Verafin CEO Jamie King

Verafin CEO Jamie King

St. John’s-based Verafin, the world’s largest financial crime management software company, has closed a $515 million equity and debt recapitalization, which it says is one of the largest growth financings ever by a Canadian software company.

In a statement, Verafin, whose software helps banks battle fraud and money-laundering, said it has enjoyed tremendous growth in recent years, hitting $100 million in annual recurring revenues this year. It added that its vision of fighting financial crime through collaboration and cross-institutional analysis is fast becoming the industry standard for fraud detection and anti-money laundering regulatory compliance. The recapitalization allows Verafin to aggressively pursue its growth plans while remaining an independent company.

The deal included new equity financing from Spectrum Equity’s current investing fund as well as Information Venture Partners’ new fund, with participation by new backers Northleaf Capital Partners, BDC Capital and Teralys Capital. Senior debt financing for the transaction was led by Wells Fargo Capital Finance and included Scotiabank in the syndicate. The company did not provide a breakdown of the equity and debt components of the round. Houlihan Lokey served as the financial advisor to Verafin.

“We are very excited to begin this new phase of Verafin’s journey,” said Co-Founder and CEO Jamie King in the statement. “This financing round with our long-term partners Spectrum Equity and IVP allows Verafin to accelerate our investments in product innovation and customer success, and continue our progress in market penetration of larger financial institutions.”

Following the transaction, Verafin co-founders, management and employees will collectively represent the largest shareholding group. A prior Information Venture Partners, or IVP, fund provided initial venture capital financing for Verafin in 2009, and a prior Spectrum Equity fund led a $60 million equity financing in 2014.

Read our Analysis of the Verafin Deal

Nearly 3,000 banks and credit unions use Verafin to fight financial crime and comply with regulations. Leveraging its big data intelligence, visual storytelling and collaborative investigation capabilities, Verafin reduces false positive alerts, delivers context-rich insights and streamlines compliance processes, the company said.

Verafin was known in the St. John’s tech community to be growing strongly, as its headcount has soared past 350. The announcement on Wednesday gave specifics on how quickly it has been growing:

  • Annual Recurring Revenue Growth: The company hit $100 million in annual recurring revenue in the first quarter of 2019, representing 87 percent growth in annual recurring revenue since the beginning of 2017.
  • New Business Growth: The company achieved 108 percent growth in sales bookings between 2017 and 2019, and 102 percent growth in average deal size over this same time period.
  • Customer Value: Consistently, 97 percent of Verafin customers renew annually.
  • Up-Market Momentum: Verafin has signed 25 financial institutions with over US$5 billion in assets in the last 18 months and said it is experiencing increased growth and inbound interest from this market segment.
  • Product Innovation: Verafin said it has developed a unique customer-driven development process that provides rapid deployment of new product capabilities to meet and exceed customer demands in the rapidly changing financial crime landscape.

“We are thrilled to be renewing our partnership with Verafin via this new investment to support its next phase of growth” said Spectrum Equity Managing Director Chris Mitchell in the statement. “We look forward to working with Jamie and the rest of the Verafin team to continue to support their product-innovation led go-to-market strategy that has enabled the Company’s explosive growth.”

Dave Unsworth, General Partner at IVP added, “Verafin is in the very early innings of its mission to create the world’s most effective crime fighting network. We see a massive opportunity ahead for Verafin to continue to lead this market transformation through continued product innovation and thought leadership.”