Software startup Bonfire acquired for US$108M
Bonfire Interactive Ltd., a procurement software startup based in Waterloo, Ont., is being acquired for US$108 million by an American firm with plans to create new publicly traded entity focused on the growing market for “GovTech.”
Bonfire announced Wednesday that it had been bought by GTY Technology Holdings Inc., a special acquisition vehicle that is also buying five other companies in the government technology space.
“GTY wants to get that group together as a unit and kind of harness the growth and the passion and the firepower here to help change the world,” said Bonfire CEO Corry Flatt.
Bonfire makes procurement software that runs in the cloud as well as management tools for public bodies. The company has mostly flown under the radar, but Flatt said that government digital transformation is a huge market.
“Procurement is not the sexiest space, right? So while journalists like covering the scandals of public sector procurement, the slower moving innovation that happens in that particular department tends to not get much ink,” Flatt said.
“Let me give you some sexy stats here: 15 per cent of GDP in North America flows through public sector procurement departments,” Flatt said. “We’re talking crazy amounts of money flowing through our public agencies, over these guys’ desks.”
Across private sector business, one of the most significant technology trends over the past decade has been a shift away from “on premise” servers and software, and a move to cloud solutions. That trend has led to greater cybersecurity and lower costs for business, while also increasing productivity.
But Flatt said nothing similar has happened in the public sector.
“Only five per cent of public sector IT spending is on cloud systems, and it’s crazy that it’s that low,” he said. “Every other industry, that number is almost an order of magnitude larger.”
Flatt said a new, younger generation of public service managers is driving digital adoption.
GTY is a US$561 million special acquisition vehicle founded by Bill Green, former chairman and CEO of Accenture, along with Joe Tucci, former CEO and chairman of EMC, and Harry You, also a former EMC executive and former CFO for both Accenture and Oracle.
In announcing the acquisition, the company laid out its mission.
“GTY has assembled a modular cloud platform designed to help organizations transform the way they engage stakeholders and manage their resources,” Wednesday’s news release said. “By combining six companies that represent key elements of public sector workflows — budgeting, permitting, billing/payments, grants management, and procurement (Bonfire) — the united platform supports departments that are traditionally fragmented and struggling to deliver citizen engagement and manage back-end-office processes.”
Flatt said that the $108 million acquisition is 50-50 cash and equity, which will give early investors some liquidity, but he said it also reflects the growth opportunity that the new corporate structure creates.
“No one is kind of cashing out and getting off the ride,” he said. “Everyone is committed to this mission and this vision, and there’s some liquidity to kind of limit the downside, but there’s still so much upside and growth potential.”
Flatt said GTY is investing significantly in Bonfire to allow it to grow, and he has plans to double the number of sales and marketing employees, as well as doubling the size of the product development team.
Flatt said the name of the new corporation isn’t being revealed yet, with a rebrand and relaunch planned for after the audits and regulatory filings conclude on the deal.