CIBC Tech & Innovation Market Update – February 2022 – Volume 23

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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

A line graph showing Canadian technology sector performance and valuation: NASDAQ was 2.1%, S&P 500 was 12.5%, S&P 500 Info Tech Index was 16.4%, and DJIA was 7.4%.

 
EV / NTM revenue multiples 1 LTM sector price performance 1
A bar graph showing EV / NTM revenue multiples. High-Growth Canadian SaaS was 6.9x, Large Cap Canadian Tech was 3.8x, Mid Cap Canadian Tech was 2.7x, Small Cap Canadian Tech was 2.6x. LTM sector price performance bar graph: High-Growth Canadian SaaS was -26.6%, Large Cap Canadian Tech was -3.0%, Mid Cap Canadian Tech was -20.2%, Small Cap Canadian Tech was -17.3%.

Source: FactSet and Pitchbook; as at February 28, 2022; in C$ unless otherwise noted.
1Please refer to the end of the document for technology group constituents.

 

Canadian Venture Capital market update 2

$1.6B

(vs. $1.3B in Jan-223)
Aggregate deal value

54

(vs. 29 in Jan-22)
Number of deals

$44M

(vs. $65M in Jan-223)
Avg. deal value

Ontario

($717M / 25)
Most active province by count ($ / #)

Ontario

($717M / 25)
Most active province by value ($ / #)

Software

(62.8% of funds raised)
Most active sector

2 18 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

Company Size Sub-sector Lead investors
Paper logo US$270M Software Sapphire Ventures & SoftBank logo
Koho logo C$210M Fintech Eldridge logo
LeddarTech logo US$140M Mobility Tech FSInvestors Logo
Co:here logo US$125M Software Tiger Global logo
7Shifts logo US$80M Software Logo SoftBank
 

Perspectives from Navdeep Bains

A headshot of Navdeep Bains

Vice-Chair and Managing Director for Global Investment Banking, and former Canadian Minister of Innovation, Science, and Industry shares his seasoned insights.

The plan for getting innovation back on track after COVID-19

As the pandemic begins to wane, Canada must re-commit to innovation to address the complex challenges ahead of us, such as climate change, supply chain disruptions, and the digital economy.

Read Navdeep and John Knubley’s Innovation Plan

Read the ‘highlights’ on the Toronto Star

 

T&I @ CIBC

Deal announcement – CIBC Innovation Banking

Graphite Ventures, Undisclosed, Financing Solutions, February 2022

Graphite Ventures – Financing Solutions

Ontario-based Graphite Ventures, a $100-million fund focused on seed-stage investments and extensions, was provided financing solutions by CIBC Innovation Banking which included a capital call facility. The capital call facility provides Graphite with the flexibility to make investments in portfolio companies prior to calling capital from the fund’s limited partners.

Read the full report on Financial Post.

Expensify - $100 million credit facility, February 2022

Expensify – $100 million Credit Facility

Portland-based Expensify, a payments superapp that helps individuals and businesses around the world simplify the way they manage money. This funding will further support the company’s rapid growth and product expansion.

Read the full report on Business Wire.

International Women’s Day 2022 @ CIBC

On March 8th, CIBC Capital Markets and Innovation Banking will be hosting events with senior female leaders, as tech and other industries commit to a gender-balanced future.

A red vector drawing of the male and female gender symbols

CVCA’s D&I Series: Celebrating International Women’s Day

Hosted by the Canadian Venture Capital & Private Equity Association (CVCA), emerging fund managers and women leaders Michelle McBane (StandUp Ventures), Tracey McVicar (CAI Capital Markets), Lisa Melchior (Vertu Capital), and Whitney Rockley (McRock Capital) discuss why they decided to pursue their own funds, how they got the funds off the ground, how they support each other and build a community, and how they’ve gained access to non-traditional LP sources. The panel is moderated by our own Kathy Butler.

Register for the event here.

T&I’s 2022 Outlooks

Missed our latest events? Watch our replays to know what to expect from the T&I space in 2022.

Outlook for Software M&A and Growth Equity:

Perspectives from Private Equity Investors

Watch the replay here.

Outlook for Technology Capital Markets:

Public Markets View

Watch the replay here.

 

Technology & Innovation in‘sites’ with CIBC Equity Research

T&I ‘Bits & Bytes’

A red vector drawing of gold bars stacked on top of each other, forming a pyramid

The Ukraine situation remains unpredictable – Equity volatility likely to continue

This conflict is the first in some time that will likely be inflationary rather than deflationary given the importance of Russia (and Ukraine) in commodity markets. Price pressures were already mounting globally, so central banks will likely be less accommodative than in the recent past. Indeed, one could conclude the conflict will drive rapid interest rate increases to control inflation. Tech stocks and the S&P 500 remain vulnerable, and Canadian equities are likely to continue outperforming.

Read the full article here.

A red vector drawing of a globe

Intelligence everywhere – Emergence of open-source intelligence

As the Ukraine invasion heightens, the U.S. and other NATO members are closely monitoring Russia’s movements through extensive intelligence gathering. While old-era intelligence may be synonymous with spy satellites and on-the-ground espionage, a new era of intelligence gathering is increasingly making use of open-source intelligence (OSINT). As electronically accessible information continues to proliferate, OSINT tools become more valuable as powerful data analysis algorithms are increasingly able to distill enormous datasets down to meaningful pieces of intelligence.

Read the full article here.

A red vector drawing of two triangles forming a diamond

Q4/21 U.S. earnings recap – Earnings, beats & raises, and some selloffs

In early February, large-cap U.S. technology companies reported their Q4/21 financial earnings. Results to date have been largely in line as pandemic-driven tailwinds begin to subside. Of the nine major companies that have reported, seven met/beat Street estimates on profitability metrics, with Meta and PayPal the exceptions. The benefits from operating leverage are beginning to ease as median EBITDA margins declined by 80bps Y/Y, with Meta, Netflix, and SAP SE the largest negative contributors. Largely, these results suggest the underlying digital transformation theme continues and fundamentals remain healthy for the tech ecosystem, barring company specific headwinds.

Read the full article here.

A red vector drawing of a bank note and a triangle, forming an right arrow

2021 a banner year for M&A – Will it continue in 2022?

Even as global stock markets ended the year in a period of elevated volatility, 2021 was finishing up as a banner year for M&A. Dealmakers and bankers made up for COVID-19 induced slowdowns, with M&A spending hitting all-time highs. Despite the hurdles investors and corporates are likely to face in 2022, namely inflation and rising rates, we expect that 2022 could be another strong year for M&A as companies look to navigate key themes such as digital transformation, tight labour markets and inflationary pressure. We believe both strategic acquirers and private equity will continue to be active on the dealmaking front given high levels of dry powder and continuing private equity fundraising.

Read the full article here.

A red vector drawing of a smartphone

Tracking the 5G wireless wave that will gain momentum in 2022

In 2022 and 2023, major U.S. carriers Verizon and AT&T plan to prioritize deploying their C-band spectrum that is a cornerstone of each of their highest performance 5G networks. In contrast, T-Mobile should be pre-occupied with the rollout of its own mid-band spectrum which it gained after its 2020 acquisition of Sprint. All carriers have ambitious plans to reach between 200 million and 300 million people by the end of 2023.

While we view 5G as an exciting and investable technology theme, the direct opportunities in Canada are currently limited to the carriers and a handful of smaller technology companies. This slow but steady progress provides investors extra time to assess the industry for opportunities.

Read the full article here.

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

 

Recent technology news

“Ukraine invasion: How the war is being waged online”

In the first invasion of its kind in the 21st century, war is not only being waged on the ground but virtually as well. From questions about private tech companies’ moral obligations in geo-political conflicts, to online censorship, the spread of disinformation, and the ramifications of internet outages- all are being played out in front of us.

Read the full article at BBC.

“Women in Tech have been a pulling a ‘second shift’ for decades”

The “second shift” is a term used to explain how women are often left performing double-duty, having the same expectations to perform at their jobs and then greater expectations to perform as the main care-taker at home once the workday is over. Author Hicks writes how gender roles have affected women in the tech industry since the 1960’s.

Read the full article at Wired.

“Build a versatile startup team to make pivots easier”

As a startup CEO, you have three jobs: don’t run out of money, set the direction and culture of the company and — most importantly — hire the right team. The latter is the crux of everything you do, because it is what enables you to pivot.

Read the full article at TechCrunch+.

“We need to keep talking about founder mental health”

The pressure founders feel to perform is immense and often isolating. The loneliness of leading a company has only been exacerbated by COVID-19, and online tools connecting founders to their social networks sometime fall short on their promises.

Read the full article at Betakit.

 

Tech & Innovation Key Contacts

Roman Dubczak
Deputy Chair
Kathy Butler
Vice Chair and Head of CIBC Capital Markets – B.C.
Colin Ryan
Managing Director, Head of Technology & Innovation, Global Investment Banking
Emilie Bissonnette
Managing Director, Global Investment Banking
Daniel Lee
Managing Director, Technology & Innovation, Global Investment Banking
Frazer Wong
Executive 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
Paul McKinlay
Vice-President and Head of U.S. Origination, Innovation Banking
Amy Olah
Managing Director and Head of Canadian Origination, 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, Coveo, Descartes, Dialogue, Docebo, Kinaxis, Lightspeed, Magnet Forensics, Q4, Shopify, Thinkific

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

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

Small Cap Canadian Tech – Alithya, Baylin Tech, BBTV, Farmers Edge, Kneat, Optiva, Pivotree, Quarterhill, Sangoma, Sylogist, Terago, Vecima, Vitalhub

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