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Lightspeed’s Dax Dasilva on going public and growing through payments

Lightspeed POS Inc. begins initial public offering at the Toronto Stock Exchange. Mauricio J Calero
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Shortly after Lightspeed CEO Dax Dasilva rang the opening bell Friday morning at the Toronto Stock Exchange (TSX) for his company’s initial public offering, he sat down with The Logic to discuss the company’s growth strategy, its share structure and how he feels about that pending lawsuit.

The Logic analyzed Lightspeed’s 211-page prospectus in February and highlighted potential risks and growth opportunities as as it joined the slim ranks of other Canadian tech companies—like Shopify and Ceridian—that have gone public. The Montreal-based software-as-a-service (SaaS) firm listed at $16 a share, and Lightspeed hopes to raise $240 million. At publication time, the stock LSPD was up to $19.15.

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Talking Point

Lightspeed CEO Dax Dasilva sat down with The Logic and explained why the company is betting big on its payments offering for growth, the thinking behind its share structure and his last 24 hours before the company’s IPO.

Why did you decide to trade on the TSX?

This project internally was called Project Patriot, and we debated whether to do a list. In the end, I think the investor base is really split between Canada and the U.S. I think that’s a real testament to where the Canadian tech ecosystem is right now, that a Canadian tech company like Lightspeed had great reception at our roadshow on both sides of the border and can trade on the TSX as a first step. In the future, we may list in New York, but we thought, Let’s make this a Canada-first exercise.

What would it take for you to list in New York?

Fast-forward into the future: We’re on a bigger scale. We’ve rolled out more of Lightspeed Payments, because that’s just at the beginning. [It will be] a company that’s taken a few steps further and it’s going to be even more exciting to U.S. investors. But we already have, I think, all of the big names in Canada and the U.S. in our allocations for this IPO.

Why is Lightspeed Payments a core part of your growth strategy?

Up until now, we’re a 90 per cent recurring revenue business, which is why SaaS businesses get the multiples that they do. Because we’re so predictable, we’re a great public company. In general, SaaS companies have that built-in predictability, and we’ve done great as a company that sells software subscriptions and sells modules to customers that allow them to have new growth drivers as they expand.

We’ve done payments, in our history, through referral partners. It means the customers have to go through a second sales process. It means it’s not so integrated with the solution. There [are] two portals: the Lightspeed Portal and a separate portal for payments. We think that introduces a lot of friction. We are trying to make the complex simple.

We work with the more sophisticated, established and complex retailers and restaurateurs, and anything we can do to make to make a better experience is something that we put on our roadmap. It also lets us participate in the growth of our customers. As our customers grow and their gross transaction volume grows, Lightspeed benefits. It’s everybody’s incentive for these SMBs [small- and medium-sized businesses] is to succeed. We believe that our solutions help them with success. We see in month three to month 15, our customers grow on average 20 per cent [gross transaction volume (GTV)]. That’s way above what I think the growth rate is for retail and restaurants in the general economy.

Do you see Lightspeed Payments expanding beyond payment processing?

What is interesting about the Payments platform is we offer our customers a lot of analytics and insights into where best to put their capital, in terms of where to invest in inventory or where to invest in staffing, or what’s working in the business and what deserves more investment. We have all sorts of financial value-adds, or financial services, that can be driven from the payment solutions.

Because our businesses are at scale and they have capital needs, this is an interesting area of opportunity for us. I think we’re not doing the low end of the market. Our businesses are at scale—they do US$500,000 in GTV per year, per customer—so an entry-level reader is not the sort of level of quality that is required by our merchants; most of our merchants have physical locations that require quality hardware. So I think we’ll have more payments offerings, but I think it will be targeted to things that will help our customers grow.

Lending, same-day funding—these are all things we can possibly look at as we build out Lightspeed Payments. Right now, [Lightspeed Payments] is available to our biggest market, which is retail customers in the U.S. Our goal over the next calendar year is to expand that to all products and all regions.

Why did you decide to go with a share structure that lets you maintain the most control?

We’ve always been a founder-led company, and that’s allowed us to focus and have a long-term view. I think myself and the other investors are very aligned in the fact that there’s so much growth potential ahead for Lightspeed. We would not want to see a big foreign company come in and take this asset from the Canadian tech ecosystem. And [Caisse de dépôt et placement du Québec], which is our biggest shareholder, did not take multi-voting shares. Between myself and the major shareholders, we’re all aligned in making sure that the decision-making power to keep this company Canadian and a tech anchor in Canada is very important [in order to] to realize the full potential of the company.

Do you see your ongoing patent lawsuit as a challenge for the company moving forward?

The lawsuit’s without merit. I don’t want to comment too much on it, because these kinds of lawsuits happen when companies are successful. It’s without merit and the people behind it are not in technology. I’ll just leave it at that.

Is Lightspeed OnSite [its Mac-based retail platform outside the cloud] still a major part of your business?

It’s an increasingly smaller part of our business and we’re focused on the cloud and all of our platforms that all have amazing growth, like our retail platform, our restaurant platform and, of course, all of our modules, like analytics and loyalty. OnSite’s the product that I built 14 years ago, and it’s still being used by a few thousand customers. It’s certainly very well-loved by those customers and we maintain it, they’re very loyal to it.

We keep it updated as Apple releases new versions of MacOS, and I think it’s probably one of the longest-running pieces of software. But they don’t let me code anymore, which is a good thing for everyone.  

How did you spend the night before your IPO? What did you have for dinner?

The last 24 hours before the IPO, I think we went from a day of meetings in San Francisco to Washington, and then drove to Baltimore and slept two or three hours before we got to meet with one of the big investors in the world, T. Rowe Price. It’s just literally been nonstop. I’m going to look back upon the roadshow as something that’s very physically taxing, and one of the most rewarding experiences I’ve ever had.

We do a crazy amount of travelling. Since I’m a vegan, it’s been whatever has been available on the road. It might have been a lentil burger.

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What is the first thing you thought when you woke up this morning?

The first thing I thought was ‘OK, it’s another day of pure adrenaline.’ It was surreal that this was about to happen. At the same time, nothing about Lightspeed has ever surprised me. It’s always exceeded my expectations. I have my upcoming book and I write about how this path has unfolded.

Who did you ring the bell with and why did you choose them?

For sure, my compatriots on the roadshow: JP Chauvet, our president, and our CFO [Brandon Nussey]. Of course, all of our executive management team were here, some of our investors and some of our bankers, My partner and my mother and some close friends and some Lightspeed team members that helped on the IPO.

We’ve had so much support during the building of this company and also during this particular process. There [are] a lot of people that worked very long nights and that supported me and the three of us in the company’s IPO process that we wanted to share the experience with.

What are you going to do this weekend?

Absolutely nothing. My mother is in town from Vancouver, so I’ll be spending some time [with her], and being in my own bed and I’m proofreading my book. It’s supposed to come out in May.