/Verafin sets sights on global expansion after signing record $515-million financing deal

Verafin sets sights on global expansion after signing record $515-million financing deal

The St. John’s software company that this week set a record for the largest venture funding deal plans to focus on expanding further into the United States and eventually abroad, according to its co-founder.

On Wednesday, Verafin announced a $515-million equity and debt financing deal that is believed to value the company at close to $1 billion.

“The past few years have been really quite rapid in terms of growth,” Brendan Brothers said in an interview Thursday morning. “This allows us to continue forward on driving the business.”

Brothers estimated the company, which he incorporated in 2003 with two co-founders, now has at least five years of financial “runway.”

The funding round involved two previous Verafin investors: Boston-based Spectrum Equity (which also has investments in Grubhub, Lynda.com, and SurveyMonkey) and Toronto-based Information Venture Partners, both of which added new equity financing. New backers in the deal were Northleaf Capital Partners, BDC Capital, and Teralys Capital. Wells Fargo Capital Finance and Scotiabank provided debt financing.

Brothers wouldn’t disclose specifics of the deal, including the breakdown of equity and debt, and wouldn’t confirm the $1-billion valuation.

According to Brothers, Verafin’s co-founders, management and employees now comprise the company’s largest shareholding group. “That’s exciting for us because we want to continue to move towards ownership of the business being in the business,” he said.

Verafin started at Memorial University with robotics software that its three founders eventually applied to money laundering and fraud. Brothers says the company’s cloud-based software helps financial institutions, such as banks and credit unions, combat those crimes by detecting unusual patterns and suspicious activity.

The company says nearly 3,000 banks and credit unions use the software, with the majority of its customers and revenue flowing from the U.S.

“Even with the large number of customers we have now, there’s still a lot of runway left for us in the U.S.” Brothers said.

The company says it has signed 25 financial institutions with over US$5 billion in assets in the past 18 months. Those large financial institutions — with greater exposure to fraud and money laundering — are key to the company’s strategy for growing its business.

Our long-term vision is to create the world’s most effective crime fighting network

Brendan Brothers, co-founder

Verafin’s plan is to move further into the United States, home to more than 10,000 financial institutions, and then to other foreign markets within the next “several years.”

“Our long-term vision is to create the world’s most effective crime fighting network,” he said. “Because crime is not local. In a lot of cases we’re dealing with transnational criminal organizations.”

But that expansion will bring challenges, including the integration of an estimated 100 new employees each year for the next couple of years. But Brothers said the deal isn’t applying additional pressure.

“This actually gives a sense of freedom,” he said. “It actually liberates us a little bit and gives us the sense that we’re just getting started when it comes to trying to tackle this problem.”

Brothers says the company intends to keep its headquarters and most of its employees in St. John’s.

Michelle Simms, chief executive of Memorial University’s Genesis Centre, the incubator where Verafin started 16 years ago, said the news was a shot in the arm for the region.

“It certain was all the talk this morning,” Simms said. “It’s a really good news story and I think it proves that we can have a very successful technology company in Atlantic Canada and we can attract investors that are world-class.”

Financial Post

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