Tech Capital Partners Blog

We often get asked about our portfolio companies — what they do, what stage they’re at, whether or not they have customers and are generating revenue, what the management teams are like … In an attempt to answer some of these questions, we’ll be posting a series of "interviews with portfolio companies" over the next little while. Hopefully these interviews will give you a feeling for the types of teams/companies we like to back and provide you with some insight into the companies’ market opportunities, products and culture.

Our first interview is with Rod Foster, CEO of Covarity. We’ve been working with Rod for years and Covarity is one of our oldest active portfolio companies (incorporated in 2001).

1. What does Covarity do?

We help Financial Institutions perform better by improving the management of their commercial loan portfolio to proactively avoid risk.

From a very linear standpoint, we automate the management of financial statements and the risk management process, as well as help reduce workload. Fundamentally though, Covarity helps Financial Institutions strengthen client relationships by assisting their borrowers in becoming better businesses with the information we provide.

Today, we are helping the borrowers of some very large banks, such as HSBC and RBC, as well as credit unions. We provide beneficial reports to these borrowers, we make it easier for them to upload their financial statements, we provide automation within the Financial Institution to get things done more efficiently and to detect problems earlier. Farther down the road, we’ll be getting into data management and risk and benchmarking and the requirements for XBRL reporting.

2. What makes the work at Covarity challenging?

Our business model is pretty groundbreaking, and I say that for a few reasons:

• One, we’re SaaS. For many people SaaS is not groundbreaking but it’s still relatively new.
• Two, the market we’re playing in.
• Three, the size of the deals we’re doing in the market we’re playing in is pretty significant. I’m not sure there are many SaaS businesses out there signing multi-million dollar, multi-year deals, and along with that comes complexities.

I’ll give you a really good example of how we’re breaking ground: normal software businesses build a product, ship the product, and they offer second and third line support. They train the customer to provide internal first line support. At Covarity, we build the product but we don’t ship the product, we deploy the product, so we do our own internal IT support and we also provide IT support for our customers. There’s no rule book, no history on how to staff for this type of support. We have no history on how many calls we’re going to get because we’re changing the way people do business. So we have to be able to strategize, implement and then adjust, without having history as a teacher.

On the technology side, we’re leading edge in .NET obviously, but the size of our application and the complexity of the rules, combined with offering a SaaS model with custom capabilities is pretty challenging. To support this, we are totally dedicated to investing in the right tools and technology… and people.

Working here is also challenging in that we demand a lot from people. You have to think, you have to produce, you have to be smart because you’re working with very smart people. Our employees really respect each other.

3. How do you make sure the employees at Covarity are enjoying their work?

We spend a lot of time making sure people clearly understand the company’s goals, how we’re doing against the goals, and how each individual contributes to achieving the goals. We communicate through monthly update meetings, through performance reviews, those types of things. We’re very transparent. Communication is important.

We celebrate our successes for sure.

On having fun at work, we have the "Call of Duty" every night at 5:30pm. On Friday at 4:00pm we have a toast, and we’ll leave it at that :). We have a games room with a pool table and a foosball table.

We often have fun things like the 7 day countdown on the last release. During the last 7 days of our release, when stress was high, we did an event-a-day to break people’s minds away. It went along the lines of a rhyme each day, sort of like a Cat in the Hat thing:

Day 7… Sandwiches
Day 6… Sweets
Day 5… Frosty ice cream
Day 4… Flowers and chocolates to bring home to spouses
Day 3… Donation to Sick Kids on behalf of the company which, interestingly enough, was the one I got the most positive feedback on from individuals
Day 2… We have a standard order from Cameron’s on release day
Day 1… Wine and cheese party to celebrate

A couple of people came to me and said they’d go home at night and their significant other would say “So… What’s Covarity doing tomorrow?”

Outside of work we do things like Laser Quest which we rented every Monday night for the winter. We do paintball and other social events, and we encourage involvement in charities and the community.

And… We have the Covarity Stanley Cup. We have a cup where at the end of every release, every developer and tester involved in the release gets their name put on the cup and we drink out of the cup. We just started this with the last release but we went back and added every release from day one. It was funny watching them drink out of it — there was a line up!

4. What opportunities do you see on the horizon for Covarity?

Entrance to the US. And we have the potential to be the standard in the Canadian marketplace. Standard may be a strong word but we’re going to have 50% of the Canadian market that we’re able to address by the end of this year so we’re very much dominant in Canada.

On the horizon, making our solution more strategic by including benchmarking and risk analysis, and leveraging our data management capabilities. We help people capture data today but the future is all about using the data. And that to me is really exciting. You think about what has happened in the US with the credit crisis, and how we can help people avoid that the next time. That’s pretty exciting.

5. What keeps you up at night?

We have a tremendous amount of growth going on. Making sure that we are keeping things simple. Making sure that we have our priorities, that people understand the priorities, and that we are aligning our resources to the priorities. Making sure that the right people get the right information at the right time.

I say "keep things simple" because as you grow quickly and you have lots of moving parts, things can get very complicated very easily. We recognize that we have to change and we change appropriately but we don’t make it difficult.

6. Tell me one interesting fact about Covarity that most people don’t know…

One that we’ll let people know? I don’t know if it’s interesting or not but "we have attitude". All of us. We’re confident about what we can accomplish. We have a ‘confident’ swagger (not cocky) going on over here. I will say that for sure.

7. What’s the biggest pressure that a VC brings to the table?

The demand for continued growth. You can’t stop. And I look at that as a positive but it is that accountability. You have someone who is tied to your business but not day-to-day and they often ask the questions you don’t want to ask. But they force you to look at yourself in the mirror. They force you to be honest with yourself.

8. Anything else you think deserves mention?

If you believe in what you’re doing and are passionate about it, and if you have someone who’s passionate and is going to put their money where their mouth is, it still makes it very very difficult, it’s not easy, but you can do it.

Hire good people. Hire talent. And make sure you get good supporters. Focus.

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