Soft­ware startup Bon­fire ac­quired for US$108M

Calgary Herald - - FINANCIAL POST - JAMES McLEOD

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.

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