Don Murray, left, and Dale Lutz, co-founders and co-CEOs of Surrey-based Safe Software, are pictured in Vancouver in June 2023.The Globe and Mail
When Don Murray and Dale Lutz quit their jobs as software developers at space technology manufacturer Macdonald, Dettwiler and Associates to start their own company, friends warned they wouldn’t last six months.
That was 30 years ago. The two have since built Surrey, B.C.-based Safe Software into one of Canada’s top under-the-radar technology success stories. The profitable 244-person company generated $80-million-plus in revenue last year with a platform that allows its 20,000 global clients to seamlessly integrate vast amounts of data from different pieces of software, for an array of uses. With Safe’s recent move into subscription-based business model, the founders have said they figure it can reach $250-million in annual revenue in five years.
Despite that, Mr. Lutz, 57, has decided to cash out, shed his co-chief-executive-officer title and work part-time. “At this stage in my life, I want the freedom to spend more time with family,” he said. “Watching our son go through a leukemia diagnosis to recovery some years ago left a big impact on me.” He is planning to focus more on philanthropy, including supporting the Leukemia and Lymphoma Society of Canada.
Mr. Lutz will have plenty to put to worthy causes. Baltimore-based JMI Equity and Mr. Murray have bought his 50-per-cent stake, marking the first time an outsider has invested in Safe. The parties wouldn’t disclose terms, but JMI said it typically invests between US$100-million and US$200-million ($133-million to $268-million) in companies Safe’s size.
Considering Safe’s revenues, its 30-per-cent operating profits and its accelerating year-over-year revenue growth rate – it hit a high of 24.3 per cent in the most recent quarter – it is likely worth more than $400-million, based on industry valuations, which would mean Mr. Lutz’s take exceeded $200-million.
JMI has established itself as one of the most successful foreign investors in Canada’s technology sector. It has backed 15 other companies here, including Pointclickcare, Clio, Benevity and Jane Software. “We’ve known for years that you can build a great software company anywhere. It doesn’t have to be in Silicon Valley,” JMI general partner Brian Hersman said. “It starts with terrific technical talent, and Canada has terrific technical talent.”
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Mr. Hersman said he has tracked Safe for 12 years, and that it is a “market-leading company with marquee customers, strong intellectual properties and delivering great solutions.” He first contacted the founders eight years ago, even though they had no desire to sell. “Life changes happen,” Mr. Hersman said. “There’s typically a time and a place for our involvement. That has to be a mutual decision. I think they’ve been very receptive to hearing what we do.”
JMI had to win a sale process managed by Vancouver’s Fort Capital that drew 18 expressions of interest. To reach a deal, JMI agreed to allow Mr. Murray to emerge the majority shareholder. It also pledged that it would never meddle in operations or push for an initial public offering, and that the functions of the two-person board (Mr. Murray and Mr. Hersman) would be limited to approving budgets, objectives and acquisitions.
JMI is fine with letting Safe continue paying 20 per cent of profits to staff, Mr. Murray said. “They said absolutely, we want to leave the leadership of Safe untouched. There’s nothing broken and so they don’t want to fix it. It was literally a five-minute discussion.” He said he’s happy to tap JMI’s network, portfolio companies and expertise to help grow the business.
The co-founders initially bonded over lunch discussions about Star Trek while working at Macdonald, Dettwiler and Associates, and started Safe in 1993 after successfully bidding on a British Columbia government contract to develop software that could ingest data into a common platform from various pieces of software used by forestry companies.
Safe established itself as a specialist in spatial data. It sold its products to governments, emergency services, electrical utilities, phone carriers, railways, airports and aviation authorities. Customers have put its software to a range of uses. Those have included mapping out virtual “highways in the sky” for aircraft to follow, tracking the locations of drug-sniffing dogs in airports, creating “digital twins” of buildings for planning purposes and managing electricity outages.
Emergency service providers use Safe’s platform to send real-time information to forest firefighters and earthquake data to insurers. Municipalities use the platform to improve the accuracy of property records, track snowplow movements and plan better tree coverage, among other things.
Safe recently started selling its data-integration capabilities to information technology companies. These deals are typically valued around $30,000, about 10 times larger than the company’s previous average contract size. And Safe has done away with rudimentary graphics, cartoon robots and lizards in its marketing, which reflected the cheerful, geeky down-to-earth culture personified by the co-founders. In the past year, it has adopted the staid branding of an enterprise software vendor.
Mr. Lutz’s exit will be a shift for Safe employees, who are used to two leaders who have a friendly rapport and often complete each others’ sentences. Mr. Hersman said he isn’t worried about the change at the top. “I’m very impressed with Don’s vision and strategy; that’s the partnership we’re signing up for,” he added.
Mr. Murray, 59, said he has no intention of selling, and that he was surprised and saddened when Mr. Lutz informed him last summer of his intentions. “We’re still good friends and there are no hard feelings,” Mr. Murray said. “He said it was the end of the line for him being an owner and he wanted to do some philanthropic work. I can’t knock him for that. He’s been an amazing partner.”