Written by Amira Zubairi

Wave provides small businesses with free cloud-based software tools to manage invoices, accounting, payrolls, and payments. In March, Wave raised $6.7 million and last month, it raised $14.6 million, both investments from BDC capital.

During the interview, Simpson said adopting a cloud-based solution early on was both advantageous and a challenge for Wave.

“Not only were we early to the cloud, but also very early to offering it for free,” said Simpson. “Figuring out how we were going to monetize, how we were going to do it in a sustainable way, how we were going to make it so that the business owner felt value through that process, was really some of the challenges.”

In order to help Wave overcome these challenges, Simpson says Wave has adopted an “up-sell model” by offering consumers the chance to purchase additional products that they need.

“We thought free [services] would bring them off the sidelines and that we could then find ways to monetize,” said Simpson. “We’ve done well in payments, payroll, small business lending and we think that there’s all sorts of services built into that free core software that will drive value for both the customer and us.”

According to Simpson, Wave has seen an approximately 15 percent conversion rate from its free users into its paid users. Croxon says that this rate can get better or worse depending on how much Simpson makes on each of additional products he sells to Wave’s users.

While it can be difficult to attract and retain small business owners, Simpson says Wave has a unique approach to acquiring and holding onto its users. “We have the most amount of data about them…when it comes to making it easy for them to get a merchant account with us or for us to process payroll or ultimately to give them a small business loan, we think we’re in the best position…and that’s going to lead to real advantages to the small business owner.”

Going forward, Wave is hoping to continue providing its services while improving its monetization strategy by raising lots of capital. “We’ve erred on the side of raising lots of capital to go after the market,” said Simpson. “We’re a Canadian company fighting among the global giants and making an impact, and we want to continue that philosophy.”

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StartUp HERE Toronto is a publishing partner of Betakit and this article was originally published on their site.