Whoever said a smile costs nothing probably hasn’t spent eight years working to build a startup into a scale-up company.

Mike Rossi, who has done exactly that, can tell you a lot about the costly lessons he’s learned along the way.

But, as CEO of the customer-rewards software company formerly known as Sweet Tooth – which relaunched today as Smile.io – Rossi and his 40-member team have even more cause to celebrate what those lessons have produced.

With annual recurring revenue tracking towards US$10 million next year, a fast-growing customer base and an expansive new office nearing completion, the smile on Rossi’s face today is hard-earned, and not misplaced.

“It does feel good to have come from almost going out of business to this,” Rossi said in a wide-ranging interview in the lead-up to today’s rebrand. “But that said, we feel like we’re one per cent of the way done.”

If that one-per-cent figure is accurate, the math suggests that Rossi sees billion-dollar potential in Smile, whose platform makes it dead easy for businesses big and small to add customized rewards programs to their e-commerce sites.

That’s a far brighter future than he would have seen four years ago, as the company struggled to find a way forward.

Launched in 2009 as a web development startup, the company’s early revenue came from building e-commerce sites. That wouldn’t last long.

“It turns out building e-commerce websites is not a long-term sustainable business when Shopify is growing,” Rossi said, referring to the then-small but now-huge Ottawa-based firm. “So we quickly realized that we were going to have to have something as a product in the long run, and that’s when we built the initial version of Sweet Tooth, which was an add-on to an e-commerce system” that facilitated customer rewards based on collecting points.

The company grew and raised a CDN$2.25-million seed round in 2012, but a subsequent CEO change and a rapidly evolving market plunged it suddenly into choppy waters, with Rossi now at the helm.

The team shrank and finances dwindled. In late 2013, “We took a loan to make sure we could keep paying employees,” Rossi said. “And any time you take a high-interest loan, you try and figure out how you don’t have to take a high-interest loan again, ever.”

Sweet Tooth came “a week or two away” from throwing in the towel before things started to turn around.

“We were sitting, banging our heads against the wall, saying, ‘OK, what do we do next?’” Rossi said. “And that’s when we thought, ‘OK, [loyalty and rewards] seems to be something that every business in the world that’s involved in e-commerce, which was our niche, seems to care about.’ So that’s when we said, ‘Let’s just build an API to do this.’ Similar to how PayPal built the first infrastructure for payments, we wanted to be the first infrastructure for rewards.”

A few months later, the company released its new API “and nothing happened,” he said. But as Shopify’s dominance as an e-commerce platform accelerated, the way forward became increasingly clear.

“This was back in 2014, so [Shopify wasn’t yet] the runaway winner,” Rossi said, “but we saw them having a lot of momentum.

“So we built our first app on top of that platform to allow Shopify businesses to run really cool VIP, referral and points programs matched specifically to their brand. And that’s when our growth really started.”

Since then, Rossi said, “we’ve built integrations with other [e-commerce] systems and developers have started building their own integrations on top of the [Smile] platform, which is the start of a real network effect, when we start getting developers building their own integrations.”

Cash-flow positive since its near-death experience, the company under Rossi’s guidance has been able to methodically build a scalable new future for itself, and gain crucial insights about its market, without external pressure from investors eager for an exit, he said.

This has demanded extreme discipline, to the point of having to turn away large customers for now to ensure the company can deliver a truly scalable platform in the coming months.

“When you come pretty close to running out of money, you don’t make certain mistakes again,” Rossi said. “We’ve been very focused and disciplined on effective use of cash, on making sure that each hire counts and contributes, and that we make intelligent decisions that are well thought out, as opposed to just sort of making bets in a lot of different places and having a lot of excess fat in the system.”

While far from pleasant at the time, the company’s bottom-out period, without big investors to fall back on, is ultimately what saved it, he said.

“I don’t think we would have come up with the same solid understanding of the customer and the landscape and how commerce is going to evolve over the next few years if we hadn’t been forced to sit there with almost no money in our bank account and think about what would actually work,” Rossi said. “If we’d have just tried stuff with a few million dollars we wouldn’t have got there. So, it’s almost a necessary hardship.”

With the top-selling rewards platform on Shopify’s app store and a product that promises to enable any company to implement its solution in as little as 30 seconds, Smile heads into the next 12 months with the wind at its back.

In July, the team will move downstairs, from its currently cramped quarters on the ninth floor of 305 King St. W. in Kitchener, to a spacious second-floor suite where Rossi expects 80 employees to be working a year from now.

And, on the evening of June 29, Smile will celebrate with a block party on King Street in front of its offices.

“I think a big part of our success has been the progress of downtown Kitchener,” Rossi said, alluding to the core’s ongoing transformation as more people work and live there. “It’s been a huge part of why we’ve been able to attract the talent that we have, being in a location like this that clearly has positive momentum, but is yet still a reasonable place to live in terms of living expenses and things like that.”

About The Author

Anthony Reinhart
Director, Editorial Strategy
Google+

Anthony Reinhart is a veteran journalist who left the Globe and Mail to join Communitech in 2011. Tony has covered everything from crime, politics and courts to business, the arts and sports, and his writing has won numerous journalism awards. He is Communitech's Director of Editorial Strategy and senior staff writer.