Long before personal computers were a thing, Bruce Croxon was building arguably the first technology-based social network in the world. Founded in 1987, his brand Telepersonals used interactive voice response — the same technology as voicemail — to help strangers connect. At its peak, Telepersonals hosted a billion and a half minutes of phone traffic per year across North America. Ultimately, that service would evolve into the online dating site Lavalife, which grew to 600 employees and over $100 million in revenue, with more than two million users.
Croxon sold Lavalife in 2004 for $180 million and left the company in 2006. He became a TV personality on CBC’s “Dragon’s Den” from 2011 to 2014 and a host on BNN’s “The Disruptors” for the last five years. In 2013, he and co-founder John Eckert launched Round13 Capital, a VC firm that invests in Canadian growth-stage technology companies. Round13 has so far raised two funds together worth $114.5 million and invested in 14 companies, of which two have exited, Hubdoc and BLUERUSH.
In this month’s scaleup Q&A, Croxon shares about adapting to rapid technological change, adopting the right attitude to venture capital, and what the government can do to help Canadian tech companies grow.
Research Money: You founded Telepersonals in 1987, well before personal computers became ubiquitous. What was the opportunity that you recognized and how did you move on it?
Bruce Croxon: We take it for granted today, but the late eighties was the first time that you could measure people’s activity using a technology system. We could see where they were hanging out, what they were and weren’t interested in. And that led us to the business, because the computer printed out a report that showed the level of activity. So the measurement of data led us to the idea.
We figured out that all of the applications for interactive voice response that we were experimenting with — and that included information lines, talking classifieds, weather reports— far and away the most popular was helping people connect with each other.
Telepersonals was the late-eighties predecessor to a service called Web Personals that we bought in the mid-nineties, and then combined both of those services and advertised them together, because we realized that the technologies, although different, were serving the same end. Whether it was voice, text or email messages, we saw them as the same market.
R$: Between the late eighties and when you left in 2006, there was an incredible amount of technological change. How did you cope with so many dramatic shifts?
BC: I’ll never live through so much profound change as the mid-nineties when the internet became commercialized. All of a sudden, our version of scale changed. Until then, we had to set up in every city that we went to, with a local 24-hour call center to handle traffic and customer service. We built it city by city. Now you can launch something, and as long you’ve got a good translator, you can be global a week Saturday.
As it turned out, the internet dating business is characterized by a large volume of people that spend a relatively small amount of money. The phone was characterized by a lot smaller number of people, but they spent a lot per person.
R$: Did you have to create new systems along the way?
BC: Continuously. And we were willing to do that work because we bought into the benefits of having strong organizational development systems to deal with change. We were also very fortunate that we were growing the business in an era when the technology itself was a barrier to entry for other people coming in, because it was big, it was expensive, and it was complex. So we were able to make a lot of money as we were growing because other people couldn’t figure out what it is we were up to. And that’s a very different situation than it is today, when the cost and the complexity have gone out of the technology. Now if have an idea that’s getting traction, your competitors are going to be hard on your heels pretty quickly. So you have to move faster.
R$: At Round13, you describe yourself as investing in growth-stage companies. What does “growth-stage” mean for you?
BC: Growth-stage for us means that you have established product-market fit and you have enough customers using your service or product that we can get in and understand where those customers have come from, what it cost to attract them, and what it looks like they’re going to be worth over time. If we’re going to invest $5 to $15 million, we expect that 80% of that money will go into attracting a lot more of those customers. We would like to have some confidence that the market is big enough to keep doing what you’re doing, largely through the channels you’ve already established.
R$: How big do those companies tend to be?
BC: Most of the companies that we engage with are north of $300-$400k a month in terms of revenue. We will look and engage earlier, but where we tend to write checks seems to be more in that range.