CIBC Innovation Banking Podcast

Michael Hainsworth:

CIBC is pleased to bring you a conversation with Ed Quilty, founder of Aquatic Informatics. This podcast was originally recorded in early 2020. Since the recording, Aquatic Informatics was acquiredby the Water Quality platform of Danaher Corporation (NYSE:DHR) from XPV Water Partners.  As part of that announcement, Ed shared that “We are delighted to be joining the Danaher Water Quality platform. We have built Aquatic Informatics into one of the largest water-focused software providers in the world over the past 17 years, and we still see a tremendous amount of growth potential. We’re excited to join our new colleagues on the journey as we aspire to empower industry experts to make data driven, smart decisions with timely water insights.”

Uniting Aquatic Informatics together with Hach’s Claros offering and OTT’s products will solve critical problems for customers across the water cycle. As an example, instrumentation and software are now fully aligned to address key customer challenges related to regulatory compliance, difficult treatment decisions, water quality testing, and much more.

While some of the details of what Ed shares in our conversation may have shifted as a result of the acquisition, Ed’s story of scaling a business globally while delivering on a critical customer need will resonate with many entrepreneurs. 

Announcer:

Today on the CIBC Innovation Banking podcast, Aquatic Informatics is a data analytics company that helped save a village in Malaysia from flooding, monitors the water quality for the world's biggest economy and provides services as far away as Afghanistan.

Ed Quilty:

When you're learning at times you have to fake it until you make it to your sweet spot. And by faking it, I think you've just got to get in there, try your best and just basically jump in from the deep end and then later in your career as you get to this sort of mastery phase, the risk there is that can turn into boredom and at that point, we're looking to perhaps, resetting people back down onto another curve where they have to start faking it again, at least initially until they learn the skills where they move from just that early learning phase and to sort of a sweet spot and again towards, for mastery of skills.

Announcer:

On this episode of the CIBC Innovation Banking podcast, we learn how CEO Ed Quilty leveraged a foot in the door to build a global success story. Here is Michael Hainsworth.

Michael Hainsworth:

Ed Quilty knows an opportunity when he sees one and while he never expected to find himself waiting into tainted waters in the BC interior or managing a global success story, the founder and CEO of Aquatic Informatics has built a career on reinventing himself. I caught up with the innovation economy entrepreneur from his office in Vancouver. Not a lot of kids growing up wanting to be CEOs of companies that manage data infrastructure providers. How did you end up in this line of work?

Ed Quilty:

Really by accident and probably through some bad luck. So I did my undergrad in biology. I was going to the University of Victoria, doing a co-op degree, and I had a great co-op job came up and I was going to be tracking elk on Vancouver Island, which was kind of the dream job for any biology students that or any sort of Marine mammal studies.

Michael Hainsworth:

And I can imagine you've got some great photos of the elk.

Ed Quilty:

Well, I wish I had, but unfortunate what happened about a week before the work placement, the funding got canceled. I was left without a job and went back to the co-op office and there's only one job available left. It was in the [Kootenays 00:02:18] and it was looking at acid mine drainage and in Kimberly, there's a mine there and looking at industrial waste, which is not what I wanted to do at the time. And obviously not really any... No other students really in the program were interested in that job. So I took it. Really no choice and I was a week later, I was standing on the edge of a creek in Kimberly, BC and pretty shocked actually at the amount of pollution going to this beautiful stream that was totally devoid of life. And I was hooked. I really wanted to solve this problem. That led to kind of a winding path where now I'm the CEO of a software company focused on the world's water data management challenges.

Michael Hainsworth:

And in between those two things, you left BC's Ministry of the Environment to start your own consulting firms. So what was the biggest lesson you learned going out on your own like that?

Ed Quilty:

I think this is where I really identified the market opportunity. So I actually really loved my job at BC Environment. I worked there for a couple of years and we were exposed to a really diverse environmental challenges, and when I did leave to start my own consulting company, I wanted to narrow in on one particular, one part of the work we'd focused on at Ministry of Environment and that was looking at the impacts of forest harvesting on rivers in British Columbia. And from there we started installing sensors in rivers to try and monitor continuously what the impacts are rather than taking a sample every once in a while.

Michael Hainsworth:

Because that was the big advance at the time.

Ed Quilty:

Yeah, this was sort of the disruption in the market. Before then you'd go out once a month or once a season and collect some observations and now we're putting a sensor in the river. It's sort of the equivalent of comparing a movie to a snapshot or a Polaroid. I can get so much more information. Really for me realized, this was a great way to collect a bunch of information, but there weren't really tools to manage the sheer volume of information coming in. And that was where sort of lightning struck for me and led me to go build a platform to manage that type of data so we could only go back and try to understand what were the challenges in the rivers at the time and what was causing them.

Michael Hainsworth:

It sounds like there was a remarkable volume of data coming out of those sensors, but data that sort of overwhelmed your skillset leading you to go back to grad school specifically to expand it.

Ed Quilty:

That's exactly right. So you know my undergrad was in biology, and really a nice dataset at the time, might be 30 or 40 samples. Would actually be considered a big data set where you could do some analysis and be able to term with statistical significance what the trends might be. Now, I'm getting that every 30 seconds and getting millions and millions of measurements per year and I didn't have the skillset at the time. We weren't taught how to process that kind of information in biology. So I went back to grad school to really take courses and work in other departments where they did manage that type of data, electrical engineering and geophysics.

Michael Hainsworth:

And so you're quoted as saying that you met for a full day once a month for three years with the CEOs of a business training program in Vancouver and 10 years later you were still meeting monthly with that original group. Do you still keep in touch?

Ed Quilty:

Absolutely. We still meet every month and that was really the transitioning from a biologist to a data scientist, to an entrepreneur and CEO. That was a really valuable, having that cohort of other entrepreneurs that we could grow together and share best practices learning from one another.

Michael Hainsworth:

I guess there's an element of a birds of a feather sort of thing as well. You want to steep yourself in a culture of entrepreneurialism to pick up as much as you possibly can.

Ed Quilty:

It's often seen when you're an entrepreneur, it can be a pretty lonely world or isolating. You tend to stand alone a lot. You're making decisions on your own initially until your company gets more to scale and you surround yourselves with a really strong team. But yeah, we had joked in the early days and I think actually still do that. We were, our group was sort of like AA where we would get together and share our challenges and support each other, getting through the wild but still fun ride of being an entrepreneur.

Michael Hainsworth:

So then what is your advice to that entrepreneur? Just starting up dealing with that insane loneliness that comes with being a one man shop on day one.

Ed Quilty:

Really my... The same way I applied sort of the concept of continuous learning. When I faced a challenge in the field with a lot of information coming in, I went back to university to try and learn new skills that can be a little bit more tricky on the entrepreneur world. So I looked for places where I could develop these skills and really the first obvious step for me was this local group of entrepreneurs who are going through similar challenges and we're bringing in experts from around the world to provide some training and mentorship. So, reaching out, not being afraid to ask for help, not pretending you have all the answers. I think really be thirsty for learning is really an essential requirement of being an entrepreneur.

Michael Hainsworth:

I was reading an old article about you that stated that in 2014, you were up to 100 staffers and you doubled your revenue year over year. Where are you now?

Ed Quilty:

We're back into rapid growth mode. Two years ago we did a deal with private equity firm out of Toronto, XPB Water Partners. They were really appealing to us as they were focused on the water market, understood it well, understood the challenges and the opportunities and they provided a lot of strategic value and so we did the deal with them to get some growth equity in the company. We acquired a few companies since that time. We've grown quite rapidly and we're now back into hiring mode. We need to hire about 20 new staff and will be continuing that pace for at least the next year.

Michael Hainsworth:

I'm looking at Glassdoor and it rates Aquatic Informatics a remarkable 4.2 out of a five stars. So I'm looking at the cons. It says relatively small company, but the pros, great senior software developers to learn and to get coaching from and awesome coworkers, great views from the office, which I'm looking forward to seeing by the way. And approachable management. How did you incorporate mentoring into the corporate culture like this?

Ed Quilty:

There's a number of things that differentiate us in the Vancouver market, where our headquarters are and where our other offices are in Denver and in Hobart, Australia and in Florida. We've got a very open culture where it's a total open books, high transparency. We talk about our financials every month. We share goals. In fact this week right now ,we've got super week going on, which is where our entire company comes together and shares in planning for the next quarter and a rolling 18 months. And so what we've done, is set up a culture of openness, transparency and coaching, helping each other. And that's been really effective.

Ed Quilty:

We've really being growing our team into leaders, providing a lot of leadership, mentoring and pathways for growth and promotion, and I think we've provided a really clear vision for our team, which is also important. People are driven, motivated by a number of different things. It's a little bit up to the individual, but typically mission is really important. Clarity of what we're working on and how they're being measured and how they can contribute. And I think the transparency has really helped with that and we've really embraced again, continuous learning to find tools and skills for our team to become better leaders.

Michael Hainsworth:

Are these are the kinds of things that come with being in your stage of the company's growth trajectory or is it something you can apply on day one as well? Because it seems to me that in the early days of entrepreneurial ship you're just so focused on getting a minimal viable product out the door, bringing in financing that the cuddly, feely type stuff that comes with bringing the entire staff in to discuss the future and on a quarterly basis no less, sounds like something that would take up an awful lot of time at those early days or am I just wrong about this? And is this something that you have to do from day one?

Ed Quilty:

Well, let me put it this way. If I was going to start another company, going to start up mode, I would definitely do it the way we're doing right now. You're really looking for a multiplier effect. I think the common mistake that many entrepreneurs make and I myself have made is trying to do everything yourself and holding on too tightly and you ended up getting in the way of your company. You end up being the bottleneck. Yeah, definitely. If I was starting a company right now, I'd have open books, be a very transparent culture and growing the rest of your team so you get this multiplier effect. So rather than providing fish to your team and train them how to fish and they can go forth and grow other team members. So that's how you scale quickly. Otherwise it's just too slow and too painful.

Michael Hainsworth:

I've been told that when it comes to hiring, you like to use the beer test.

Ed Quilty:

That is true. There's many benefits to the beer test. Really what it is, is a getting to know the person. We are a technology company, but we're actually a people company. It's the people that work on the technology, help with our strategy and help drive growth in the company. So, I find in interviews, people can be nervous. They can maybe not show their best side or they can maybe fake it until they make it approach. So I find the beer test is a good way to really go out in a more casual setting and just have a good chat. And I do find I learn a lot more about the people in a one hour beer than I do over multiple rounds of interviews.

Michael Hainsworth:

What do you make of that fake until you make it idea?

Ed Quilty:

I think it depends on the situation. Often I think, in our careers it's good to reset at times. Like you'll go through this growth curve or S curve of learning and then getting into a sweet spot of knowledge and then into a mastery. And I think, when you're learning at times you have to fake it until you make it to your sweet spot. And by faking it, I think you've just got to get in there, try your best and just basically jump in the deep end. And then later in your career as you get to this sort of mastery phase, the risk there is that can turn into boredom. And at that point, we're looking to perhaps resetting people back down onto another curve where they have to start faking it again, at least initially until they learn the skills where they moved from just that early learning phase into sort of a sweet spot and again towards for mastery of skills.

Ed Quilty:

So you know, in our company we will have people move from team to team and sometimes then it seems like you're moving from top run on one ladder down to the bottom of another, but it's usually in reality a big step forward in your own personal growth and professional growth.

Michael Hainsworth:

You've advised entrepreneurs to hire thoroughbreds and that you learned early not to be afraid to hire the best people and pay for it. How do you do that though in a startup environment where the money is tight and everyone has to wear multiple hats?

Ed Quilty:

Yeah, it's a good question. So our approach in early days is we had an employee stock option plan. So you're right, we're very tight on money. In fact, we didn't have any money. I remember having very long conversations on when we'd be able to afford a printer for the office. $300 seemed just not in the realm of possibility when we started up. And then at same time you're trying to acquire great people. So what we ended up doing is rolling out an employee share option plan where we would provide some salary and in the early days, a higher portion of stock options in the company. And so, that draws a certain type of individual to the company. Not everybody can come in on a lower salary with this more risky upside. But some people are really drawn to that and those can be entrepreneurial type people. They're willing to take risks and bets. And in the early days, those are very useful people in the company. Of course as a company matures, you start phasing that out where you start paying fair market value for staff, find other ways to motivate them.

Michael Hainsworth:

So let's rewind the clock a little bit to 2013 when you won that $8 million contract with U.S. Geological Survey, what did you learn about the need to staff up to be able to meet those demands?

Ed Quilty:

I think in the time, we grew from about 40 people to 80 people in a very short period of time.

Michael Hainsworth:

And for perspective, how many do you have now?

Ed Quilty:

We're at about 120 and expecting to grow to about 150 in the next three, four months.

Michael Hainsworth:

All right, so U.S. Geological Survey.

Ed Quilty:

Yeah, so I mean this seems like a, and it really was, a giant mountain in front of us. It felt like our Everest though I say, I think it's a Himalayan saying that the mountain in front of you is the largest and you get to the top of that one and there's another big one after that. And that has been our experience. But at the time, it seemed almost insurmountable to that quickly double our staff and to take on this massive project. Very exciting. But challenging. And so yeah, where do you start?

Ed Quilty:

We had to focus on, really focus on, bringing in great people. The first place we went was for referrals. So with our team, get them to leverage their networks, tell their friends to join our company, tell them why our mission is so important, tell them why they love working at our company. And that was where we got the majority of our candidates. Out networking as well and meeting new people at software development meetups and industry events. That was really good. We also had open houses where we'd open up our office so I could combine and learn about our company in our space and our culture. And we actually pulled it off. We were able to hit our hiring goals and like I said, we're now facing this again where we're expecting to hire upwards of 40 people in the balance this yearn probably continue with that track for some time.

Michael Hainsworth:

What's the hardest part about expanding global and how did you overcome it?

Ed Quilty:

Certainly there are cultural and business differences in some of the markets we've gone to. I don't know, for example, over in places like Sudan, Afghanistan, Sri Lanka, we're in Vietnam, Malaysia and those places are a little bit different to do business and then we're in other places that aren't so different like Australia, New Zealand, the UK, but really, it was interesting. I looked back and said, "a lot of people question, why are you guys in 60 countries when you've got this big market you're on the door step of? The United States." It's a really good question, but when it was mapped out or are the countries that we expended to in the early days, they're really tied to between my undergrad and at grad school days, I went on a trip, actually a number of trips. For the first one, around the world and a realization I had on the road is that it doesn't matter where you land, people are people. They're generally very friendly, easy to get along to.

Ed Quilty:

And the cultures can be quite different, the religions, language, but that made expanding to those markets a little less intimidating. So when we were standing... In the early days, I literally would get on planes, land in country and just start networking, making calls, emails, knocking on doors and that's just how it got going. So admittedly there wasn't that much strategy put into it.. So these can be exciting places to work and it fit with our mission, massive water problems around the world. And I really felt in our mission wasn't tied just to the U.S. It was much bigger than that.

Michael Hainsworth:

Did it help that you started with English speaking foreign markets before moving into Asia and Latin America?

Ed Quilty:

Absolutely. Yeah, absolutely. The first place we went to was Australia. That was a place I had traveled to in my youth, was quite familiar with it. And culturally, Australia and in particular New Zealand are much more similar. The language has obviously the same, slightly different accents of course, but it was a much easier place to start.

Michael Hainsworth:

So then how did you overcome the cultural differences when you did get into Asia and Latin America?

Ed Quilty:

Yeah, one of the keys for us is finding the right partners. In some countries we did go at it alone, but we typically try to find a great partner that's worked in that market. So it was kind of a bridge to that culture. We had someone that had maybe one foot in both cultures and we use that bridge initially to get in there.

Michael Hainsworth:

So the company was founded back in 2003. So clearly past the startup stage. You mentioned you're back into the growth stage. But I was also told that it's kind of a matter of outlook, not financials as to whether you consider yourself a 10 year old startup or a two year old startup or a 10 year old growth stage company or a two year old growth stage company. How do you describe the where you are right now?

Ed Quilty:

Yeah, we're back into growth but as a sustainable profitable growth versus in the early days... And we've been through lots of cycles. We've been around 17 years now or almost 17 years. We've gone through all of those stages, all of those cycles and we're in a bit of a different phase right now. We're very stable as a company. We've got strong revenues, we've got a lot of customers, nearly 2000 customers. So in one sense, we're a very stable and we're in a market that is very conservative and slow moving and stable, and so it can be hard to grow quickly in a market like that. And also when you've come out of many years of kind of excitement and stress of high growth and successes and failures along the way, there's perhaps a temptation to go a little slower once you're in this more stable position. But we're really excited about our mission, solving these problems worldwide. We really feel to accomplish our mission, we have to grow much more quickly, solve more problems in the water space, in more geography. So yeah, we're back into rapid growth mode but it feels different this time. We've got great financials, lots of customers. It's not a high growth startup, it's a high growth, more mature company.

Michael Hainsworth:

Tell me about those financials. You mentioned you've already received investor cash injections. CIBC provided you with a debt facility. Why was that the best solution?

Ed Quilty:

Part of our growth strategy is to do acquisitions. So really our... we've got four brands now under the Aquatic Informatics company and each one on its own is very strong and is having nice organic growth at a really good clip. But on top of that we wanted to acquire companies and have and will continue to acquire companies. So that's done through a mix of options and one of them does include using debt, which we've through CIBC a nice a debt facility to help us grow and we're using it mostly to acquire companies.

Michael Hainsworth:

And I guess the idea is that you're not giving away a piece of your company to acquire those other companies.

Ed Quilty:

That's exactly it. So we are buying companies that are smaller but are quite profitable and we go in and grow them more rapidly. Maintain the profitability and through a debt facility, it provides pretty good option as we're not diluted and as far as our ownership and we can bring in these companies and pay off the debt in a few years from the profits from those companies.

Michael Hainsworth:

Tell me about that and that financial calisthenics you have to go through because you have to weigh the rate at which you would be repaying any debt versus the growth rate and the revenue, the cashflow, coming in from that new acquisition.

Ed Quilty:

Yeah, that's right. So again, we do have a number of options. We can use our own profits from operations to acquire company. We can use debt and we can also use equity. We do have an equity firm, a private equity firm backing us. So we really have a number of options. And then when deciding which one to do, you're exactly right. We look at the financials of the companies we're acquiring. Some are a very good fit for debt. Like I said, if they're profitable and sort of bankable, really good fit for a debt. If they're more a startup, little revenue, more of a bet, that's more of a fit for equity. And so we really do model out the acquisitions, what we expect they'll do over the next five years, running a number of different scenarios. And from that we can decide what's the best mechanism.

Michael Hainsworth:

So other than a debt facility, so what is CIBC done for you?

Ed Quilty:

I think within the first week we acquired our first company with it. So yeah, we're off to a very good start. They've been very supportive, through that initial transaction we felt them. They're really great to deal with. And looking at our options for the bank, we wanted to partner with them. It really is a partnership. We're working with them. They'll review the deals in the later stages if we can use the debt facility. So it is early days but so far, I mean we've been dealing with a number of banks for nearly 20 years and it's been a really great relationship and I think the relationship's important part. The individuals we're working with, they know our businesses quite well. Lots of discussions and sharing our strategy, of course financial information and them meeting our teams. We got very comfortable with each other and I think we looked at it as really a partnership.

Michael Hainsworth:

So let's extend your Himalayan metaphor. What's the next mountain in front of you?

Ed Quilty:

Yeah, so right now it's filling this rapid growth and a very competitive marketplace for talent. Having to hire 40 or so staff, get them onboard really quick. That's the mountain in front of us.

Announcer:

Learn more about the innovation economy, how letting go of two thirds of your clients can pivot your startup for greater success. How to retain that entrepreneurial spirit in the face of growing head count, and why your business model doesn't have to follow a Silicon Valley's rules. Subscribe to the CIBC Innovation Banking podcast with Michael Hainsworth at cibc.com/innovationbanking.