3M in private equity with funds from founders and local and North American private investors. Read the full press release.

This is CEO Cameron Peters 3rd company. He co-created Cantax Software in the 1980’s (now part of CCH), and founded GreenPoint Software and the ProFile Tax Application Suite in the 1990’s. GreenPoint was acquired by Intuit in 2000, after which Cameron served as CTO for Intuit Canada and U.K.  

$3.3M for a first raise for a pre-revenue startup is something you don't hear about every day in the Alberta tech community, let alone across Canada, so I thought it'd be interesting to reflect why.

Before I proceed, I should disclose that I'm pretty close to this deal. I've been in business more or less with Cameron since 1988 and I count him amongst my closest friends. He hired me at Cantax, I co-founded Greenpoint with him, and I was the CMO for Intuit Canada.

Now, with my consulting firm, Stephdokin.com, I helped him put together the business plan, go-to-market strategy and pro-forma's in the summer and we've also done the "VIP" launch and commercialization strategy of DoxCycle.com this fall, the first product from Trilogy; "Intelligent source document management for Canadian accounting and tax professionals."

I should also mention that Cameron's corporate legal counsel is James Smith from Labarge Weinstein who has done his usual exemplary work with term sheets and such.

So, with my inside track on this deal, let me postulate why Cameron has been successful in this raise vs. the thousands of startups who are flailing getting their $10K chunks from angels and friends/family in what my buddy Randy Thompson from Venture Alberta calls "drip financing." I was at an Alberta Deal Generator company pitch event yesterday morning and our A100 monthly lunch focused on this last week, so this is all pretty fresh in my brain.

1) Let's get this out of the way first. Cameron is a successful serial entrepreneur who returned healthy multiples to investors when Greenpoint exited to Intuit. And, while that's significant, I know of many 2nd and 3rd generation leaders who have failed to raise appropriate levels of cash, so it's certainly not the whole story.

2) Cameron spent a great deal of time understanding the customer's problem, understanding what technology is best suited to solve that problem and building underlying architecture and foundation. He officially started planning in January, 2010, and 23 months later, he's announcing the private equity raise. Compare this with entrepreneurs have an "awesome idea … everyone will want this," spend a month and a half building a shaky prototype with lotsa vapourware features using Ruby on Rails ("'cause that's what I know") and then fail to understand why angels won't rain money on them. Read Cameron's blog on his approach to listening to customers.

3) Cameron understands monetization of software products. You know … build a product that TRULY delivers quantifiable benefits for customers who will actually pay for things (in his case, accountants). Compare this with, for example, most mobile apps where people choke on laying out $0.99. Or even worse, companies who think "we just want to get traction, we'll figure out the business model later." (This is actually a fine approach, but usually not if you're asking private investors for lots of cash to do so, at least in this here part of the world).

4) Cameron understands the importance of a great team. Slowly but surely, he's built a dream team of people that have all worked together over the years and have the expertise in the areas of his business that both compliment his skill sets as well as having domain experience. Check them out here. He also understands that developers LOVE flexible work hours, big-ass dual-monitors, unlimited Coca-Cola and comfortable chairs.

5) The great team understands the importance of frugality; both before and after the raise. As Cameron told me this morning, "Yes, the raise is a significant event, but the real work is still ahead of us until we reach revenue levels that can sustain the business."

6) Cameron understands the importance of surrounding himself with qualified outside consultants. Yours truly, of course :), but also James from Labarge Weinstein, Mitchell Stewart (a C.A. that contributed to the pro-forma work), all the way to Nathan and Christina who took the awesome team pics you see on the DoxCycle website. WAY too many startups cut corners here, "I can get my Mom to work up the pro-forma forecasts, she's done bookkeeping for almost 5 years." or "My Uncle is a I.P. lawyer … I'm sure he can draw up some good term sheets"). Bad work in these areas causes a ripple effect … it's not done right in the first place, it needs to get re-worked, and it wastes everyone's time.

7) Cameron had enough gun powder in the barrel to have patience for the raise. Cameron and the other founders were able to fund operations until it made sense for both the company and the investors to come together. You'd be surprised at how little gun powder that was, tho … but the point is: if you start a company and you're already sucking on fumes, chances are you won't get to the finish line.

8) Cameron understands that working with investors is about relationships. He targeted specific investors and has been working with them and having a dialog for over a year. Compare this with CEO's who use the shotgun approach and hope that some angel will break out the checkbook after an Angel group pitch.

9) Cameron's valuation wasn't crazy and his share cap table was straightforward. He understands the value of having good investors as part of the team, and making sure the investors will win if they all win (and vice versa) … it's a group effort, not a solo sport. I'm not disclosing details, of course, but compare this with companies looking to sell $750K of equity for 10% of their 6 month old pre-revenue startup ("and you're lucky to get in at this level 'cause we're in talks with lots of BIG customers!" lol). In other words, view investors as partners, not just cash cows.

Ultimately, Cameron built a vision and team that was not only realistic in delivering on short-term goals and delivering expected results to investors, but also one that could give the amazing hockey stick growth if he hits a homerun. That's something everyone can buy into.

You can follow Cameron's journey on his personal blog: www.cameronpeters.com.