CIBC Tech & Innovation Market Update – October 2021 – Volume 19

Welcome to the official newsletter of CIBC’s Tech & Innovation Capital Markets group

A curated monthly report to keep our readers abreast on relevant and recent developments within the Canadian tech ecosystem.


Canadian technology sector performance and valuation

 
EV / NTM revenue multiples 1 LTM sector price performance 1

Source: FactSet and Pitchbook; as at October 31, 2021; in C$ unless otherwise noted.
1Please refer to the end of the document for technology group constituents.

 

Canadian Venture Capital market update 2

$462M

(vs. $1.06B in Sep-213)
Aggregate deal value

43

(vs. 50 in Sep-21)
Number of deals

$14M

(vs. $32M in Sep-213)
Avg. deal value

Ontario

($292M / 18)
Most active province by count ($ / #)

Ontario

($292M / 18)
Most active province by value ($ / #)

Software

(79.3% of funds raised)
Most active sector

2 9 deals with no announced value are omitted from deal value.
3 17 deals with no announced value are omitted from deal value.

 

Noteworthy Canadian deals

Company Size Sub-sector Lead investors
US$50M Software
US$40M Software
US$39M Software
 

T&I @ CIBC

Deal announcement – CIBC Global Investment Banking

Q4 – $100 million Initial Public Offering

Q4 is a leading capital markets communications platform that is transforming the way publicly traded companies, investors and investment banks make decisions to efficiently discover, communicate and engage with each other. Today, they are the trusted partner to over 2,500 public companies including approximately 50% of the S&P 500 constituent companies.

READ THE FULL REPORT ON BLOOMBERG

Deal announcement – CIBC Innovation Banking

Terminus – $50 million Credit Facility
Terminus Software is a leading account-based marketing platform from Atlanta and Indianapolis. The Terminus Customer Data Platform (CDP) enables customers to continuously cleanse go-to-market data and automatically discover new buying committees at their target accounts.

READ THE FULL REPORT ON FINANCIAL POST

Point Predictive – Growth Capital Financing
Point Predictive Inc. is a San Diego-based data and analytics company that helps lenders automate loan decisions, mitigate loan losses and reduce underwriting friction. CIBC Innovation Banking partnered with Ten Coves Capital and Mosaik Partners to provide growth capital financing to assist the company in keeping up with the significant industry demand of accelerating the underwriting process.

READ THE FULL REPORT ON BUSINESS WIRE

Mindful Health Solutions – Growth Capital Financing
California-based Mindful Health Solutions is a provider of mental health services geared towards treatment-resistant depression. CIBC Innovation Banking has provided an undisclosed amount of capital funding to the company, which will enable it to expand from its 15 Californian clinics into new locations across the United States, as depression rates rise across North America.

READ THE FULL REPORT ON BUSINESS WIRE

 

Podcasts

Moving Into the C Suite with Benevity CEO Kelly Schmitt
Kelly Schmitt successfully guided the CSR platform for charitable donation management, Benevity, throughout her tenure as Chief Financial Officer, and later President. Today, the Canadian company is a billion-dollar organization with more than 650 employees, two million users, and $7 billion in processed donations to 300,000 global charities, and Kelly has transitioned to the role of CEO. In this episode, Kelly shares her story of assuming the coveted C Suite at Benevity, how she overcame self-doubt, and the true meaning of a growth mindset in business.

 

First Impressions: The Art of the Pitch with CIBC Executive Vice President and Chief Security Officer Keith Gordon
As Executive Vice President and Chief Security Officer at CIBC, Keith Gordon has been on the receiving end of an untold number of pitches from  startups. In this episode, we discuss how to get a foot in the door, the elements that go into a great pitch, and what to do once you’ve secured a meeting with a prospective client. We explore the reasons why an effective pitch can turn a client into an evangelist for your product or service, while a bad pitch could damage your reputation with future prospects. Keith also shares his perspective on the importance of building authentic relationships and advice for startups looking to make a positive impression.

 

Technology & Innovation in‘sites’ with CIBC Equity Research

T&I ‘Bits & Bytes’

Q3/21 U.S. Earnings Recap – Cloud Migration Continues To Propel Broad-based Growth
Q3 earnings season has arrived, with some of the largest U.S. technology companies reporting at the end of October. Results to date have been strong for large software names despite pandemic tailwinds subsiding. Most technology companies we track have beat both top- and bottom-line estimates. In the business services sector, performance was more muted, with the majority of the names we follow delivering in-line results.

On average, the software companies we follow beat Street sales estimates by 2%, EBITDA estimates by 6% and EPS estimates by 9%. Of the 10 tracked companies, eight beat Street estimates on key financial metrics. Results highlight the benefits from operating leverage, as median EBITDA margin improved by 80bps Y/Y. These results are a positive readthrough for Canadian software companies as industry tailwinds, particularly demand for digital and cloud solutions, drive strong earnings. 

READ THE FULL ARTICLE HERE

Supply Chain Digitization – Supply Chain Woes Leading To Increased Spending
Prior to the pandemic, the prevailing philosophy in supply chain management was ultra-lean inventory management in an effort to keep costs as low as possible. The pandemic has upended those assumptions as shipping delays and inventory shortages have led organizations to prioritize a combination of supply chain resilience and agility. Facing major shipping delays and surging freight costs, manufacturers and shippers are increasingly relying on real-time data to realize supply chain efficiencies and perform scenario analysis amid constantly changing conditions. This priority shift is a tailwind for the supply chain management (SCM) software industry, whose tools allow manufacturers and shippers at both the enterprise and SMB level to remain agile and move in step with the shifting macro environment. 

READ THE FULL ARTICLE HERE

Minimum Global Tax – A Tax The Tech Giants Might Actually Prefer
The world is inching closer to a near-universal 15% minimum tax on large corporations after more than 130 countries agreed to the concept at a recent OECD meeting. The tech giants have been one of the most aggressive users of low-tax jurisdictions and we would have expected strong opposition to any attempt at a minimum global tax. However, tech industry lobbying groups have already signaled tentative support for the global tax. We believe that the tech industry may be viewing the global minimum tax as the lesser of two evils, with the OECD agreement potentially eliminating the use of country-specific digital services taxes that have popped up in certain regions (ex. France, U.K.).

READ THE FULL ARTICLE HERE

Not Enough Heads In The Cloud– Tech Firms Not Immune To Labour Shortages
While much of the conversation around post-COVID labour shortages has focused on restaurants, trucking companies and other service industry jobs, the technology industry isn’t immune to staffing concerns. As the corporate world accelerated digital transformations to implement remote work, the demand for engineers with cloud skills has skyrocketed. Even prior to COVID, cloud engineers were a hot commodity, and their bargaining power has only continued to rise. As compensation expectations rise, the pool of companies that can afford to bring on high-level cloud engineering talent has shrunk, and even the largest tech companies find themselves competing for talent. It has become clear that companies of all sizes with plans to grow and scale their businesses will need to be proactive when it comes to cloud talent by either paying up for top talent, retraining less skilled employees, outsourcing if necessary, and staying prepared for unexpected recruiting and hiring delays.

READ THE FULL ARTICLE HERE

Stay informed. Request access to CIBC Capital Markets Research Central here.

 

Recent technology news

“The metaverse may be coming. But don’t expect it from Mark Zuckerberg”
Facebook’s CEO and Founder, Mark Zuckerberg believes that the “metaverse” – the blending of virtual and physical reality, is going to take over in the near future and that his company (undergoing the rebrand of “Meta”), will be at the forefront of its development. In 2014 Facebook acquired Oculus, the pioneer VR headset company, for $2 billion dollars and plans to invest another $10 billion in their Reality Labs division. Meagan McArdle, reporter at the Washington Post, is not convinced that Facebook will be the market leader by the time the metaverse becomes our current reality.

Read the full article at Washington Post

“Jeff Housenbold – inside Softbank Vision Fund”
Jeff Housenbold is a guest star on the latest Capital Allocators podcast with Tom Seides. Housenbold has been a Managing Director for the last four years at Softbank Investment Advisors, and is the lead of one the six investment teams that deployed the $100 billion Softbank Vision Fund.

Listen to the episode available on Apple, Spotify and Google.

“A tech millionaire’s guide to philanthropy”
Hunter Walk, a Partner at a seed stage VC firm, provides his insights on how he engages in philanthropy, as well as some key mindsets he has developed the more he has given back.

Read the full article at Medium.

“The 10 best data visualization of 2021”
Terence Shin compiles 10 visualizations that provides interesting perspectives on such things as the Earth’s submarine fiber optic cable network, U.S. COVID cases, and China’s CO2 emissions.

Read the full article at towards data science.

 

Tech & Innovation Key Contacts

Roman Dubczak
Deputy Chair
Kathy Butler
Vice Chair and Head of CIBC Capital Markets – B.C.
Emilie Bissonnette
Managing Director, Global Investment Banking
Frazer Wong
Executive Director, Technology & Innovation, Global Investment Banking
Daniel Lee
Managing Director, Technology & Innovation, Global Investment Banking
Mark McQueen
President and Executive Managing Director, Innovation Banking
Mark Usher
Executive Managing Director, Innovation Banking
Robert Rosen
Managing Director, Innovation Banking
Julia Kassam
Managing Director, Innovation Banking
Amy Olah
Managing Director, Innovation Banking
Eric Laflamme
Managing Director, Innovation Banking
Joe Timlin
Managing Director, Innovation Banking
Rob Magwood
Managing Director, Equity Capital Markets
Stephen Redding
Managing Director and Head

Canadian Technology Constituents

High-Growth Canadian SaaS – Ceridian, Descartes, Dialogue, Docebo, Kinaxis, Lightspeed, Magnet Forensics, Shopify, Thinkific

Large Cap Canadian Tech – Altus, Blackberry, CGI, Constellation Software, Converge Technologies, Dye and Durham, Enghouse, Evertz Technologies, Nuvei, OpenText, Real Matters, Softchoice

Mid Cap Canadian Tech – Absolute Software, Calian, Celestica, Computer Modelling Group, Farmers Edge, Sierra Wireless, TECSYS, WeCommerce

Small Cap Canadian Tech – Alithya, Baylin Tech, BBTV, Blackline Safety, Kneat, MindBeacon, Optiva, Pivotree, Quarterhill, Sangoma, Sylogist, Terago, Vecima, Vitalhub


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