There is, in Ottawa, in Vancouver, in Kitchener-Waterloo, even in Alberta, a tremendous amount of evidence that the Canadian technology scene has never been more vibrant or filled with promise.
But we cover the public markets, and this all feels a bit like viewing the phenomenon under glass; the frenzy simply has not yet hit Bay Street. In Kitchener-Waterloo there are now nearly a thousand technology companies, but barely a handful of them are public.
To compound the matter, the number of companies we cover has recently decreased with the M&A frenzy here. No more Mosaid or Miranda. No more Zarlink, 20-20, March Networks or Bridgewater, either. So what would it take to shift the balance towards a full blown sector rotation from mining and metals into tech? We think the IPOs of one or more of these five companies might just do the trick. Consider this our Christmas wish list.
The fact that we’re not seeing too many large financings in the public markets made the news that, in early September, Waterloo’s Desire2Learn had closed an $80 million financing from New Enterprise Associates (NEA) and OMERS Ventures doubly impressive. Desire2Learn, which develops e-learning software for hundreds of clients, including schools, universities and governments says it will use the proceeds of the financing to bolster its customer service, support its growth and further develop its technologies. The cloud-based learning company, which now has more than 550 employees, was founded in 1999 by John Baker while he was attending the University of Waterloo. The company is now one of the fastest growing techs in Canada, and has become a notable recruiter of talent in the area. For those tracking the layoffs at Research in Motion, Desire2Learn is another clear signal that the region’s fortunes will not rise and fall with BlackBerry sales.
Vancouver’s Hootsuite, which was founded by Ryan Holmes in 2008, has paralleled the rise in use of social media tools such as Twitter by large businesses, and then some. The company’s all-star client roster includes The Gap, Facebook, Zappos -even the Obama administration. The social media platform now sends more 150-million messages per day. How hot is Hootsuite? Hot enough that when Facebook’s Mark Zuckerberg was spotted at a hot dog stand in Vancouver earlier this year, the rumour mill exploded that he was in town to buy Hootsuite. Holmes quickly quashed that notion by saying that he wanted to “build a billion-dollar company and take it to an IPO..
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While Hootsuite might be described as an overnight success, the story of fellow Vancouver tech BuildDirect actually stretches back to the era when pet food companies had puppet mascots. Founder Jeff Booth told the Globe and Mail recently that his goal was to be the Amazon of building supplies, and that is why he took a recent investment from, you guessed it, OMERS Ventures. So do Canadian companies have what it takes to run the table and compete on the world stage, or are we doomed to simply hand the ball off when the game gets tight? Booth told tech journalist Mark Evans that “It wasn’t a matter of needing a lot more cash but also [of] having the right partners to build it into an Amazon-size company. Canada develops a lot of good companies but they don’t typically scale. We don’t want to be caught as being in the future of a great industry in which we are second [or] third place.”
4. Beyond the Rack
Never heard of Montreal’s Beyond the Rack? Ask your wife or girlfriend. The company, which works with premium brands to stage “flash sales” of high-end merchandise to its internet subscribers is already the number three ecommerce site in Canada behind Amazon and eBay and is gunning for number one. Many of the company’s numbers bely its age; Beyond the Rack has 7.5-million consumer members and is adding 200,000 each month. It has 3000 brand partners and, although the company has been closely associated with the aforementioned “flash sales” of women’s apparel, its home business is its biggest winner, accounting for a third of its current topline. Beyond the Rack now sells more than a million dollars worth of sheets each month. After raising $53-million from investors such as iNovia Capital, Rho Canada, Highland Capital Partners and BDC Venture Capital, the Quebec-based company’s sales topped $50-million in its second year and $100-million in its third. CEO Yona Shtern estimates revenue will come in between $160-180-million this year.
5. General Fusion
You can’t accuse Burnaby-based General Fusion of not thinking big. “This is the holy grail of energy,” said founder Michel Laberge recently. “In 100 years, the whole planet will run on fusion”. For those who forget that twelfth grade science class about E=mc2, fusion happens when the nuclei of two forms of hydrogen collide together at such a high velocity that they fuse. They then break apart, and form a neutron and a helium nucleus, which produces massive amounts of energy. Sound easy? It isn’t. General Fusion will require a lot of capital to get anywhere near commercial viability. Luckily, their list of backers includes Amazon.com founder Jeff Bezos and oilsands giant Cenovus Energy.