Adam Adamou

Shopify CEO Tobias Lütke. In recent months, the anticipation around some of Canada's best private tech companies going public, namely Hootsuite, Vision Critical, BuildDirect, Shopify and Desire2Learn, has intensified. I believe there are very good reasons why this, the greatest crop of Canadian tech IPO candidates since the mid-nineties, should go public in Canada and, at least for now, resist the allure of the U.S. markets. The Canadian Venture Capital and Private Equity Association (CVCA) released its annual report last month and it continues to show the pattern that we identified in the last edition of ‘The Bankers Note’: a glut of new venture capital money coupled by a rapid increase in the number of US-based VC’s picking through our market is leading to larger deals at higher valuations. This is putting a little extra strut in the step of the current wave of VC fund managers with sugar plum dollars in their sights and visions of huge NASDAQ IPO’s in their horizon. Before they start to count their carried interest dollars we’d like to reiterate our warning that the Canadian market is a vastly different and more volatile beast than the US market. It is exceedingly difficult for a Canadian-based company to launch on a US exchange without an interim step in the Canadian public markets. Pumping (in some cases hundreds) of millions of dollars into early stage technology companies certainly gives them an extra push in the short run, and for now they are the kings of the hill. Hopefully they’ll all land well. In terms of the numbers, the CVCA reports that there were over $2 billion dollars in venture capital deals closed during 2013, an increase of 31% over 2012. The report once again ignores public venture capital figures that totaled over $550 million by our conservative estimate; bringing the total to almost $2.6 billion for 2013. The CVCA also noted that there was a downturn in venture funding for Ontario-based companies – however adding the Ontario-based public venture capital deals to the Ontario CVCA numbers highlights that total investment in Ontario based companies was higher in 2013 than in 2012 – highlighting the importance of including all of the venture data into the industry figures. Below we list the top venture capital transactions of 2013 (by dollars invested) as reported by the CVCA and the top public venture capital transactions (which were apparently excluded from the CVCA data). We reiterate our point that these public market transactions are really venture capital transactions in the Canadian public markets. We believe that the CVCA should include public market venture capital activity in future studies. The various government and other bodies reviewing issues of access to early stage financing for venture stage deals in Canada should also ensure that they are measuring all of the relevant data. The deal data is in the table 1 below: ______________________________________________________________________________________________________________________

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