EARLY INTO THE CLOUD
The first four years were very, very tough. There was very little demand
Most businesses decry red tape and regulation, but for technology entrepreneur Warren Roy, chief executive and founder of Global Relay, it has been salvation.
He has built a $30-million, international company that helps investment firms comply with laws requiring them to capture, store and retrieve employee’s emails and digital communications to satisfy industry regulators.
“I wanted to build something that accomplished a couple of things. No. 1 was building a recession-proof company,” says the former construction project manager who started Global Relay in 1999, when email was just finding its way into the workplace. It was also an early adopter of software as a service and cloud computing — storing information on remote servers over the Internet, rather than locally within a business and its own computers. That allows Global Relay to charge clients a subscription fee.
“By archiving and holding data, my belief was we would have similar stickiness to a telco, where clients pay their phone bill every month in a recession or not.”
The Vancouver-based company has experienced explosive growth, with more than 265 employees and offices in London, New York, Singapore and Chicago. It has more than 17,500 customers worldwide using its archiving and messaging compliance solutions, including 22 of the world’s top 25 banks and many hedge funds. More than 97% of its business is offshore. But it hasn’t been easy sailing. The firm in its early years struggled to find an industry that wanted its technology. “The first four years were very, very tough,” he said. “There was very little demand because it was new.”
It wasn’t until the firm’s brain trust — which included Shannon Rogers, a corporatecommercial lawyer, who left a big law firm to join the startup in 2003, Duff Reid, chief operating officer, and Eric Parusel, a senior system software architect — hit on financial services that things began to take off.
“I was leaving what was a very good firm to work at a kitchen table and trying to get a company started,” said Ms. Rogers, who is now president and general counsel. “Most people thought I was crazy.”
At the time, securities regulators in the U.S. were passing laws permitting broker-dealers to store information electronically, which included the need to track email and digital communications.
Self-regulatory bodies such as the Financial Industry Regulatory Authority, formerly the National Association of Securities Dealers, Inc. (NASD), required investment firms to have in place a system that supervised the activities of its brokers, which extended to online communications and messaging. Now, the focus is expanding to include social media and tracking communications and interactions on platforms such as LinkedIn.
“When the rules from the SEC came down, we recognized we had very good technology,” Mr. Roy said. So they reached out to the NASD and explained what they did. “They helped us understand what was needed to service the financial sector and service the rules.”
Like many Canadian companies, Global Relay had to achieve success in the United States before finding greater acceptance at home — where it now services a number of investment firms that are subject to oversight by the Investment Industry Regulatory Organization of Canada.
“The reality is that it is very hard as a Canadian startup to sell technology to Canadian companies,” Mr. Roy said. “Our corporate sector is very skeptical of our own ability to deliver world-class technology.”
One Canadian-based firm that took a chance on Global Relay early was Canaccord Financial. “There were few providers out there and we took a bet on Global Relay,” Greg Drazenovic, vice-president, enterprise infrastructure, said.
He was particularly attracted to the idea of putting data into the cloud and not having to worry about all the issues of internally managing and indexing the data. “I don’t have to worry about a lot of storage concerns.”
“When you buy technology,” he said, “you are betting on the racehorse. You don’t know if it will be great out of the gate. There was a lot of belief in Warren and Shannon.”
There was also some nationalistic pride. “We wanted to help a Canadian company. We felt we could give them an opportunity to help build their business,” Mr. Drazenovic added.
Research firm Gartner group recently named Global Relay a “leader” in its Magic Quadrant rankings for enterprise information archiving. Analyst Alan Dayley said “they are very focused in an area that is growing very fast — compliance in financial services. They do an exceptional job and haven’t let themselves get distracted by other things.” However, he added that it’s also an area that is ripe for consolidation. “I feel there are too many players and something has to happen.”
Expect Global Relay to be an acquisitor. Since starting, it has scooped up eight smaller companies and rolled them up into its service.
The firm is hitting its stride, winning a number of awards for its technology, services and entrepreneurism. It has also started building its own eco-friendly data centres, including a $24-million operation in North Vancouver and another one planned for the Maritimes. “There is an enormous amount of data in the world to be managed,” Mr. Roy said, adding that it is a “core strategy” to have data managed in Canada.
One of the interesting things about Global Relay is that it has been able to grow without selling a chunk of the company to venture capitalists and remains employee-owned.
Ms. Rogers said in the early days “when we needed money, we couldn’t find financing. Nobody believed in us.” But that’s been a godsend. “We don’t have any outside investors. We are in charge of our own destiny.”
She said management wants to avoid the trap facing many Canadian technology companies, which is to grow to a certain size using venture capital and then be pressured to sell to a U.S. buyer because the investors want to cash out. By avoiding venture capital, the company has avoided the pressure to sell, she said. “We just want to build the company and keep the headquarters in Vancouver.”
While email has been a big part of Global Relay’s growth story, so too, is the financial crisis, which spawned litigation and regulatory investigations around the world.
The company conducts anywhere between 250 and 400 searches a month for compliance or court cases. Now with the Libor scandal heating up, Mr. Roy expects business to increase and has plans to hire another 50 people in 2014 for the London and New York offices.
He also sees great opportunity in the insurance business. “Insurance moves more data than finance. It’s an area where we are placing our largest focus on, outside of the financial services sector.”