Kirk Simpson is leaving Wave three years after the sale of the pioneering Toronto software company to H&R Block

One of Toronto’s most successful software entrepreneurs, Kirk Simpson, is stepping down as CEO of Wave Financial Inc., the company he co-founded 12 years ago and sold to H&R Block, Inc. for $405 million in 2019.

Mr Simpson, 47, said the decision was “100 per cent mine” and comes shortly after Wave, now a standalone small business software unit of the American tax giant, posted annual sales of CA$100 million for the first time.

“It seemed like a perfect opportunity to transition and hire someone who could take it through the next round of growth,” said Mr. Simpson, who will be taking a few months off and has plans to start another business. He declined to share details about his next startup.

Mr. Simpson will be replaced by Zahir Khoja, who recently joined Australian e-commerce consumer finance giant Afterpay Ltd as general manager for North America. who was paid now and later. “Following a thorough search for Kirk’s successor, we were thrilled to meet Zahir, who has an entrepreneurial spirit, is a leader in the fintech industry and is poised to steer Wave’s future success,” said Jeff Jones, CEO of H&R Block. in a statement.

“The pandemic has shown us that small businesses are vital to the health of the economy and our local communities,” Mr Khoja said in a press release. “They’re a group worth fighting for, and more of them need the financial management tools that Wave provides.”

Wave was a major player in Canada’s tech startup sector after the 2008-09 recession. At the time, the domestic sector suffered from the demise of Nortel Networks while BlackBerry Ltd lost its early lead in the global smartphone race. What remained were mostly cash-strapped companies at risk of being snapped up by foreign buyers for bargain pricing, branch offices, and a few tiny startups with names like Shopify, Hootsuite, Lightspeed — and Wave. Technology companies made up just 1 percent of the S&P/TSX Composite Index.

Wave began offering free, cloud-based accounting and invoicing software for small businesses in 2009, and was able to quickly and inexpensively acquire users. Mr. Simpson originally intended to make money selling advertising on the platform, but that proved a challenge. In the early 2010s, the company started offering financial services such as bank transfers, online loans, invoicing and payroll to its customers through the platform. It was early days to offer so-called embedded financial services, which are now a key value driver for companies that sell digital business operating system platforms to small businesses, including Shopify, Lightspeed Commerce, Clio, and Jobber.

When pension giant Ontario Municipal Employees Retirement Systems became the first post-recession Canadian institutional investor to return to venture capital investing in 2011, it made its first investment in Wave. OMERS originally invested in a $5 million financing led by Charles River Ventures (now called CRV), which also made Wave one of the first Canadian companies of the era to break out of a major US venture capital let company support.

“It’s very common these days for Canadian startups to attract US investment,” said Damien Steel, global managing partner of OMERS Ventures and former Wave director. “It wasn’t usual back then. This was a major achievement at a time when the Canadian tech market was very small.”

Wave raised $77 million in venture funding and had set out to raise further funding in 2018, but sold it to H&R Block a year later – a significant “exit” that allowed OMERS to recover its approximately $10 million investment to quintuple.

Wave’s “freemium” model — which typically sees a minority of its free customers signing up for paid services — has helped fuel the company’s revenue growth, which has roughly doubled since it was acquired by H&R Block in 2019 , and the company has increased employment to 370 employees, up from 260. Wave, with 300,000 paid and unpaid customers, mostly in the US, isn’t profitable yet, but Mr. Simpson said “there’s a defined path” to getting there to arrive and declined to share details.

While valuations of many tech companies have fallen sharply in recent months, Wave has been shielded as New York Stock Exchange-listed H&R Block shares have risen 36 percent in value over the past year.

Mr Steel credited Mr Simpson with not leaving immediately after the acquisition, but staying with it to “complete his vision”. He added, “I can’t wait to see what Kirk does next. I would literally write him a blank check on his next adventure if he chooses to do so.”

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