After three funding rounds, B.c.-based data company Certn eyes expansion abroad.
VANCOUVER • Andrew McLeod knows he had a better year than most people. “It’s terrible,” said the co-founder and CEO of Victoria-based Certn. “I hate me for my luck in 2020.”
Mcleod celebrated the birth of his first child (who already sleeps through the night), grew the revenue of his company, which provides instant background checks, more than sixfold, and secured a combined $43.4 million in three, somewhat unexpected financing rounds — all amid a global pandemic that he thinks may have swept through his company’s office in early 2020, even before COVID-19 tests were widely available.
“From the outside, all things are awesome and we grew exponentially,” Mcleod said in an interview with The Logic, adding the company was fortunate to hit some major milestones. Mcleod and two others came up with the idea for Certn in 2016, but officially formed it a year later. At the time, the data company targeted landlords and property managers, offering them a quick way to scan a potential tenant’s suitability through what the team calls human-risk intelligence or the factors a landlord needs to make a good decision, like credit information or prior evictions.
The company then struck a deal with the RCMP and various police departments that let it conduct faster criminal record checks, allowing it to start offering new services, including pre-employment and volunteer screening, and broaden its clientele. Its platform now allows employers to verify job candidates’ educational, employment and other history.
In early 2020, though, as the first cases of COVID-19 started to surface in Canada, Certn faced two immediate problems. In February, all but two of the company’s more than 20 employees mysteriously fell ill, taking multiple sick days in a row. Mcleod’s luck showed; he and the staffer sitting closest to him were spared. “We don’t know if it was COVID,” said Mcleod, given the lack of testing available at the time. “But it was definitely enough to give us a good scare in what could potentially happen if it was COVID.” While people recovered, the company tackled a second obstacle. The airline industry accounted for “a good chunk” of Certn’s revenue as of January 2020, but as COVID-19 spread the company saw the writing on the wall for air travel. The pandemic decimated the industry as business and leisure travel ground to a halt. Certn’s sales team honed in on essential industries, especially ones that became more lucrative amid the pandemic, such as grocers and pharmacies. As these employers looked to add people to meet sudden demand — many in emerging categories like e-commerce — Certn provided a quick, safe way to perform background checks on prospective hires. Rather than sending them in-person to a police station, and have them wait weeks for a result, Certn offered an online solution that took a fraction of the time. In Canada, it returns results in less than 15 minutes on average, the company said. “That led to exponential growth,” said Mcleod, estimating the company’s revenue grew just over 500 per cent last year. It now has roughly 2,800 clients and a staff just shy of 90.
Meanwhile, Certn sought funding at the start of 2020 to fuel its growth goals, particularly U.S. expansion. In February 2020, it closed a $6.1-million seed round led by San Francisco-based Tribe Capital. “The capital came in and the company just started growing gangbusters,” McLeod said.
It hadn’t planned a second funding round, so soon, but an existing investor, Inovia Capital, approached Certn with what Mcleod called a proposal they couldn’t refuse. “We wanted to take this strategic capital to help grow even faster,” he said. That Series A closed in November 2020 at $27.8 million.
Then came the third raise of the year, $9.5 million in a “really strategic” Series A+ round in December. This round was led by Telstra Ventures — backed in part by Australian telecom giant Telstra, it bills itself as “Australia’s largest venture capital fund” — and B Capital Group, co-founded by Eduardo Saverin, who also co-founded Facebook. “We have our sights on international expansion,” McLeod said. “So it’s probably not hard to draw the correlation between Telsra and B Cap being really strategic for our international expansion.” Certn plans to launch its offering in the United Kingdom and Australia this year.
After raising $43.4 million in 2020, Mcleod says the company isn’t looking for any additional funding in the near future. He wouldn’t disclose the company’s new valuation, but said it grew in a significant way last year, outpacing revenue growth. Mcleod and his partners took some dilution in their equity to secure the funding, but he characterized the terms as “fair” and “reasonable,” adding that “the amount of horsepower” the funders brought in “more than compensated” for that.
Patrick Lor, an early investor in Certn, calls the company’s growth “just magic” as it pivoted to new markets. The managing partner at Panache Ventures has invested in Certn several times. He declined to disclose the amount, but said the firm’s typical cheque size tends to fall between $250,000 and $500,000. He believes that early bet will pay off in multiples partly because of the energetic team and partly the product.
The background check industry has some established players. Among Certn’s competitors is Atlanta-based First Advantage. It boasts 4,300 employees and a valuation north of US$1 billion, according to Pitchbook.
But the speed and ease of use of Certn’s product sets it apart, said Lor, noting it still has room to grow. Certn, he believes, will be essential to the next generation of business as remote work and online hiring increase the ability to dupe employers about past work or education experiences, or other aspects of a person’s identity. Certn’s growth is continuing to impress this year. In January, typically a slower month, it’s posted double-digit revenue growth, said Mcleod. He has high hopes for 2021. “We want to be Canada’s next narwhal, and we’re committed to doing that.”