NewPace, which is headed by founder and CEO Brent Newsome, will become a subsidiary of the NewNet messaging division, based in Amsterdam. The company will change its name to NewNet Canada, and Newsome will become a vice-president of NewNet Communications and general manager of the Canadian operation. NewNet, which is a portfolio company of Los Angeles private equity firm Skyview Capital, did not reveal financial details.
Krishna Viswanadham, president of NewNet’s mobile messaging business unit, said the company bought NewPace because the Bedford company created technology facing strong demand around the world.
“Mobile operators are trying to develop content-rich messaging applications and NewPace has developed technology that we can offer to the mobile operators’ customer base,” said Viswanadham. “NewPace is probably the top one, two or three players in the world in this technology space.”
The deal is the third exit this year for Atlantic Canadian tech companies. Fredericton-based UserEvents was taken over by LiveOps Inc. of Redwood City, Calif., in January, and Compilr of Halifax was bought by lynda.com of Carpinteria, Calif., in April. With no financial details, none generated massive media interest. But already in 2014 there have been three exits by Atlantic Canadian startups whereas last year there were only two – BioVectra of Charlottetown and RIVALUS of Halifax.
NewPace has spent the past few years developing a suite of rich communications service, or RCS, mobile phone products. These products increase the flexibility that companies can offer in texting services on mobile handsets. It means texts can be used for chat, group chat, file transfer, video and voice calling across networks and using any smartphone. The goal is to upgrade the current standards of voice and text messaging offered by mobile carriers.
The company, whose revenue was well into seven figures in 2013, has been focusing on sales for the past year, but its 28-person staff simply didn’t have the firepower to sell to mobile operators around the world. NewNet has that sales force. It now supplies products to 80 operators around the world, including the top one or two operators in each major market, said Arjan Lasschuit, senior director, product management, for the messaging unit.
“We simply can’t reach the world the way NewNet can,” said Newsome.
He said the company will maintain its current workforce in Halifax, honour existing contracts and likely grow it in time, given the sales potential that comes with the new ownership. In the past, NewPace offered consulting services in a range of mobile businesses, and that side business will in the future focus more precisely on RCS-based work.
NewPace has been in existence for five years, and in that time, paid a total payroll of $10.2 million, almost all of it within Nova Scotia. The company was owned by Newsome and CTO Gavin Murphy. Without giving specifics, Newsome said that they’ve done well from the deal. Yet he made it clear that the deal with NewNet was very much their second option.
“We would have preferred to stay independent,” he said.
He had been trying to raise equity capital, but could not secure the $5 million or so that would have been needed to build the bona fide sales force that NewPace required.
Newsome said all the components exist in the Atlantic Canadian ecosystem to develop tech companies whose products can sell globally, but the acute shortage of growth capital is preventing them from growing.
“It’s a missing piece in our ecosystem,” Newsome said.
This article was originally published on Entrevestor.