One week before he announced the deal that would transform his company, Verafin CEO Jamie King came home to his alma mater to describe the secret to his company’s success.
The story is often told in St. John’s that they set out to develop software for the mining industry. But they soon realized there was a better market in helping banks prevent fraud and money laundering, so they pivoted.
On Thursday May 8, King delivered the closing address at the Open House being held that day by the commercialization centre of the Newfoundland university.
He made a vague reference to the pending $60 million buy-in by Spectrum Equity, saying only that he’d been talking to investors and hoped to have an announcement soon. One week later he would reveal that the Boston and Silicon Valley-based private equity firm would take a major stake in the company, allowing several early investors to exit. During his speech, what he wanted to detail for the students and entrepreneurs at the Open House was the culture that makes Verafin unique.
“I realized years ago our continued success as a business would not be based on my ability to write code or algorithms all day that would detect and prevent fraud,” he said. “Our business success depended on developing a company where innovation could flourish.”
And Verafin has undeniably become a success. It attracted its 1,000th customer in March 2013, and has kept growing. It has 200 employees, and its revenues this year are expected to increase 50 percent to $30 million. King plans to continue growing and to add as many as 150 employees in the next two to three years.
And the company meets a definite need as debit fraud losses could reach $20 billion by 2015 and the United Nations Office on Drugs and Crime estimated in 2009 that the amount of criminal proceeds laundered globally each year reached $1.6 trillion.
Verafin frequently learns of its software being used to catch people engaging not only in white collar crime but also drug trafficking, terrorism, elder abuse and human trafficking – news that invigorates the entire staff.
King stressed in his speech that Verafin is perpetuating its winning formula by developing a corporate culture that stresses six facets: purpose, value, growth, reward, freedom and joy. And the speech demonstrated that Verafin goes beyond the usual clichés in addressing these values.
“Verafin has been a great company to be associated with, both in their product and their approach to management,” said Mark Dobbin, the head of Killick Capital, an early investor in the company. “I’ve learned more from being on their board than from working with any other company I’ve been associated with.”
Case in point: when Verafin opened its first office, King and his cofounders didn’t like the factory-made cubicles that were available because they didn’t engender teamwork or creativity. So they bought plywood and built their own tables – circular and portable. They could be moved anywhere. That means employees can sit around a table one week and move around the next as teams reconfigure. Some staff sit at a different table each day, depending on who they need to sit with.
Verafin encourages “continuous improvement” throughout the entire organization, King said. Once a month, there are hackathons in which a team proposes a new product and has 24 hours to come up with a prototype. King said the benefits of such innovation radiate throughout the organization.
Verafin also has each of its divisions set its goals for the coming quarter, and detail those goals to the entire company. That means 30 teams, quarter after quarter, set higher standards for themselves and fight to meet those standards.
“People love it,” said King. “Do you know what they like about it? They love it because no one is telling them what their target will be. They’re setting it themselves.”
Much of the culture in Verafin rests on the employees setting their own standards, and having their performance assessed by their peers.
Rather than performance reviews set by managers, Verafin encourages peer reviews so everyone – even King himself – is assessed by other staff members.
The company aims to reward its employees, but not necessarily with cash. There are no performance-related compensation packages, even for the sales people. King said the sales team is paid well but not with commissions.
So how does it reward employees? The employees – sales people and others – compete to see who can make the most noise when they meet their quarterly targets. (King’s slides included photos of cowbells, fog horns, gongs and other instruments of mass dissonance the staff use.)
Any team hitting a target can celebrate by making all the noise they want. A big sale calls for a chain of high fives. That means every employee (as many as 200 people on any given day) line up and the sales person who scored the sale runs through the office high-fiving them.
There may be fewer than 200 people on some days because Verafin employees are allowed to work wherever they want, at home or at a coffee shop, as long as they meet their targets. Or they may be on vacation. Verafin does not track its employees’ vacation. “We’re talking about adults here,” said King simply.
King also said he and the company founders have had their own book club since they started the company. They read and discuss the same books to mine the ideas of leading business thinkers. “If you ever want to build something impressive, never, ever, ever stop reading,” said King, who is trained as an engineer. “If you stop reading, you’re done.”
Finally, King said his staff likes to have fun. The company has been known to clean out the nerf gun section of Toys R Us so the staff will have guns to play with. If he’s walking through the office and gets hit by a nerf dart in the side of the head, he just keeps walking because it’s just another day at Verafin.
As King delivers his speech, it’s necessary to keep reminding yourself that this is a company that successfully foils the world’s leading crime syndicates in their essential goal of laundering illicit funds. And the company that hands out nerf guns to its staff is good at fighting financial crime, as $30 million in revenue and a $60 million buy-in will attest.
This article first appeared in the Spring 2014 Entrevestor Intelligence report, which can be found here.