Real Matters’ Billion dollar IPO demonstrates that it Can Be Done

Mark McQueen

It’s not often that our firm, or anyone in the venture business, gets to participate in the Initial Public Offering of a “unicorn.”

As the order books closed last night on the $157 million ($125M treasury, $32M secondary) IPO of Real Matters, we finally had an excuse to open the bottle of bubbly that had been given to us as a gift when we closed our $300 million Wellington Financial Fund V in October 2015.  Not that there hasn’t been a lot to celebrate over the past 19 months, but this was a poignant moment, too.

Poignant because of the recent loss of Alistair Blackburn, our good friend and COO of Real Matters.  His decade of unfailing effort played a key role in Founder & CEO Jason Smith’s remarkable accomplishment this week.  We meet plenty of talented people in our business, but this was a particularly dynamic duo.  We toasted his memory, and all that Mr. Blackburn had done on behalf of the company’s many stakeholders.

The business that you reviewed in the Real Matters IPO prospectus is dramatically different, and more than 12x larger, than the one we first financed in 2010.  The mission was the same, however.  But, as everyone knows in the venture space, it doesn’t always come to pass.  Far too rarely.

At our Fund III Annual General Meeting in 2011, Mr. Smith told our LPs that he was going to build a “billion dollar business.”  My stomach sank; not because I didn’t believe that Mr. Smith had the energy and talent to do it.  We’d already worked with him on our 2002 financing of Basis100 in Fund I, and knew that he had the industry experience to tackle a large market like the mortgage space.

It was simply that no one in the Canadian innovation landscape has been rewarded for making that public promise.  Too many folks have over-promised and under-delivered, making investors guy-shy every time a CEO makes that proclamation.  With the pricing of the IPO last evening, Real Matters achieved that billion dollar valuation, and justifiably so.

The difference here was that Mr. Smith knew the space he was tackling, he had enough early bank and insurance customers to give him comfort about the scalability of the business model, and he had the toolkit to bring it all together.

As our team sipped from our paper cups last night, I thought about the success factors that led to this great moment, and the lessons we can take from them — with the clear benefit of hindsight.  Several Canadian venture funds had the chance to invest in the business between 2010 and 2012, and many passed.  There’s nothing unusual about passing on a story, and, to their credit, they mention it when the company’s name comes up in conversation.  (There’s nothing unique about this; a VC we know in Menlo Park always reminds his visitors that he passed on an early Facebook round).

The takeaway on the Real Matters’ story seems clear: people and market.

On the people front, experience matters as we know — but energy, judgment and focus are supreme.  And our man Jason Smith is the case study.  He had been through the 1999-2002 tech “experience”, and already knew what it was like to start, grow and sell a business.  In the end, though, without his other attributes, none of this would have come to fruition.

The capstone to the day was a quick visit to the local Loblaws to pick up some President’s Choice mini tortilla shells.  I couldn’t find them, and needed to recruit the help of someone behind the customer service counter.  She was working a long shift-and-a-half; she said her kids and husband were at home, wondering when she’d be on her way.

It was the perfect life moment.  Her Union pension plan is one of our long-standing institutional investors, which means that, unbeknownst to her, the day’s success was her investing success, too.  I know the work has only just begun for the Real Matters team, but I hope they take a moment next Friday to take some pride in this first leg of the journey: you did it, just like you said!  And folks far and wide, most of whom you’ll never meet, stand to benefit.


(disclosure; our Fund III owns equity securities in RM)



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