CIBC Tech & Innovation Market Update – January 2022 – Volume 22

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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.


Perspectives from Navdeep Bains

A headshot of Navdeep Bains

In this issue of the Tech & Innovation newsletter, our Vice-Chair and Managing Director for Global Investment Banking shares his seasoned insights as the former Minister of Innovation, Science and Industry for the Trudeau government from 2015-2021. Navdeep has built a reputation as a collaborative leader and consensus builder in both the public and private sectors, and has deep expertise on a wide range of public policy issues including innovation, international trade, government operations, sustainability and human rights.

 

Canada and the challenge of the climate tech revolution

The following is an excerpt from MacLean’s magazine authored by The Hon. Navdeep Bains and co-authored by Elder C. Marques, Partner at Blake, Cassels & Graydon LLP.

Just before Christmas, the U.S. Department of Energy launched the Office of Clean Energy Demonstrations. The name may be boring, but its job is to spend US$20 billion on climate tech demonstration projects in areas like carbon capture, energy storage and small modular reactors. This is just one example of many existing programs that use U.S. tax dollars to leverage private funding to support carbon-friendly innovations.

All around the world, governments and investors are making similar bets on climate tech. Coal-dependent South Korea has announced tens of billions of dollars in its Green New Deal, to be spent before 2025, with much of it dedicated to new technologies. Europe’s climate ambitions include a series of partnerships with the private sector focused on technology, with the most recent example being a billion-dollar deal with Bill Gates’ Breakthrough Foundation.

The bets are big because they have to be. A study by Boston Consulting Group and the Global Financial Markets Association estimates that $100-150 trillion in investments are needed globally between now and 2050 to achieve Paris Agreement targets. A significant part of that money is to invent, develop and deploy new technology. The scale, speed and ingenuity of these necessary changes cannot be underestimated and there are few, if any, good historical analogies. Investors are catching on: PwC’s 2021 market tracking found that 14 cents of every venture capital dollar is now dedicated to climate tech businesses.

Read the full article on CIBC Capital Markets Insights Portal.

 

Canadian technology sector performance and valuation

A line graph showing Canadian technology sector performance and valuation - NASDAQ was 2.2%, S&P 500 was 16.5%, S&P 500 Info Tech Index was 17.0%, and DJIA was 13.9%.

 
EV / NTM revenue multiples 1 LTM sector price performance 1
EV / NTM revenue multiples bar graph: High-Growth Canadian SaaS was 9.1x, Large Cap Canadian Tech was 4.2x, Mid Cap Canadian Tech was 2.8x, Small Cap Canadian Tech was 2.7x. LTM sector price performance bar graph: High-Growth Canadian SaaS was -20.7%, Large Cap Canadian Tech was 3.4%, Mid Cap Canadian Tech was -24.0%, Small Cap Canadian Tech was -14.3%.

Source: FactSet and Pitchbook; as at January 31, 2022; in C$ unless otherwise noted.
1Please refer to the end of the document for technology group constituents.

 

Canadian Venture Capital market update 2

$1.3B

(vs. $607M in Dec-213)
Aggregate deal value

29

(vs. 35 in Dec-21)
Number of deals

$65M

(vs. $22M in Dec-213)
Avg. deal value

Ontario

($1.1B / 15)
Most active province by count ($ / #)

Ontario

($1.1B / 15)
Most active province by value ($ / #)

Software

(88.2% of funds raised)
Most active sector

2 9 deals with no announced value are omitted from deal value.
3 4 deals with no announced value are omitted from deal value.

 

Noteworthy Canadian deals

Company Size Sub-sector Lead investors
1Password Logo US$620M Software Iconiq Logo
Assent Logo US$446.5M Software Vista Logo
Shoplazza Logo US$150M Software SoftBank Logo
Canalyst Logo US$70M Software Dragoneer Logo
BenchSci Logo US$63M Software Inovia TCV Logo
 

T&I @ CIBC

Latest insights into climate tech from CIBC Global Investment Banking

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How can the carbon market evolve to help increase penetration of EVs?

CIBC recently partnered with Electric Autonomy Canada to publish an article on carbon credits and its ability to provide an innovative financing tool that can incentivize automakers to produce and sell environmentally friendly vehicles.

Historically, it has been difficult for buyers and sellers to connect on the voluntary carbon markets, and to execute transactions due to a lack of market infrastructure; but with recent developments in market infrastructure such as Project Carbon- CIBC’s joint venture with Itaú Unibanco, National Australia Bank, and NatWest Group, automakers that generate voluntary credits from electric vehicle charging systems are able to transact and sell these credits more easily.

Read the full report on Electric Autonomy.

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Woolly pigs, high tech and other ingenious ways to take carbon out of the air

Dominique Barker, CIBC Global Investment Banking’s Head of Sustainability, attended a moderated session by acclaimed climate strategist Gabrielle Walker. Walker is Founder of Valence Solutions, an organization committed to catalyze faster change in the sectors that are hardest to decarbonize.

Watch Dr. Gabrielle Walker’s TED talk.

 

Technology & Innovation in‘sites’ with CIBC Equity Research

T&I ‘Bits & Bytes’

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Canada vs. Google – Google pushes back on proposed Canadian internet laws

This is not the first time big tech has pushed back against government regulations. Last year in Australia, both Google threatened to pull search services, and Meta temporarily removed news from its platform in opposition of requirements to pay for news content posted to their platforms. With the Canadian Liberals pushing hard for additional regulation, we expect future showdowns between our government and the major internet platforms.

Read the full article here.

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CIBC Western Conference – Our biggest takeaways

CIBC hosted its 25th Annual Western Institutional Investor Conference. Key takeaways from discussions with our corporate clients included: 1) organic opportunities remain robust as customers accelerate digitization and the move to the cloud; 2) while M&A valuations are somewhat elevated, firms are looking to M&A to expand their platforms/add customers; 3) companies are looking to expand the total addressable market (TAM) by targeting new end-markets and verticals.

Thank you to all who attended, and we look forward to an in-person return to the Mallard!

Read the full article here.

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High tech & rising rates – A look at the impact of rising rates on our coverage

With North American economies experiencing sustained elevated levels of inflation, the timing of central bank rate hikes has quickly moved to the top of the list of key equity market variables in 2022. Technology markets have been hit hard in recent weeks as it apparently has become clear that rate hikes are coming faster and more frequently than previously expected. As tech equities have sold off, we have been left wondering how much of the drawdown is warranted, strictly as a fallout from rising rates.

Read the full article here.

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Regulating unicorns – SEC starts push for increased private disclosures

While 2021 was in many ways defined by the large number of IPOs, the trend of companies remaining private and raising mega rounds of venture capital was also pronounced. The growing number of unicorns has raised concern at the SEC, which is now working on a plan to require more private companies to disclose financial and operational data. Lawmakers are concerned about the lack of regulatory oversight for large private companies, especially given the widespread impact and reach that many of the private companies with the richest valuations have. Plans for additional private disclosures remain in their early stages and appear certain to attract significant pushback given the administrative burden that would result from the disclosure requirements.

Read the full article here.

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Green Cloud – CIOs are leading sustainability efforts

A Chief Information Officer likely isn’t the first person that comes to mind when picturing a champion of sustainability, but a recent study from IBM found that 42% of a group of 5,000 CIOs believe that sustainability was an area where technology would have the biggest impact on their organizations. CIOs are becoming recognized as one of the key drivers of corporate ESG initiatives, tasked with everything from developing new technology solutions and data platforms to reducing the company’s IT/digital infrastructure footprint and monitoring progress against ESG KPIs.

Read the full article here.

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

 

Recent technology news

“What’s all the hype about the Metaverse?”

Microsoft cited the metaverse as a reason for buying Activision Blizzard for $69.7 billion, saying the deal would provide the “building blocks of the metaverse”. Google has been developing metaverse-related technology for years, and Apple is poised to enter the metaverse in the near future as well. But for those who are still wondering if it even exists- Brian Chen of the New York Times breaks down everything you need to know.

Read the full article at the New York Times.

“How companies are using tech to give employees more autonomy”

While the dominant narrative about tech today is that human judgment is being replaced by machines, particularly far down on the org chart, but the truth is far more nuanced. The authors have conducted research into decentralized firms in which individual employees have more, rather than less, autonomy.

Read the full article at Harvard Business Review.

“VC Economics: why startup valuations are art while dilution is a science”

Whether you take a valuation-first or dilution-first approach to fund-raising, founders need to understand how VC economics works. Considering the nature of the innovation economy, very few, if any, founders will manage to see their original investors guide them from seed funding all the way to a successful exit.

Read the full article at BetaKit.

“Lessons from a fintech founder: Solving for C by going B2B”

Fintech founders that set out to solve big problems for consumers almost always begin with the best intentions — they want to help people. But they often miss that mark by a country mile, which spurs questions about how effective other fintech founders can be at helping consumers.

Read the full article at TechCrunch+.

 

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, 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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