Communitech photo: Anthony ReinhartIn depth: Q+A with Igloo Software CEO Dan Latendre, a Waterloo tech veteran Anthony Reinhart July 16, 2015 Columns, View from the ‘Loo Top photo: Dan Latendre’s office at Igloo Software has a clear view to the company’s future headquarters (centre left) at 55 King St. W. in the heart of Waterloo Region. When I stepped into Dan Latendre’s office, the first thing I noticed was the massive jar of protein powder on his desk. It’s not what typically comes to mind when you imagine a tech executive’s inner sanctum, but Latendre, CEO of Igloo Software, has his reasons. Chief among them is a commitment to health and fitness – his own, and that of his 80-and-counting employees, whose job is to build “intranets you’ll actually like.” They are, after all, in the midst of a marathon that began with a think-tank collaboration project in 2004, was spun out into a standalone company in 2008, and just now is hitting stride as a growth-stage software-as-a-service (SaaS) company. Three years of accelerating growth have prompted Igloo Software to move into expanded quarters in 55 King St. W. The former bank building is also home to NetSuite’s local operations. (Communitech photo: Anthony Reinhart) Later this year, Igloo will move from its increasingly cramped quarters in an office tower at 22 Frederick St. in Kitchener, to a 13,000-square-foot space in a more modern office building at 55 King St. W. The move was precipitated by the fact that, after several years of tough slogging as a startup, the company grew by 40 per cent two years ago, 70 per cent last year, and is on track to grow by another 70 per cent this year. The protein powder is also fitting for a man of Latendre’s experience; his broad shoulders are among those upon which Waterloo Region’s thriving technology sector was built. After beginning his career at MKS (Mortice Kern Systems) in 1988, Latendre helped – in conjunction with future BlackBerry maker Research In Motion – to develop an early Internet software package that MKS sold as a business unit to OpenText, now Canada’s largest software company, in 1994. In 2004, Latendre left OpenText, where he’d helped build its flagship intranet product, to consult on an intranet project for the Centre for International Governance Innovation, founded by RIM co-CEO Jim Balsillie. That project, IGLOO (International Governance Leaders and Organizations Online), was the basis for what is now Igloo Software. I sat down with Latendre in his soon-to-be-old office, which has a clear view of his soon-to-be-new one, to talk about his long local history, about the challenges facing Canadian tech companies and about the future of the Waterloo Region ecosystem as he sees it. The following Q+A has been edited and condensed. Q – Let’s talk about your history in tech. You were involved in early work on Internet access and search engines, both here in Waterloo Region. What kind of work did you do? A – It kind of started at MKS (Mortice Kern Systems). That was my first real exposure to the tech industry; it was in 1988-89. At that time, MKS was eight people, and they were really focused on things like Unix tools on non-Unix platforms, mostly Windows. It was very interesting, because a lot of people don’t know that the Internet was really kind of founded on Unix. And, back at that time, I said, ‘You know what? Wouldn’t it be great if we could create one of the first wireless Internet packages, or just an access package with wireless as a phase 2?’ So, Randall Howard and Ruth Songhurst – Ruth, at the time was president, and Randall, one of the founders – said ‘Yeah, if you can raise the capital, we’ll create a business division within the company to do this.’ So I did. I went out and raised $1 million, in conjunction with – guess who – RIM (Research In Motion), and with CATA, the Canadian Advanced Technology Association, to do this project. The project was so successful that we ended up calling it Internet Anywhere. Back then, if you can imagine, there were tons and tons of Internet access providers, through telcos and a variety of ISPs and so forth. It really wasn’t consolidated like it is today with Rogers and so forth. We provided a package where we’d give you access to the Internet – there were over 150 providers – pre-configured with all the major tools, such as email and Netscape, which was the number 1 browser, and a bunch of other tools. We put it into market and it was extremely successful. We actually had it all over Japan and Korea; it was sold in retail stores and so forth. But the market was consolidating, and it really wasn’t a core business of MKS, so we sold the whole business unit to OpenText in 1994. And at that time, OpenText was the first search engine on the Internet. We actually powered Yahoo. [Then-OpenText CEO] Tom Jenkins wanted to create another Internet division within the organization. So, we ran that product out until 1996, when we were going public. Then I turned my attention to search, and helping, as a product manager, build out search technologies called the OpenText Index. Q – Settle an argument: Did OpenText develop the first Internet search engine? A – Yes they did. A lot of people will agree or disagree, but at the end of the day, the number 1 commercial-based search engine was Yahoo, and for two and a half to three years, we powered Yahoo. We were up against vendors like AltaVista, which poured a bunch of hardware at [customers], who moved to that platform. But for the first three years, if you know the history, we had stock in Yahoo. Then we sold and helped [OpenText] grow. Tom Jenkins felt that a better play was in the business of web-based corporate intranets, so they switched gears and moved into becoming a corporate, web-based intranet platform. Now it’s web content management, but it was just an evolution. Q – What is Igloo and how did it come to be? A – I retired from OpenText in 2004, and really was looking for a new challenge. My interests lie in startups and in building businesses, and OpenText was in more of a maintenance growth mode, through acquisitions. Tom Jenkins and Jim Balsillie were collaborating around CIGI, and Tom was focused on how we could use information technology – same with Jim – in order to bring together educators, practitioners and researchers around the world who were working on international governance issues. They were just using email; they were using planes, trains and automobiles to go to meetings and conferences, and this made no sense. And there was no sharing of collective wisdom. So, who better than me, who helped build their flagship Livelink, to come and do this? I said “it sounds good; it’s an interesting project; it would be good to do something that would help the world rather than just for profit.” So, I was hired on at CIGI as a consultant, which then turned into a full-time job as their CIO and CTO, around what was called the IGLOO project. We were originally going to use the OpenText Livelink technology, but it really wasn’t suited for what they wanted to do. I said, ‘If we’re really going to do this right, we need financing.’ So, I went out and I raised [the money] from the Ministry of Research and Innovation [which contributed $7 million to the $15 million project]. The goal of that government grant was to do three things. One, it was to build an online network of practitioners around international governance. Two was to build a technology platform, and three was to commercialize it. I walked into Jim Balsillie’s office and I said, ‘Are you interested in a [multi]-million grant in order to do this project?’ You don’t usually surprise Jim Balsillie, and he went, ‘What??’ And I go, ‘Yep,’ and he goes, ‘You’re kidding me.’ I said, ‘Yeah, it’s ready to sign; you’ve got to read through it; it’s been approved by legal.’ And he goes, ‘You’re kidding me.’ And the project started. It was a five-year grant with a collection of milestones. We were so successful that we completed all the milestones in three years. We all agreed and the government agreed that we should spin this out, commercialize it and make it available to for-profit organizations. You can imagine, from the MRI’s perspective, their mandate is obviously to promote innovation technology, but also to create jobs. In partnership with RBC, we raised another $4 million in order to spin the company out. We did that in February of 2008. Q – Was the decision to spin it out simply based on the success you were having with it? A – Yes, and it wasn’t CIGI’s function, mandate or role to build technology, but to leverage technology. When you look at the time, we’re talking 2007. This is the start of the social revolution – products like Facebook, LinkedIn, Twitter, YouTube. All of that started coming of age, and we said this is the opportune time. You look at intranets of old, and they failed primarily because they didn’t have the primary ingredient: people, the social side. All an intranet does is provide connections from people to people, people to information and people to processes. And if you can make those powerful connections, you can drive productivity, drive innovation and create competitive advantage. It’s so simple, the concepts, but sometimes as executives we forget the most simplistic things. Do companies make service calls or build products or take support calls? No, people do. Businesses without their people are borderline useless. The most successful companies – look at Google; look at their corporate culture and what they do. We really put a focus on people, but still kept an eye on information and processes. That’s what kind of makes us different from products like Jive, which is a conversation platform. We just didn’t think it was sustainable. It was a difficult path, because, at the end of the day, we also bet on the cloud. I’ve never seen this before in my career, where three major trends were converging at the same time, back in 2007. One was obviously the social revolution. Second was mobile, and third was cloud, even though cloud had been around for a while. So, we leveraged all three. Q – Entrepreneurs will often say timing is everything. A – Preparation meets opportunity equals success. But it’s also work. We all hear the hype about companies that made it really quick, but that’s not the norm. It takes some time for certain organizations to mature. You hear about products like Slack. That’s so artificial, because . . . what [Silicon Valley investors] do is create their own hype: ‘OK, I’ll put hundreds of millions of dollars into something and tell everyone it’s worth billions.’ But we’ll see if it has sustainability. As we all know, sustainability in this new global economy that we live in, and in the information economy, is very difficult. Look at Apple. Apple was on the verge of bankruptcy until Microsoft bailed them out. Now look at them. Q – Is Slack a competitor of yours? A – They’re not. They’re more small business. I have a bunch of friends who use it and it’s very low-cost and good for small teams. But when we deal with companies that have tens of thousands of employees, Slack isn’t going to cut it. You have to have enterprise-class security, enterprise scalability, enterprise-class integration frameworks, all that enterprise stuff. All I’ve really done is taken my knowledge and experience over the last, say, 15 years with OpenText and have reapplied it in this new social age. What’s old is new again. Q – Tell me about some of your customers. A – We’ve done some interesting stuff. We deal in three primary markets: We deal in the SMB space, we deal in the mid-market and large enterprise. We don’t generally deal in, say, the Global 1,000-Fortune 500 space. That’s where the big platform players live. Our model is really around this new world of, ‘Hey, it’s freemium, try before you buy.’ Our software is free for 10 users forever, so we’re allowing small not-for-profits, small businesses to use it for free. But when the mid-market and large enterprises come in, they say, ‘Do you have the features that we need for your intranet?’ We say ‘yes,’ they check it out and then they contact us, because then what they want to do is turn it into a solution. That’s where we differ from products like Box or what we call these bring-your-own apps. We’re a solution, where we’re trying to solve business problems by helping you configure the application to an intranet solution that meets your business pain. Everything we do is primarily white-label. It looks like your intranet, and no two intranets are the same. You know the analogy I like to use? I love Home Depot – ‘You can do it; we can help.’ For example, you walk into Home Depot on your first visit and you say, ‘I’m just here to learn. I’ve got a project and I’m thinking about it.’ You talk to some the experts, see what products are available and so forth. The second time you walk in, you say, ‘OK, I’m going to go do this project and I need the materials,’ and you go do it. Or third, you go in and say, ‘I want to build this big deck; I’ve got an idea but can you give me someone who can help me do it, or do it for me?’ We have the same philosophy. Not only do we have the tools, but we have what we call an in-house ad agency of project managers, consultants, designers, developers who can do a whole project for you. Some need less, some need more, some have different resources, and not even our delivery model is the same, because our customers are different. Like Hulu. They’re like Netflix; a big organization; Disney’s the big investor. We run their intranet. It’s really interesting, because not only do we help you deploy your intranet; we actually help you be successful, because our world is a SaaS business. We want customers here 10 years from now, because it’s a recurring model. Once you’re deployed, we have business analytics and reporting that can show you where you’re successful or where you’re not. We have solution consultants who will meet with you on a quarterly basis and help you plan out next phases, or help you where you’re not succeeding. People aren’t aware of this, but knowledge sharing is not a natural activity, especially in the business world. Why would I share my knowledge with you? Isn’t that what makes me valuable? So, how do you do that with your intranet, and that culture that you want to build? Q – Give me some vital stats on the business. How many employees, etc.? A – We’re about 80 employees now. I’ll be honest. It was difficult for us in the first three to four years of our business, because first we had to transition ourselves away from not-for-profit to for-profit, and understanding what new companies wanted. Second thing we had to do – we launched our first platform in 2011, and cloud wasn’t universally accepted. We lost a lot of million-dollar deals because we wouldn’t go on-premise, so that hurt. But we stuck to our guns, and we have no on-premise. So, in the last three years, we grew 40 per cent, 70 per cent and 70 percent. Q – So it’s really picked up. A – Yes. Jim Balsillie said something to me that was so simple but so amazing. Building a business is not a sprint; it’s a marathon, so you have to plan out how you’re actually going to finish the race. There’s not that much thinking when it’s a sprint. I look at a sprint as if you’re going to build a business so that you can sell it in a year or two. What I would do is say, ‘OK, which major vendors are out there – Salesforce or Google or whoever – and we’ll build something they really need so they’ll buy it.’ That’s not what we’re doing. We want to build a Canadian software company that doesn’t get bought by the Americans. That’s the fatal flaw of most Canadian technology entrepreneurs. They’re just too nervous to stick it out, and they take the first offer that comes along. Q – How do we change that? A – [Former University of Waterloo president] David Johnston always said, ‘What’s in the water in Waterloo?’ We have some of the best academic institutions in Canada, we have some of the greatest think tanks, and we have some of the greatest entrepreneurs. Bringing those together will help. The biggest challenge we have as Canadian entrepreneurs is financing – access to money. The basic Canadian VC market has dried up; most of them are follow-on. And getting debt financing in Canada is tough, because [lenders] don’t understand SaaS companies. Our business partner is Silicon Valley Bank. We had the banks fighting for our business in the States. The Canadian banks wouldn’t touch us. How pathetic is that? You can write that. It’s pathetic. How are we supposed to build businesses when we can’t get loans or credit? Q – What can you tell me about Igloo’s revenue? A – To give you an idea, we have about 350 paying customers. We have 15-20,000 sites that are using our software in some way or another, that don’t pay, and we’re OK with that. And we’re averaging about a 94 per cent retention rate year to year. Average contract length is about 28 months. You look at our business from an attraction perspective, it’s growing at 70 per cent year over year right now. There’s a big transition for us now this year; when we finish out this year, our recurring business will be larger than our new business. I’ll give you another number. We run on an 85:15 ratio, so 85 cents of every dollar that we bring in is recurring. I’d like to get that to 90. That is a pretty significant stat. Why? Because we sell enterprise-class software, and you can imagine how much customization was required in the old days to get a solution. So, we’re getting it more and more to what I call self-serve, where I can go and sell an enterprise. What’s interesting is that one of the tech companies here, they rolled out an extranet with us. I can’t tell you who, but you can probably guess. And it took us longer to negotiate the contract than for them to implement. They implemented in less than two weeks. That’s what we’re trying to get to. You look at this economy and this marketplace that we live in, speed and agility are imperative for companies to succeed. Never before in our lifetime have we seen change so quickly. You have to be able to do things faster in order to grow. It makes it exciting. Q – You’ve been in downtown Kitchener for some time. A – Eight years. Igloo Software’s new King Street headquarters is a bright space in the midst of an explosion in tech startup activity in downtown Kitchener. (Communitech photo: Anthony Reinhart) Q – And you’re staying, and moving soon into an office tower on King Street. Why here? A – I’ve been in this region since 1988. I’ve been all over the world, but this is where I grew up as a technology and business leader. The ecosystem here is amazing. I don’t know of any other ecosystem for CEOs that exists in Canada, of people I can reach out to, talk to, get advice, as well as the support I’m getting locally from organizations that use our software. Why would you go anywhere else? It doesn’t make any sense. Q – Why downtown Kitchener specifically, and not in, say, one of the former RIM buildings in Waterloo? A – With our employee base, some are in Waterloo, but some are in Cambridge, Guelph, Oakville, Mississauga even. And, unfortunately, getting into Waterloo is very, very difficult now. It’s also very spread out. I’ll be honest; I’m not a fan of the technology park or Tech Town or whatever you want to call it. Here, my people can go and interact with the local community in walking distance. People can walk to work, bike to work. And I like the old vibe of the city. Kitchener grew up as a manufacturing town, and now they’re reinventing themselves into a tech community, using the infrastructure that’s here. So the vibe is really cool. And I think I want to be part of the revitalization of Kitchener. Q – Aside from the extra space, what appealed to you about moving to that particular building? A – One is that I could get enough floor space, because I want everybody, or at least 130 of my people, to be together. The culture is very important to us, and here, unfortunately, we’ve outgrown it. Our digital and our corporate culture is not matched here with our physical infrastructure. So, the new building is really kind of trying to match who we are as a company. We’re very collaborative, very open, very hardworking, we like to play and have fun as well. We’ve got a lot of cool things going on over there. We’re putting a Kegerator in for our Beer Fridays, and we’re putting in different game rooms and so forth, because people work different hours, and we want to make it a place where they want to come to work. The old adage is, if you think of your life and what you do day in and day out, you spend a majority of your time sleeping, but second is where you work. And we don’t want to feel like a place where you work. We want to feel like your going to your second family. Q – What’s the biggest change you’ve seen in the Waterloo Region tech ecosystem during your career? A – The biggest one, of course, is the rise and fall of the BlackBerry empire. I still think there could be a significant organization, but to me, I don’t think I’ll ever see anything like that again. I give such huge credit to Jim Balsillie and Mike, because I think it showed us what’s possible. Tom Jenkins showed us what’s possible building a company a different way, which was through acquisition, primarily. The other thing I thought was really interesting during my time was how those leaders brought government, technology companies, and research and education together. Because all three of those pillars are required in order to make a successful ecosystem. Where are our next-gen leaders coming from? Right over there. Where are they going to get mentorship? Through Communitech, the Accelerator Centre and the leaders. It’s really, really cool. Look at the governance issues we have to deal with in going and selling our products in a global world. We were going to do a joint venture in China, and we had to shut it down. Why? Because the Chinese government at the last minute said ‘We want 51 per cent of the joint venture.’ Being able to go talk to people over at CIGI about what are the ramifications of this – where are you going to find this stuff? It’s pretty cool. Q – What do you see for the future of this tech community? A – I really love the concept of Tech Town; I don’t know if we executed it properly. But, when I was over in China, I was absolutely amazed at what they’re doing, and we should be really, really, really afraid, because when they were courting us, they would show us their tech towns. Their tech towns were something you couldn’t believe. They had plastic models that are 15 feet long, and then you show you them, built. We hadn’t signed anything yet and they had our logo on the building, they had accommodations, they had an academic institution where they trained people, they had living accommodations, and then other industries that would help you – from IT infrastructure and hosting infrastructure to software developers – all built in one community. I would love to see that here – an ecosystem that would support the technology. The second thing I would like is a way to figure out how to attract investment here. I’m a CEO. Where do I go to have a drink to talk to investors here? I can go to Silicon Valley and go to six different bars within a 20-minute radius. I can drive down and see 30 investors in three days. We don’t have that here, so that’s going to be huge for us. [Entrepreneurs] need the mentorship of more-seasoned veterans like myself, or a Tom Jenkins or a Jim Balsillie or a John Baker, and the ability to get financing. Those are the two big components for this to be successful. There’s not a shortage of ideas, but ideas need to become real, and you’ve got to commercialize them. And without money, you can’t do it. How do I compete when I hear that a company down in Silicon Valley just got $40 million in financing? We can compete, but it would be a lot easier [if there were more financing in Canada]. We need to build that complete ecosystem here, and Communitech has done a good job, but how do you take companies once they’re past that incubation stage and seed funding, to a company that’s doing $10, $20, $50 million in revenue? Another question I’d ask is, how many of you have done it? You can talk theory, because a lot of people have great strategies. But unless you’ve lived and breathed it, it’s awfully hard to understand it. That’s my struggle. Who do I go talk to? There are a handful. I find it very difficult, for example, that we’re a SaaS company. A lot of CEOs or sales reps have no clue what SaaS really is, or the metrics and things that are successful, because we’ve always done it on-prem. It’s a different model. We’re renting our software, we’re not selling our software. We’re not even a software company any more. We’re a solutions and services company. So, it’s a different model. Q – What role do you see Igloo playing in the future of the Waterloo Region ecosystem? How big can this thing get, do you think? A – There’s no doubt we can be as big as OpenText. No doubt. And the nice thing is, we don’t compete against them, which is even better. Then, as we grow, we become more ingrained in the community – more support for the universities, just like OpenText and RIM did, and really facilitating jobs. Also, working closer with the entrepreneur program at Waterloo, or the Accelerator Centre. All of those things will come into play. But right now, my focus has to be growing the company. I call it the snowball effect – as you reach certain milestones, the snowball keeps getting bigger and has more inertia. We’re past the make-it-or-break-it stage and now we’re into the growth stage. It’s very interesting when you reach that pivot point, because my role as CEO is changing. And it’ll change again as we get bigger. I learned that through Tom and I learned that through Jim, about the things I’ll need to start doing as CEO as it changes. I mentor CEOs now. I don’t have time to sit on their boards, but I do a lot of mentorship meetings. I would really like to help, with others, to crack this nut of financing; to go beyond seed funding, the $150,000 and $1 million. To get to a growth company you need $5 million. Q – In the last few years there have been quite a few – Kik, Vidyard, Thalmic Labs, Clearpath Robotics, Miovision, eSentire. A – But can those investments be with Canadian venture capitalists, and not Silicon Valley or Boston? What I think we can do better is make a closer network of the CEOs that have gone past the incubator stage. The problem is, we’re so focused on our own business, and most of our business is outside Canada. These are all challenges that are easily solved. Is there a role Communitech can play? Anthony Reinhart is Communitech’s Director of Editorial Strategy and senior staff writer. View from the ‘Loo looks at the issues, people and events that shape Waterloo Region’s technology sector.