Scaling with Angel Money Only in Canada: Joel Lessem, CEO of Firmex (Part 3)

Sramana Mitra: Is this the company that we are talking about right now?

Joel Lessem: Yes, I wrote the business plan 10 years ago. There was no documentation of who owned this IP. Then I had to go to the client and say, “I want to sell this to all your competitors.” I had to structure something with them. I took about a year to actually get the business legal, papared, and moving.

Sramana Mitra: So you bought the IP from these people?

Joel Lessem: That’s not really that important. I structured a deal where we owned it.

Sramana Mitra: However, you started a different company.

Joel Lessem: Right. It was fuzzy about who owned the IP, but basically I carved the IP out of the consulting company and the client into a new company and incorporated this company called Firmex. I struck a deal with both parties to then commercialize this thing that they’d invested half a million dollars in. It was funny because the owners of the consulting company were very excited about this. They said, “You can’t sell it because the person who wrote this application no longer works for us. We don’t know how to support it. You have to wait till we build the commercial version.” I said, “I’m just going to test market it.” I went out and I sold 80 licenses.

Sramana Mitra: At what price point?

Joel Lessem: Very cheap. It wasn’t a very goodlooking software, but I knew there was an opportunity at a very low price point.

Sramana Mitra: What did the product do?

Joel Lessem: It facilitates sharing of highly confidential documents for M&A and corporate finance. It’s called Virtual Data Room. To their shock and horror, I kept ringing the sales bell. What was really good about that was, it showed commercial proof.

We hired some developers to build this commercial version. The consulting company was only 10 people. It was getting expensive. They said, “We need you to raise money now.” That’s when I became the CEO. Without selling that prototype, I would never had the commercial proof to sell the angel investors. I raised $4.5 million.

Sramana Mitra: From angels?

Joel Lessem: Yes, from angels.

Sramana Mitra: This was happening in Toronto?

Joel Lessem: 90% Toronto, 10% US. The first round was a million. It took 18 hours.

Sramana Mitra: Who were these people? Were they people you had prior relationships with?

Joel Lessem: Yes, and no. I had one relationship with one of the individuals. He’s my first cousin. He introduced me to a number of high net worth people. They asked if they could have some friends invest. It just had a viral impact. Next thing you know, I had 37 shareholders. They wrote small checks. The fund raising was very rapid. I didn’t sell to all 33 outside investors. I probably sold to 12 of them, and then they had their friends jump in. That was successful. It got the business funded so I could hire 25 people. This is late 2007.

In the fall of 2008, we were selling a product to run M&A deals. The financial crisis hit. I’d $50,000 a month in revenue and $200,000 in expenses. My two angel Board Members said, “You still have a couple of million dollars in the bank. Go get an institutional round before you’re in a really difficult situation.”

This segment is part 3 in the series : Scaling with Angel Money Only in Canada: Joel Lessem, CEO of Firmex
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