Ruffolo, Cowan and McQueen debate the State of Canadian Tech

On Tuesday, as the Toronto International Film Festival took over the city’s theatres, restaurants and sidewalks, four men sat on stools at a hall on the twelfth floor of a downtown hotel to talk about something with a touch less starpower: the Canadian technology sector.

The men were Ron Shuttleworth of M Partners, who were hosting the event as part of the larger M Partners Tech12 conference, TMX Equities President Kevin Cowan, Wellington Financial CEO Mark McQueen and OMERS Ventures CEO John Ruffolo.

The panel, called the “Collins Barrow State of Tech”, touched on many of the themes familar to those who have followed the Canadian tech sector since it has been living in the shadow of a dozen year commodities bull market, but it got unexpectedly feisty.

Here’s a rundown in pictures: OMERS Ventures CEO John Ruffolo (right) says Canadian tech is up against some obvious headwinds. We are coming off the biggest commodities bull market in history, he said, and that is compounded by the recent troubles of Research in Motion. But we are seeing a huge renaissance in tech companies in Canada, pointed out the OMERS Ventures CEO, citing the success of  Waterloo’s Beyond the Rack and Desire2Learn, as well as Vancouver-based Hootsuite. Wellington Financial’s McQueen said that although the Canadian tech sector represents a paltry 1.6% of the value of the overall market, companies such as Constellation Software and SXC Health (now Catamaran Corporation) have, in fact, made people a lot of money. Wellington Financial CEO Mark McQueen said Canadians need to pay attention to the excellent tech companies in our backyard instead of waiting for US firms to validate them. Ruffolo concurred: “If you’re a Canadian VC, and Sequoia Capital is coming up to take a meeting with a company in your backyard” he said, “maybe you should take that as a signal that you should too.” Ruffolo said OMERS recent and large financings with private tech standouts Hootsuite and Desire2Learn came about because of a belief the companies could compete on the world stage. But why is there so little volume for Canadian listed techs? The TMX’s Kevin Cowan says many underestimate the value of interlisting. Companies such as Open Text, Redline and Redknee, he pointed out, initially listed elsewhere before returning home to volumes that are better here. Mcqueen says too many companies who list in the US, where there is a slew of companies with a billion dollar plus market cap, get lost in the shuffle. Why are there valuation differences between companies in the same space between Canada and US? Mcqueen says that other than a brief period more than a decade ago the gap has been a way of life for Canadian tech. Ruffolo believes  a stingy Bay Street is partly to blame. The reason networking gear specialist BelAir Networks agreed to be purchased by Ericsson this past February instead of go public in Canada, he said,  was that the bankers valued the company  at a  fraction of what the Swedish telecom giant did.  Ruffolo says he worries about low Canadian valuations because of the possibility of takeovers. And now for the feisty part. “The last question of the day” said host Ron Shuttleworth, “comes from none other than Art Mesher of Descartes Systems.” “I don’t really have a question” said Mesher, from the back of the room, “I have a series of statements…I think we have to stop worrying about all this stuff. We have to stop thinking that Canada is somehow an inferior place to do business, because it’s not, it’s a great place to do business. I have been here eight years and I have no intention of leaving anytime soon. Canada is great place to build a company. If you are trying to build a tech company, stop worrying about a ten percent difference in valuation or whatever and get to work. I’m not here to build something that is here for five years or ten years and fizzles out, I am here to build a company that my children and their children can point to with pride. And Canada is one of the best places in the world to do that.”