“There was no succession planning at all,” said Hans Downer, who became the company’s new president and CEO in September.
Through connections with various directors on the firm’s board, Mr. Downer found out about the company and its need for someone to take the wheel. Because of his acquaintances, he gained the board’s approval and jumped into his new role as head of a company that he only recently learned existed.
Beginning on Sept. 11, Mr. Downer said there was enough money in the bank to satisfy payroll until the end of that month. His first order of business was to find funding.
“I had to do an investor presentation at the end of September. I had started (at the company) two weeks earlier,” he said. “At that point, I kind of knew where the bathroom was and that was about it. It was pretty awkward.”
Despite that, Mr. Downer managed to secure angel financing from the Oakville, Ont.-based Angel One Investor Network, as well as funds from Ottawa’s Capital Angel Network, raising a total of $515,000 since October. That adds to the company’s previous angel funding of $625,000 raised by Mr. Thomson and the $1 million in funding from the Federal Economic Development Agency for Southern Ontario – financing that was conditional on ActivDox obtaining $2 million from other sources. Mr. Downer said he expects to raise the remaining funds by the end of March.
But funding wasn’t the only challenge the new president and CEO faced.
“You’ve got a brilliant founder and some of the stuff is written down, and some of the stuff is in his head,” he said. “Putting all the pieces back together was extremely difficult.”
The startup is also in the process of changing its name to SavvyDox to avoid conflict with a company called ActiveDocs that’s headquartered in New Zealand.
Yet the company is still on the the path to success, with its developers – all seasoned professionals who came from Adobe Systems Inc. – working through Mr. Thomson’s death to come up with a prototype by Sept. 20.
“The demo just blew the socks off everybody,” Mr. Downer said. It also landed the company two pilot projects that will begin this month: one with IT company CGI Group for a large-scale enterprise resource planning implementation in Ventura County, Calif.; one to assist U.S.-based construction company Burns & McDonnell with the implementation of an oil pipeline in Alberta.
These 45-day projects will prepare ActivDox to launch its product in April or May, Mr. Downer said.
WHAT IS ACTIVDOX?
ActivDox is an enhanced mobile solution for document management to ensure customers are always viewing the most recent copy of a document, as well as any changes that have been made to it. The software also informs the author who has read what parts of the document.
Currently, the firm is marketing itself to enterprises that manage large projects, but future sectors will include the wealth management industry and government departments, according to ActivDox’s new president and CEO Hans Downer.
FOUNDER: David Thomson
EMPLOYEES: Seven full-time employees and two contractors
2013 PROJECTED REVENUE: $1.6 million
USERS: CGI Group and Burns & McDonnell. Full product roll-out in April or May.
EXTERNAL FUNDING: $1.14 million in angel funding; $1 million from the Federal Economic Development Agency for Southern Ontario.
REVENUE SOURCES: ActivDox sells its software to channel partners, who then license the software to their customers.
THE GOAL: Fully integrate new president and CEO Hans Downer and raise an additional $860,000 in angel funding early this year.
OBJ asked three succession planning experts to take a look at ActivDox and share their thoughts on the company’s situation. Here are their edited responses:
REALIZE YOU ARE REPLACEABLE
Gary Connolly, accountant at Connolly & McNamara:
"You always need to realize that you are replaceable and you always need to be on the lookout for someone who can do your job. You should be training them. That’s not just part of disaster planning, that’s just good business planning. Finding someone new can take time, and time can be a killer – especially in the startup business. Sometimes you don’t have time because the competition is creeping up on you. By the time you find a CEO, it might be too late if it’s a fast-moving business. Our job as accountants is to provide some balance and identify the risk factors. We’re not here to be cheerleaders. The good stuff will take care of itself. The bad stuff is what will creep up and hurt you."
IT’S NEVER TOO EARLY TO START
Norman Bowley, lawyer at Low Murchison Radnoff LLP:
"Most startups are strapped for cash. They’re focusing on getting work through the door and getting product out the door. The last thing they want to do is sit down and think about succession planning. But it’s far, far less costly in terms of professional health and emotional impact to do it before than after. If you try to do it (after the fact), it’s infinitely more costly. If the company is going to do it right, you’re going to involve a number of individuals – an accountant because there’s a lot of tax planning that should be done, an insurance expert, sometimes you need a facilitator because more and more in succession planning, we’re realizing you need to bring in all the stakeholders."
SOMETHING IS BETTER THAN NOTHING
Alaina Spec, lawyer at Low Murchison Radnoff LLP:
"Having a shareholder’s agreement in place is not something that would replace succession planning, but it’s certainly a document that could help to resolve disputes between shareholders. Even a letter of instruction – something is better than nothing. At least if you have some idea of the CEO’s intention, some sort of instruction on their perspective, it will usually help guide the situation. Everybody, especially in a family-owned business context, has a different idea of what the founding member of the company would have wanted. You need to put those long-term goals down in writing. It’s something that I know a lot of our clients are facing as the generational shift happens."