Having been through three previous startups, Stephen Jagger and Michael Stephenson were hardly untested when they launched PayrollHero. But this new enterprise, which makes payroll, scheduling, time and attendance software, is different in so many ways from a typical Canadian venture that Jagger and Stephenson might as well be entrepreneurial newbs. Just after PayrollHero announced in February that it had raised $1 million in funding from some of the brightest stars in the startup galaxy, PROFIT’s Ian Portsmouth asked Jagger how they pulled it off.
Q You’ve described your company as “two Canadians raising Canadian dollars for a Singapore entity that has offices in the Philippines and Whistler focused on selling in Southeast Asia.” Apart from it being a mouthful, explain why that makes fundraising so challenging for you.
A Investors usually like our company, but they say, “Oh, you’re not an American company” or “You’re not a Canadian company”—and boom! You are completely out of their loop because their fund must invest in the U.S. or North America. No matter how much they love you, that’s how their fund is structured. You go up against a lot of that.
Q Still, $1 million doesn’t sound like much in today’s startup environment. Why is it a big deal for you?
A This was the first time we’d ever raised money. We went down the path never knowing what the next step was. So, I was running around trying to figure out how it works and trying to look like I under- stand what I’m doing while trying to put together a deal with a bunch of investors from a bunch of different countries.
Q You actually moved PayrollHero to Silicon Valley for four months to test whether you needed to be there. What was your thinking?
Silicon Valley is amazing. But if we’d stayed, we would have had to raise more money to hire the people we wanted.
A We’d already built three companies in Vancouver, including Ubertor, a real estate software company that’s doing really well. But we’d always questioned whether those startups would have been different if we’d started them in the valley. So we thought that this time, we’d check it out. We did it with the plan of networking and meeting as many people as we could; basically, working to find the right advisors to help us achieve our goals. We attracted some very solid advisors who really helped us when we started to raise money.
Q But you ended up not staying in the valley. What did you discover while there?
A I think the valley is amazing. But there are hiring problems everywhere down there. If we had stayed, we would have had to raise more money to achieve the level of hiring we wanted.
Q What’s interesting is that your big financing break came in Singapore and not in the valley, although it involved valley money.
A With the advisors on board, we entered some pitching competitions. We did one in Jakarta, and we did one in Singapore, which is where we ended up really getting down and dirty with [VC fund and PayrollHero investor] 500 Startups. [500 Start- ups partners] Dave McClure and George Kellerman were there, and they chatted with us at our booth. One of the judges, Benjamin Joffe, who invested in PayrollHero, pushed Dave and George to invest, too. In 500 Startups, we got that big Silicon Valley investor on board, and it helped close out the round.
Q You’ve assembled a star-studded cast of advisors, including Ryan Holmes of Hootsuite and Eric Ries, the lean startup guru. What value do they bring to the table?
A Each one of them is very different. For instance, we don’t get Eric on the phone every week for an hour, but he’s good at making the introductions we need and he has a big name worldwide. When we were doing a pitch competition in Jakarta, the organizers made a point of announcing that Eric Ries was one of our advisors.
Q How big can PayrollHero get? A At some point, we will tap North America. But our plan is to plow through Southeast Asia first. The Philippines has 100 million people. Indonesia has 240 million. There are a lot of people over there that are just coming into cloud computing and smartphones use. The opportunity is, I think, massive.
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