A year after Wave’s $405 million acquisition by H&R Block, the company’s co-founder acknowledges the Toronto startup’s story seems like something of a fintech fairytale — with the happy end of one chapter perhaps overshadowing the struggles in the pages before it.
“This won’t be true for everybody, but what we found was — just stay alive,” Kirk Simpson, co-founder and CEO of Wave, told Startland News. “Do everything you possibly can to extend the runway by weeks, months, years. You just never know where and when things are going to turn around.”
For companies hit hard by COVID-19 especially, it’s critical to realize there were plenty of times where Wave too nearly crashed, he said.
“We went through layoffs, we came within days or weeks of running out of money.”
Those impacts were all products of trying to scale the accounting software company too quickly, Simpson said, elaborating on the startup’s decision to double-down, right-size its team, and focus on hiring smarter — decisions that ultimately helped the company survive to the kind of exit founders dream of.
Click here to learn more about Wave.
“There was just an instant alignment around what we were doing, how they thought about where the future was going, how they wanted to continue to move Block forward from an innovation standpoint, from an expansion standpoint,” Simpson said.
“To our company [the acquisition] was really exciting and groundbreaking in the Canadian tech landscape, and there was a feeling of pride [for] what we had built and the journey that we had,” he added. “I think after that, you start to adapt to the new reality of being part of H&R Block.”
Despite clear indicators of COVID-19-related growth from some tech companies, startup growth remains a concern for Simpson as the pandemic continues. Kansas City’s startup ecosystem today offers shades of the Toronto tech scene from a decade ago — a climate that made launching Wave anything but smooth, he said.
“When I first started in 2009, 2010, as an ecosystem we were celebrating $20 million to $30 million exits, $2 million or $3 million fundraising rounds,” Simpson recalled.
“Forgive my ignorance if I’m wrong, but I would say from what I can tell, [Kansas City] is sort of what we were seeing in Toronto. … Those first $500,000 were the most difficult by far to raise because the ecosystem was very young and immature at the time.”
Today’s Toronto startup scene is being grown by tech, Simpson said, noting companies are now exiting for hundreds of millions of dollars and startups are closing funding rounds in similar values.
“The more that the ecosystem can rally together to grow talent, to nurture some of the up-and-coming startups, and begin to sort of see a coalition of likeminded people who are growing big businesses — I think you’ll see the ecosystem thrive,” he said of Wave’s sister city and what local startup leaders and community builders could do to focus their attention on ecosystem growth.
“I think the movement that we’re all gonna benefit from, whether it be in Toronto or KC or in other areas, is that the sheen might be coming off a little bit in terms of the Valley and San Francisco. COVID is allowing people to work from where they want. And we’ll likely see ecosystems like ours continue to flourish through that process,” Simpson hypothesized.
Small business driving community
While time to retool and sizeable exits aren’t necessarily a reality for companies amid a global pandemic and choppy economic waters, Wave is eager to do what it can to offer support to small businesses — especially those locally — and hopes to serve as an example of what holding onto hope might do.
“We’re sitting sort of at the center, watching what’s happening with small business owners through COVID and I can tell you I’m really concerned,” he said. “I think you see in the public markets that the big, dominant tech firms are stronger than ever and I’m really, really concerned about small businesses in our community.”
The impact of communities losing the vibrancy small businesses offer could be detrimental across more than just the economy, Simpson added.
“It just takes away from part of the soul of the community. … I’m grateful for all of the initiatives that the governments have stepped up [with] to support small businesses, but I think we need to continue to do more,” he said. “I think companies like ours need to redouble our efforts to make it easier for these small business owners to start and thrive.”
Armed with a long-term goal of serving small businesses and a new arsenal of tools from H&R Block — a company that’s long embodied entrepreneurial spirit — Simpson believes the two firms can churn waves.
Click here to read more about Wave Money — announced last week by Wave and H&R Block — and how it could impact small businesses.
The vision that small business can drive community has proven to be more than a corporate sales pitch from H&R Block — it’s revealed itself as entrepreneurial gospel, Simpson said.
“Our goal at Wave has always been to serve small business owners. Small business owners are trying to take better control of their business, run it more efficiently, run it better, and Wave is there to try and remove as many obstacles to that as we possibly can,” he said, noting the support of H&R Block and its commitment to community and entrepreneurship has been invaluable.