Nabbing $20 million in venture capital capital is a feat many CEOs can only dream about. Scoring it immediately before and following a recession? That's a rare one, accomplished by Montreal-based Neuralitic Systems Inc. At a time when investors worldwide were pinching pennies, the mobile data intelligence provider snagged enough cash to catapult it from a twinkle in the eyes of co-founders Audry Larocque and Louis Brun to a bona fide growth star.
The firm's SevenFlow mobile intelligence application gives telcos prized data on how their customers behave online. Yet, even in the red-hot smartphone sector, SevenFlow would never have come to life without money, and lots of it. Neuralitic's understanding of, and ability to provide, what investors really want is what helped it win two rounds of "Show Me The Money."
From the start, Neuralitic's executives knew they would need to be strategic in attracting the big bucks required for development. The founding CEO, a serial entrepreneur who has since left the firm, came up with a list of 20 VC firms that might be warm to Neuralitic by virtue of its sector (software) or the size of its request ($12 million). The team got meetings with many of these financiers and, in March 2007, secured the money from five investors.
The pitches were successful because the Neuralitic team designed presentations for investors that emphasized not just how brilliant the app was but, more important, how it would make money. .
Still, the early cash was not a golden ticket. In fact, the $12 million proved insufficient to cover all the fine-tuning it took to make SevenFlow take off. As the recession deepened, the firm found itself in the unenviable position of needing more capital.
In January 2010, Neuralitic started looking to raise funds again. The second time around was tricky; some investors questioned why the earlier cash wasn't enough.
Testimonials helped. The founding CEO had asked early-adopter clients to express the value in using the app. These testimonials spoke volumes, helping investors see the potential while assuring them the earlier cash hadn't vanished. "The more strong testimonials you have, the better your chances of convincing investors of the validity of your idea," says current CEO Luc Filiatreault, who had started four well-financed tech firms before joining Neuralitic in early 2011.
Along with testimonials, the Neuralitic team turned to the same tactics it used before, going light on the tech talk and heavy on the money-making potential. It worked. The firm raised an additional $8 million in January 2011 from a group of five investors that includes Export Development Canada and the BlackBerry Partners Fund.
Flush with cash, Neuralitic's focus is now on generating revenue. The original trickle of sales to early adopters has become a relative deluge, landing just shy of $1 million in 2010. That's fast enough growth to rank 11th on this year's PROFIT HOT 50. Customers in Asia and Europe have joined their North American counterparts in embracing SevenFlow. And with the explosion of mobile networks around the globe, sales projections are even more bullish.
All this means Neuralitic may have hit the entrepreneurial sweet spot: as good as it has become at scrounging up cash, it may never have to do it again.