CASE STUDY
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Sprout Solutions is a Philippines based SaaS payroll, HR and recruitment company. Sprout’s products are tailored to meet the requirements of each jurisdiction in which their enterprise clients operate.
We recently spoke to co-founder and CEO Patrick Gentry about working with Kindrik Partners on Sprout’s series seed funding round.
Sprout was founded by the husband and wife team of Patrick and Alexandria Gentry. In 2016 Acceleprise (a US based SaaS accelerator) asked Sprout to be the first Philippines based company to join its program. Patrick says:
We were interviewed by other accelerators, but chose Acceleprise because it specialised in assisting companies that were looking to scale their sales to enterprise customers.
The connections that Patrick and Alexandria made at Acceleprise helped them to raise an angel round from overseas investors. Those funds were used to expand the company’s software engineering and sales teams. The company grew rapidly, and by the middle of 2017 it had over 75 employees and 150 enterprise clients in the Philippines.
After proving the business model locally, the company wanted to expand into other emerging markets in Southeast Asia. Patrick and Alexandria began looking for institutional investors to fund the tailoring of the company’s products for each new market, and to grow the international sales and services teams.
Patrick was well connected in the startup ecosystem after several years of bootstrapping both Sprout and a previous company. A fellow entrepreneur provided Patrick with a warm introduction to several VCs with a focus on B2B SaaS products. Sprout soon began negotiating a series seed investment round led by VCs Kickstart Ventures (Philippines), Wavemaker Partners (Singapore), and BEENEXT (Singapore).
A condition of the round was that Sprout needed to redomicile in Singapore. This type of restructure (or flip) is quite common, since many Southeast Asia VCs will only invest in a Singapore incorporated entity. There are a number of reasons for this, including taxation, minimal restrictions on foreign ownership, the ability to easily repatriate investment returns from Singapore, and legal certainty (including IP protection).
For Sprout, a new Singapore head company was incorporated and the existing company became a Philippines operating subsidiary. The terms of the restructure were incorporated into the long form investment documents and the flip was completed at the same time as the rest of the investment round. Patrick recalled that:
Some aspects of the restructure were unique. Kindrik Partners were great in this scenario as they did a deep dive to understand the specific requirements and complete the process by working closely with local counsel.
The company closed its US$1.6m series seed round in late 2017. Patrick told us that:
Completing the round was a huge deal. I knew we could accelerate this business with capital, and felt like the timing was perfect. It’s exciting to gain the freedom to stretch a bit and continue our rapid expansion in new areas of the business and market.
Kickstart recommended Kindrik Partners to Patrick as they had worked with us on the other side of previous deals.
Patrick says:
Kindrik Partners were invaluable in moving the deal forward as efficiently as possible by keeping the negotiations centred on the critical commercial points, and by providing insight as to what was common market practice in these areas. I can’t emphasize enough how important it is to have a strong partner that not only knows the process inside and out, but will also go to war for you and represent you as if they are negotiating for their own company.
Kindrik Partners even assisted with the calculation of the cap table, as the deal involved some bespoke debt conversion calculations relating to a previous round.
As entrepreneurs we pour our heart and soul (and blood and sweat) into our companies, and to have someone fighting for us as if it were their own – that’s just awesome!
Sprout is rapidly becoming a regional SaaS star, and we would like to thank Patrick for taking time out of his frantic schedule to speak with us.
[Note: The firm’s name was changed to Kindrik Partners in July 2020 and references to the firm’s previous name have been updated.]
