Some stories take longer than others to unfold. The dot-com era’s massive investment in internet infrastructure looked like a lost bet until a wave of mobile devices and complementary technologies began to utilize that bandwidth, midway through the 2000’s. Business to consumer technologies were all the rage in 1999, or rather, the idea of business to consumer technologies were. Fact is, the implementation stage of tech can happen long after the idea stage, especially on an enterprise level.
Northcore Technologies (TSX:NTI) grew out of a dot-com era company called Bid.com, which had developed Dutch Auction technology that is now being implemented by enterprise clients more than a decade later. Canadian tech veteran Amit Monga thinks the timing is now right for Northcore, whose suite of business to consumer tools manages the assets of everyone from Kraft to General Electric. Cantech Letter talked to Monga about why enterprise needs to be social, his company’s improved balance sheet, and whether or not the time is right for an “Enterprise Groupon”.
Amit, you joined Northcore this past summer. What did you see in the company that made you want to join?
The reason I came to Northcore is because I see enormous potential in the company. Northcore, as you know, is the old Bid.com, which was one of the early companies in the auction space. One of the key assets of the company today is the Dutch Auction patent. We have a great working relationship with numerous enterprise clients, including GE. We have a fifty-fifty joint venture with GE on something called the GE Asset Manager. We work with GE Capital and provide a very strong technology platform, which they use internally and externally to manage their clients. So I saw the relationships the company had I saw the IP, and on top of that there was some really really great talent in the company as well. The COO of the company, Jim Moskos, has been with the company for more than a decade. I thought there was a great foundation for me to take the company to the next level.
What’s your background?
I’m a mechanical engineer, by training. I was born and raised in India and I went on a UN scholarship to study in Moscow. I came to Canada in 1992 to do my PhD in engineering at the University of Alberta. I did my PhD in genetic algorithms and applied them in the asset management space. Northcore is in this space, so it ties into my educational background well. After my PhD, I joined KPMG consulting, I was part of their e-commerce practice. In 1999, I left Canada to go to California to start a company called HigherMarkets , which was an e-procurement software company that competed with Ariba and Commerce One, but we were focused on the higher education vertical. That company was acquired by Sciquest, which at that time was Nasdaq listed. After that, I came back to Canada and was a venture-capitalist at MDS Capital, which is now called Lumira Capital, and then I was headhunted by National Bank Financial to focus technology investment banking. I was involved in IPO’s for companies such as Constellation Software, Miranda and Sandvine. I took a step back from investment banking in 2008 and spent some time with my alma mater, The University of Alberta, and helped them set up a finance specialization, in fact I endowed a couple scholarships in the area of capital markets and venture capital. Every summer, I go back to Alberta and teach a course called The Practice of Investment Banking and Venture Capital. But it wasn’t long before I wanted to jump back into business and so I started looking for a situation in which I could get involved with a company that had something, but needed help getting to the next level. I was going through multiple opportunities…
That takes us to your involvement with Northcore. What did you feel you had to do when you first got involved?
I spent a lot of time figuring out what the company’s strengths and weaknesses were. The first thing I found out was that the company was never funded properly. They wanted to expand on their IP Portfolio, but never had the capital. The told me “Amit, the problem we’ve had is that we don’t know how to pitch this to the capital markets or even strategic investors, so it would be great to have someone who understands the technology and can articulate the story to the street.” When I came on board June 1st, I knew we had to come up with very clear cut messaging. There are three value creating drivers in this company. One is the enterprise asset management side of the business, where we do end to end life cycle management. We do sourcing of the asset, tracking of the asset. The second part of the business came about because we were working with some clients that wanted to get into group discounting, so we have since built some real domain expertise in social commerce. The third part of our business is the intellectual property. We have a valuable Dutch Auction patent. Before I got involved the company actually engaged a third party to see where we could derive the most value, which verticals we should go after, so we have started to ramp that side of the business up.
So, the third part of the business is what remains from Bid.com?
Generally, yes. Some of the work that has been done on the enterprise side has an auction component to it. Our Asset Seller is a business to business exchange, if you will. These are targeted auctions, but are much more sophisticated than an eBay, for instance. We do these auctions for clients of GE, for example. There is a component of Bid.com there, on the intellectual property, absolutely. The Dutch Auction patent is a part of my long-term vision for the company. We have two patents, we are actively looking at licensing opportunities and we’re also looking if they are any active infringements of our patents. We are also looking at expanding our patent portfolio.
You came in this past summer, you have had very little time with Northcore so far. What’s your next year going to look like?
Our next year is all about executing on the three components of the businesses we just discussed. On the enterprise side, there a four critical components; Asset Buyer, Asset Tracker, Asset Appraiser and Asset Seller. These are very sophisticated, work flow driven engines. It’s a system that is used by our clients today to globally track, manage and reallocate assets, at the same time this is a very comprehensive disposition suite that does targeted and open e-auction platforms. We have a strategy now to take our platform and sell it to enterprise clients. Our sweet spot on the enterprise side is companies that are about $50 million in revenues, that have more than four locations, and that have capital assets that need to be tracked. We are now building that sales pipeline. On the social commerce side, what we have done is develop a very powerful group discount liquidation platform , which we believe could be white labeled. Within that, we are also incorporating our patented Dutch Auction. Unlike Groupon, for instance, we can work on tiered auctions. That’s a strategy that’s behind the enterprise stuff, but we expect to act on that as well. The third piece, as I mentioned is the IP.
Not to be too salacious here, but are you talking about an “Enterprise Groupon?”
The reality is we are doing a kind of Enterprise Groupon. I don’t really like to talk about our product using other companies names, but we definitely have the ability to exploit social media tools to expand the businesses of enterprise clients
Why it is important for enterprise to become more social?
Companies today have internal business processes to manage how they do their existing business. I’ll give you an example. There is a company that is in the consumer electronics space that we have been talking to. What they do at the end of the month is look at all the inventory they have. Their particular inventory is televisions, cameras, dishwashers, etc. They look at their product cycle, look at the products that are near the end of the road and dispose of them. One of the things they were doing was to do an email blast with an Excel spreadsheet to all their dealers. When we met with them we said “How about we integrate this whole process into your social platform?” For example, people can go onto your website, your Facebook page and we can make it so customers can, with a click, take a look at your inventory. From there how about we set up way for these customers to bid on these items. We’re helping move them away from a rigid, linear approach and into something more social, more flexible and ultimately, more profitable and efficient.
Give me and example of a company that would use these tools. Take a company that deals in farm equipment, for instance, would that be a typical customer?
Yep, absolutely. But let me give you a real world example. Kraft Foods is a company that has 600 locations worldwide, and they use our system to track all their equipment and then whatever they have to dispose of or reallocate, they will go into our system to make that decision. Another way they might use it, for example, is if they need equipment they might look at another of their locations to see if that equipment us being underutilized somewhere else within their system. Our software has a very sophisticated work flow that is captured around each asset.
What are companies like this using now?
A lot of them would be using an in house system that uses very inefficient spreadsheets. That’s basically our competition.
Aren’t there a million companies going to large companies and pitching these kind of ideas right now How do you distinguish yourself?
We distinguish ourselves with our track record. We have built enterprise level systems. We are not a fly by night concern that has been around for a year or so. We have built businesses that interact with General Electric’s systems and Kraft’s systems, Toro’s systems etc. We can bring a high level of security, encryption, all the things that enterprise requires. We have worked with and succeeded in working with very demanding enterprise clients.
You mentioned three different aspects of your business. What do you think the revenue mix will be going forward?
That’s very hard to say at this point in time. All I can say is that we are going to execute on all three. As you start looking at our quarters going forward, I think the revenue mix will sort itself out. There are a lot of moving parts right now. We are changing our business model internally, regarding how we license out products, and we’re looking at revenue sharing arrangement with clients. From my perspective I want to offer software as a service, cloud based services, in which we can focus more on recurring revenue.
Are there going to be additional infrastructure costs that will mean you have to go back to market? Northcore’s revenue has slowed to a trickle. What are your financing needs looking like going forward?
When I joined the company there were warrants that were exercised, so that has given us some cash and a better runway to execute on the vision. We have a very strong balance sheet, from a cash in hand perspective. My first focus is to get the company to break even. It’s important to me to raise awareness of the company in the capital markets, and so far I am pleased to report that the feedback I have gotten has been very positive. What I need to do now is to show a couple quarters of execution to validate what we are doing. I am looking to raise money, but at a higher share price so the financing will be less dilutive.
Even though there is quite a long history behind Northcore, you seem to be approaching it like a start up, with that kind of energy.
Well, we have a new board, a new executive team and the focus is now squarely on accelerated growth. The enterprise group is going well out of the gate. We have existing clients that we believe we can up sell. Our social commerce group is working on being the go to company for blending social with enterprise. And we have a very focused strategy on monetizing our intellectual property. I have a very strong technical background that is already meshing well with the team, and I understand how to work well within the capital markets. You’ll find me three days a week meeting with analysts, marketing the story and getting some really valuable feedback. My focus is now to build a solid foundation and execute on the vision I have.