Canadian Manufacturing

Investor’s looking to high-tech sector as resource growth plummets

Lower resource sector returns and a strong pool of tech companies has created ideal conditions for high-tech IPOs

CALGARY—Vancouver’s high-tech sector is poised to cash in on Canada’s public listing boom.

The combination of lower returns in traditional resource sectors, alongside a strong pool of tech companies valued in the hundreds of millions, has created ideal conditions for them to go public, Brent Holliday, CEO of Garibaldi Capital Advisors, said in an interview.

“What you see is a thirst for public issues from the institutional investors in the TSX, where they’re going to get some return, where they’re going to get some growth,” said Holliday.

Vancouver-based Mogo Finance Technology Inc., the creator of an online loan platform, is already working through a public listing as it looks to raise $50 million.

The company has reportedly settled on a slightly lower issuing price than the $11 to $13 it was seeking, but Nick Waddell, editor of the technology-focused Cantech Newsletter, says it’s still been a strong showing.

“I think it’s only a lukewarm reception when compared to a Shopify, because coming on the heels of something eight times over subscribed is a tough act to follow.”

Waddell says Vancouver tech companies are growing more confident that they can compete internationally. That has meant fewer companies selling out early as they instead concentrate on growing their business.

“There’s a new attitude among these 20-something, 30-something founders,” says Waddell. “There’s a confidence that we can take on the world, and we’re going to do it.”

Holliday points to the growth of later-stage funding to help their companies grow, rather than being forced to accept a takeover offer.

“Those companies that could have been IPO candidates last decade ended up selling early; they had no other way of growing,” said Holliday.

He points to new funds like OMERS Ventures, the venture capital arm of the Ontario Municipal Employees Retirement System’s pension fund, for helping fill the void in the $10 million to $50 million range of funding.

“That really gives the companies the fuel they need to become global players,” said Holliday.

Vancouver-based Hootsuite is one of the most highly anticipated public listings in Canada, but so far the company hasn’t made any time commitments about going public.

The company is one of many that’s benefitted from late-stage funding, raising $60 million last year from existing investors Accel Partners, Insight Venture Partners and OMERS Ventures.

Hootsuite’s CEO Ryan Holmes has been a champion of growing companies in Vancouver. Back in 2013, he committed to long-term investment in the city in an editorial.

“My colleagues and I want to grow HootSuite into a billion-dollar company right here in Vancouver, then go on to fund a whole new generation of tech ventures in the city. We’ll have the capital and the experience to make a real run at turning Vancouver into a legitimate high-tech centre.”

And while Hootsuite, which helps companies manage their social networks, is one of the more closely followed public listing candidates, there are many others in the city.

Holliday says there are probably 20 technology companies in Canada that could go public, pointing to Vision Critical, which provides customer research, BuildDirect, an online home improvement retailer, and Cymax Stores, an online furniture retailer.

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