Deal Radar 2010: I Love Rewards

I Love Rewards provides results-driven rewards and recognition solutions that clients can use to motivate employees and increase sales. The company focuses on recruiting, retaining, and inspiring employees so that they are in tune with their employers’ goals. Through the company’s points-based system, which includes packages targeted at younger workers and at keeping people motivated during a recession, employees can chose their own rewards.

Based in Toronto, Canada, and Wellesley, Massachusetts, the company was founded by CEO Razor Suleman in 2002. From his dorm room, this serial entrepreneur started Razor’s Edge, a company that provided students with athletic branded apparel. After graduation, Suleman developed his business to supply corporate branded items to large businesses. He soon realized that employees receiving corporate branded apparel from senior managers as a “thank you” for a job well done weren’t satisfied with or motivated by such gifts. He created I Love Rewards, a Web-based business, as an alternative.

The company has raised over $14 million so far: an angel round of $1 million from 16 investors, including members of the senior leadership team; a $4.7 million Series A led by JLA Ventures and Laurence Capital in August 2008; and an $8.7 million Series B led by GrandBanks capital and Ontario Venture Capital Fund with participation by JLA Ventures and Laurence Capital in May 2009. The company has no plans to raise additional money at this time.

According to Incentive Federation Inc., firms spend $26.88 billion annually on employee incentives. Although there are other companies in the market with similar solutions to I Love Rewards, the startup’s biggest competitors are companies that choose to administer their own programs. HR professionals create their own programs in order to cut costs, but administering and tracking such programs can be time-consuming. Other companies that offer similar services are Globoforce, Incentive Logic, Maritz, O.C. Tanner and Rideau. Some of these companies, like I Love Rewards, focus on two major areas: employee rewards and recognition, and sales and partner channel incentives. Others offer products in these areas and also deal with workers’ compensation, marketing campaign design, and wellness incentives.

I Love Rewards positions itself by offering points-based software that allows employees to choose their own rewards, a model that was not used until fairly recently but one that is quickly becoming popular among HR departments and recognition solution providers. The company’s rewards catalogue currently includes over 1,200 brand-name items, including products from Sony and Apple, and various life experiences, including renting a Ferrari for a day. The company has also partnered with vendors such as VISA and American Express. I Love Rewards’s SaaS solution can handle around 120,000 members on a single recognition platform.

I Love Rewards is based on a pay-for-performance model. Clients are given a free consultation and are assisted in setting up recognition programs. I Love Rewards brings in profits from margins earned on the redemption of products. Clients are not charged set-up, administration, or other fees to use the online solution. I Love Rewards builds a fully customizable website for each group of employees that includes ongoing point cards and employee marketing communication materials.

I Love Rewards won several top employer awards in 2009, including being named one of Greater Toronto’s top 50 employers by the Toronto Star and one of Canada’s Top 10 Tech companies.

The I Love Rewards system is built to be scalable to serve between 10 and 15,000 employees spending $25,000 to $4 million annually. The company runs on two levels. The first is the major market: employee recognition, sales incentive and cost-saving solutions. The second level is a niche market that provides specialized programs for clients in the hospitality, restaurant, professional service, call center, automotive and retail (footwear) industries. Customers include KPMG, Grant Thornton, PricewaterhouseCoopers, Bruce Power, Rogers, Marriott Hotel, Delta Hotel, Clarks, Cara Foods, ConAgra Foods, Bell, Microsoft, and others.

I Love Rewards turned cash positive in early 2009 and has seen a 92% increase in gross billing y-o-y. The number of customers grew 119% y-o-y. The company also saw record growth in Q4 2009. Thirty-five percent of year-to-date gross billings were generated during the quarter, and there was a 103% increase in gross billings for Q4 y-o-y. The number of employees has also grown by 48%. I Love Rewards declined to give revenue information, but according to the most recent information available, revenues in 2007 were C$10 million (US$9.64 million).

The ompany says that the I Love Rewards site has seen a 76% increase in traffic y-o-y. According to compete.com, there were just over 10,100 unique visitors in December 2009. The company says that its Express Site (online platform for members’ use) has seen a 378% increase y-o-y, while customer acquisition has increased 253% every year since the company’s founding. The number of members has grown 151% y-o-y and there has been a 652% increase in the number of redemptions y-o-y.

I Love Rewards plans to concentrate on its expansion into the United States. It would consider an IPO to raise additional capital for international expansion in the future. “Our success is directly tied to the rise in demand for our results-based recognition solutions,” said Suleman. “At a time when companies are looking to drive revenue generating and cost-saving activities from their employees, we provide metrics-based solutions that drive employee performance and engagement.”

Recommended Readings:
Deal Radar 2009: Cynergyis
SuccessFactors
Lars Dalgaard and his Success Factors

This segment is a part in the series : Deal Radar 2010