The Deloitte Technology Fast 50 Program list was released the other day, detailing a resilient and growing tech sector from coast to coast, with Toronto’s Chango taking the top spot.
Deloitte compiles its list of companies with revenue higher than $5 million from Canada’s tech sector, based on highest percentage revenue growth over five years.
To indicate just how Canada’s tech sector stacks up against its recent history, the aggregate five-year growth rate for all 50 companies was 4,736% this year, up sharply from 2013’s growth rate of 832%.
“The achievements of this year’s Fast 50 recipients are an indication that Canadian technology companies can excel here on home soil,” said Robert Nardi, Partner and National Technology Media & Telecommunications Leader for Deloitte in Canada.
“Fast-growing companies used to look solely to the US to secure sources of capital when domestic venture capital dried up after 2000, but the pendulum is now swinging back into balance. That is the result of recently added investments to the Canadian technology investing sector. ”
While public-facing companies like Hootsuite and Blackberry are naturally better known to the public, it’s the companies who hide in plain sight, invisibly working behind the tech infrastructure, who shine brightest in these results.
While Hootsuite takes second place, with its high-profile VC fundraising announcements and billion-dollar valuation, it’s programmatic retargeting firm Chango who squeaks into the top spot.
Hootsuite’s prominence will come as no surprise to no one who has been paying any attention to the Canadian tech scene. They moved from 2013’s “Companies to Watch” directly into the #2 spot.
Chango, on the other hand, is brand new to Deloitte’s list. For avid watcher’s of tech’s back pages, however, they’ve hardly gone unnoticed.
Established in 2008, Chango earned itself rocket-like revenue expansion by becoming one of the early partners on Facebook’s FBX ad exchange in December 2012, posting five-year revenue growth of 69,800%.
The growth of a category that essentially didn’t exist five years ago into an industry-defining marketing sector perhaps adds to Chango’s element of surprise.
“I’ve watched ‘programmatic’ evolve from a concept, to a buzzword, to a fundamental strategy that is the future of online advertising,” said recently appointed chief revenue officer Keith Lorizio. “Today, you can programmatically buy inventory of all ad types across all platforms to maximize your ROI, as well as create an elite brand experience.”
Also in stark contrast to the rest of the tech sector’s superstars, Chango has achieved its startling numbers almost entirely through organic growth, taking minimal investment early in the company’s history, and no investment recently.
Ottawa-based Shopify took third spot with a five-year growth rate of 16,759%.
While 29 Ontario companies may make the list appear overly reliant on central Canada, what’s encouraging about the development of Canada’s tech scene since 2008 is the rise of regional scenes, with anchor companies such as Hootsuite, Global Relay and Avigilon in B.C. operating on a “pay it forward” philosophy in order to keep local talent and wealth in place.
For anyone scratching their head, wondering, “Where’s Vision Critical? They’ve got revenue of around $95 million, with huge year-on-year topline growth,” they’re tracked by Inside Research’s annual report into the state of the Market Research sector.
Vision Critical, despite falling into the “market research” category, also acts as an anchor company in Vancouver’s thriving overall tech scene, which makes you wonder whether taking that overlap into consideration might not affect next year’s Deloitte list.
What encourages most about the Deloitte list is that it spells out an atmosphere of sound fundamentals for investors looking forward. Access to venture capital is improving for companies, whether based in Ontario’s tech triangle or not. And company valuations are based on sounder metrics, as opposed to the go-go bonkers numbers of the late ’90s tech bubble, also a good sign for tech companies looking to stay in Canada for the long haul.
“Entrepreneurs can get good valuations in Canada,” said Pascal Lamoureux, Partner and Leader for Deloitte’s Fast 50 program. “With the right business model, combined with support from investors and government, they will stay.”
Keeping an eye on next year’s list, it pays to remember that Hootsuite rocketed from 2013’s “Companies to Watch” category into the #2 spot this year. So it’s likely that we’ll be seeing a few names from 2014’s “Companies to Watch” appearing in the Fast 50 next year, including Unbounce (who have also achieved a high rate of growth almost entirely through organic revenue), Busbud, BitLit, mnubo and Kik Interactive.