The front office for Canada’s hottest social media company, HootSuite, looks a bit like the foyer of a frat house, and not just because it’s filled with young people. It’s crammed with bikes, a well-used foosball table, video games and some older furniture. There’s a leopard skin with head intact draped over some shelving – a family heirloom, explains Ryan Holmes, the company’s founder and CEO.
HootSuite’s East Vancouver office is a very busy, crowded place. The social media management developer is growing so fast, it will soon need to move.
While Montreal is offering tech firms like HootSuite some attractive relocation incentives, Holmes wants to stay in Vancouver and fulfil his mission of building HootSuite into a $1 billion company, selling it and then ploughing some of the exit money back into the local tech industry through a venture capital syndicate.
Holmes recently sat down with Business in Vancouver to talk about his company’s success and future plans.
HootSuite was spun out of Invoke Media less than three years ago. What’s its growth curve been since then?
We launched HootSuite internally for our team [at Invoke Media] and then exposed it to the world, and we had really good feedback right out of the gate. In terms of user numbers, it took us two years to get our first million users; it took us eight months to get our second million. We recently hit three million within six months, and we’re looking at hitting a total of six million by the end of the year.
Last year at this time, we were at 25 employees. We ended the year at 100. We’re at 148 right now, and we’re on track to hit 240 for end of year. Our revenue – we went from zero to a $10 million run rate last year. We’re not disclosing our end-of-year run rate, but we’re on a pretty amazing growth rate.”
Omers Ventures recently invested $20 million in HootSuite. How does that position the company?
This latest round was not an equity round; it was a secondary round, meaning the investors bought stock directly from the owners in the company. The company doesn’t really need a cash injection right now. What it does allow for is it reduces risk and allows us to head toward a bigger goal.
In Canada, we see companies taking exits at $10 million, $50 million, $100 million. That’s a hard cheque to turn down for anybody. What I’m interested in is building a $1 billion company. If somebody comes along and offers me a cheque anywhere along the path up to $1 billion, it’s a very tempting thing. I sold a small percentage of my ownership in this latest round. I now have reduced temptation of taking a premature exit.
Why are you fixated on that $1 billion target?
One thing I would like to see in Vancouver and Canada is something similar to the PayPal mafia. They were all early employees of PayPal. They all had monster exits with PayPal, and they were able to take their winnings and form a syndicate that co-invests. For that to happen in Vancouver or Canada, you need to have people that have a significant exit and understand the technology. Everybody getting a significant exit creates a legacy and creates something that you can pay forward and bootstrap an industry in a substantial way.
Vancouver seems to be good at incubating startups, but there are a lot of early exits. Why?
They need access to capital. Over the past couple of years, the investment market has changed, and it’s gotten much better. But there are a lot of ideas that die on the vine.
Would you consider taking HootSuite public?
It’s not off the table. That’s really not my goal right now – I just want to build an amazing company that is helping to revolutionize social communication.
For most users, HootSuite’s social media dashboard is free. How do you make money from it?
It’s a freemium model, so 96.5% of our users are free, and we monetize off the 3.5%.
Freemium is one of the most disruptive business models we’ve seen. I’m very bullish on freemium; 20% of [our enterprise users] at one point were free users. We launched our paid plans in late 2010, so we pretty much went into January 2011 at zero revenue.
Four months later we were profitable, and we’ve continued to be profitable. We had a big user base at that point, so it was like flipping the switch.
HootSuite is growing quickly. Any growing pains?
Finding space that works with our culture. We really are looking to find the space that works for us.
We’re looking at needing a 24,000-square-foot facility by the end of the year to meet our end-of-the-year goals.
Do you plan to relocate within Vancouver?
I’m doing everything I can to. Zoning has been a bit of a problem – finding something that is appropriately zoned. We’ve had offers.
They [the City of Montreal] would love to move us out. But for the most part, I’m trying to keep us here. •
