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.
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Special Announcement – Adam Noily Adam Noily joins our Global Investment Banking team as Managing Director & Head of U.S. Technology & Innovation Investment Banking. Based in San Francisco, he brings more than 20 years of investment banking and equity research experience with U.S.-based banks in the technology and innovation space. Adam began his career as an investment banker covering the semiconductor sector with SoundView Technology Group, subsequently covered the media, entertainment, and video game sectors with Cowen’s equity research group, and most recently led the Software and SaaS investment banking practice at KeyBanc Capital Markets. |
Canadian technology sector performance and valuation
| EV / NTM revenue multiples 1 | LTM sector price performance 1 |
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Source: FactSet and Pitchbook; as at August 31, 2022; in C$ unless otherwise noted.
1 Please refer to the end of the document for technology group constituents.
Canadian Venture Capital market update 2
2 12 deals with no announced value are omitted from deal value.
3 9 deals with no announced value are omitted from deal value.
Noteworthy Canadian deals
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Company |
Size |
Sub-sector |
Lead investors |
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US$66M4 |
Software |
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C$34M |
Agtech |
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US$26M |
Software |
Carpae Investments /
|
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US$25M |
Software |
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4 CIBC Innovation Banking provided US$20M of growth financing of WellnessLiving’s US$66M capital raise.
Perspectives from The Hon. Navdeep Bains
Vice-Chair and Managing Director for Global Investment Banking, and former Canadian Minister of Innovation, Science, and Industry shares his insights.
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In the face of a challenging geopolitical environment and the possibility of a slowing economy, one thing is very clear – the time is now to double down on attracting and growing our human capital if we want to be leaders in the economy of the future.” |
Human capital will power long-term economic growth
Canada is a burgeoning tech powerhouse, with four Canadian cities listed in the world’s top tech talent markets. But in order to maintain this lead as an innovation nation, we must continue to invest in training, upskilling and reskilling of our talent pools at large. As the IMF has stated, a fully engaged workforce may ease inflationary pressures while making recovery more inclusive. The war for talent is fierce and Canada needs to stay ahead of its competitors. As Calgary is showing us, a focus in inclusive growth can drive opportunity for all.
Read the full report on Calgary Herald
T&I @ CIBC
Deal Activity
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Ageras – €35 Million Growth Financing CIBC Innovation Banking provided €35 million in growth capital financing to Ageras to accelerate the Copenhagen-based company’s strategic acquisitions pipeline and to expand its suite of software tailored to the demands of small businesses. Ageras’ product line includes SME banking, accounting, invoicing, and payroll software trusted by over 100,000 paying customers. |
Announcements
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Kathy Butler listed in Business in Vancouver’s 2022 BC500 Vice Chair and Head of Capital Markets (B.C.) and Co-Head of Technology Investment Banking, has been recognized in Business in Vancouver’s 2022 BC500 list under the Banking and Finance category. BC500 features trailblazers making an impact on British Columbia’s communities, industries and economy. |
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CIBC Innovation Banking opens Durham, North Carolina office, bolsters team in Northeast CIBC Innovation Banking opens its 14th office in Durham, North Carolina, supporting the hundreds of start-ups and innovation companies emerging in the Research Triangle area by delivering expertise in growth capital, advisory, and cash management. North of Durham, former Wells Fargo Foothill / Wells Fargo Capital Finance banker, Andrew Phillips has been brought in as a new Managing Director for the Boston office. |
Technology & Innovation in‘sites’ with CIBC Equity Research
T&I ‘Bits & Bytes’
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Private market slowdown – Investments slow but remain above pre-pandemic levels With two quarters of private investing data in hand, it is clear that the negative sentiment impacting growth-oriented public companies has leaked into venture capital (VC) investing markets. Global venture capital investment dollars were down 23% Y/Y in Q2 after declining 20% in the first quarter. Overall investment volume (YTD US$124B) and deal count are lower than in the record-setting 2021 (US$369B), though deal values are still solid relative to historical levels and have already surpassed full-year 2019’s US$117B (CB Insights figures). We believe H2/22 investment and fundraising figures will remain below prior-year levels as a result of the uncertain macro environment and an inactive IPO market. |
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Q2/22 Wrap-up – Revenue performance generally meets expectations but signs of margin contraction showing up Q2 was an encouraging quarter for technology firms, as companies generally reported solid results amidst an environment that included high-single-digit inflation and aggressive central bank rate hikes. Despite concerns that macro uncertainty may have put pressure on enterprise and SMB budgets, 67% of companies under coverage met or exceeded consensus revenue estimates. |
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On high alert – IBM report highlights security market growth IBM and the Ponemon Institute released their annual report on the cost of a data breach, and how organizations are being impacted by malicious actors gaining access to their data. The average total cost of a data breach continues to rise, hitting $4.35 million in 2022, up 3% from 2021 levels. The cost of a data breach varies widely by the country it happens in, with a breach in the United States costing organizations $9.4 million vs. a breach in Australia costing organizations $2.9 million. The report makes it clear that given the prevalence of the threat, focusing on prevention of a breach is not a viable strategy. The report notes that 83% of organizations that have experienced a data breach have had more than one. Organizations need a clear plan to identify and investigate potential breaches, mitigate damage once a breach has occurred and clearly communicate with key stakeholders in the event of a breach. |
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Competitive concerns – The antitrust tides are shifting Last week, the U.S. Federal Trade Commission (FTC) took a noticeable step in advancing its agenda of keeping a very close eye on dealmaking activity at Big Tech firms. The FTC sued to block Meta’s October 2021 acquisition of Within Unlimited, the creator of VR fitness app Supernatural, alleging that it lessens competition in the VR industry. FTC commissioner Lina Khan has publicly stated her desire to sue to block anticompetitive mergers rather than negotiating settlements with the acquirers. While the Within Unlimited deal is immaterial in the grand scheme of things, the lawsuit and its eventual outcome will have an impact on technology acquisitions, potentially setting an important global precedent. While Canadian competition regulators have had their hands full lately, they have also expressed a desire to take a more hawkish approach to antitrust regulation, and we see increasing regulatory risk for companies that rely on consolidation for top line growth. |
Recent technology news
“How startups can survive a market downturn”
Stefan Palios of BetaKit gathers the insights from Katy Yam, partner at Real Ventures & GM of Founder Fuel, Peter Fishman, co-founder & CEO of Mozart Data, and Ethan Ruby, partner of analytics at Craft Ventures on how to survive this current slowdown in growth capital, and the key metrics to track for tech companies’ long-term success.
Read the full article at BetaKit.
“Why does the WeWork guy get to fail up?”
Adam Neumann, founder of WeWork, drew ire by media outlets in August when it was announced that his residential real estate startup called ‘Flow’ received venture capital firm Andreessen Horowitz (a16z)’s biggest investment ever of $350 million. To many, this illustrated the double-standard in tech between white male founders and the many female & BIPOC founders searching for their first investment. Regardless, Neumann posits that ‘Flow’ will help address the significant housing shortage in the U.S. Even from that perspective, Rani Molla of Vox is not convinced that ‘Flow’ is worth the unprecedented investment.
Read the full article at the Vox.
“What is ‘the Merge’?”
The most popular crypto platform, Ethereum, is undergoing its transformative software update called ‘the Merge’ that promises to reduce the platform’s energy consumption by 99.5%. While the update will help assuage criticism against the platform due to environmental concerns, David Yaffe-Bellany of the New York Times warns that the process of ‘the Merge’ is complicated and carries significant risks.
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CIBC Capital Markets Insights Leverage leading insights and stay abreast of developments in the markets with CIBC Capital Markets Insights. |
Tech & Innovation Key Contacts
Canadian Technology Constituents
High-Growth Canadian SaaS – Ceridian, Copperleaf, Coveo, Descartes, Dialogue, Docebo, Kinaxis, Lightspeed, Magnet Forensics, Q4, Shopify, Thinkific
Large Cap Canadian Tech – Altus, Blackberry, Celestica, CGI, Constellation Software, Converge Technologies, Dye and Durham, Enghouse, Evertz Technologies, Nuvei, OpenText, Sierra Wireless, Softchoice, Well Health
Mid Cap Canadian Tech – Absolute Software, Calian, Computer Modelling Group, D2L, E Inc., Payfare, Real Matters, Sangoma, TECSYS
Small Cap Canadian Tech – Alithya, Baylin Tech, BBTV, Blackline Safety, Farmers Edge, Kneat, Optiva, Pivotree, Quarterhill, Sylogist, Terago, Vecima, Vitalhub, WeCommerce
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