CIBC Tech & Innovation Market Update – March 2022

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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 10.4%, S&P 500 was 16.6%, S&P 500 Info Tech Index was 23.5%, and DJIA was 7.0%.

 
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 2.8x, Small Cap Canadian Tech was 2.5x. LTM sector price performance bar graph: High-Growth Canadian SaaS was -18.6%, Large Cap Canadian Tech was 0.3%, Mid Cap Canadian Tech was -8.5%, Small Cap Canadian Tech was -16.5%.

Source: FactSet and Pitchbook; as at March 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

$538M

(vs. $1.6B in Feb-223)
Aggregate deal value

57

(vs. 54 in Feb-22)
Number of deals

$12M

(vs. $44M in Feb-223)
Avg. deal value

Ontario

($258M / 35)
Most active province by count ($ / #)

Ontario

($258M / 35)
Most active province by value ($ / #)

Software

(80.3% of funds raised)
Most active sector

2 13 deals with no announced value are omitted from deal value.
3 18 deals with no announced value are omitted from deal value.

 

Noteworthy Canadian deals

Company Size Sub-sector Lead investors
Talent.com Logo US$150M Software Inovia Logo
Layzer Zero Logo US$135M Software Logos of Sequoia, FTX and a16z
Validere Logo US$43M Software Logos of Mercuria and BlackRock
Athennian Logo US$33M Software Centana Logo
 

T&I @ CIBC

Deal announcement – CIBC Innovation Banking

Sprout sale to Telus Health, undisclosed, Financial Advisor to Sprout, March 2022

Sprout Wellness Solutions – Sale to TELUS Health

Sprout Wellness Solutions, a health engagement platform for the workplace, has been acquired by TELUS Health. The acquisition will enhance TELUS Health’s virtual care offerings and add another leading Canadian digital health solution to their suite of services tailored to address the needs of organizations and their employees.

Read the full report on BetaKit.

Assembly Digital sale to SJC, undisclosed, Financial Advisor to Assembly Digital, March 2022

Assembly Digital – Sale to St. Joseph Communications

Assembly Digital, a leading digital media technology company, has entered into an agreement to be acquired by St. Joseph Communications. Assembly’s proprietary audience analytics solution powers real-time audience and revenue attribution insights, enabling publishers to amplify audience growth and optimize monetization through paid marketing strategies.

VTS, $150 million, Debt facility, March 2022

VTS – $150 million Debt Facility

New York-based VTS is a leasing and asset management software for landlords and brokers to track leases, assets and tenants through their easy-to-use platform. VTS received $150 million syndicated debt financing with our team as the lead arranger.

Phorest, $12 million, Growth financing, March 2022

Phorest – $12 million Growth Financing

Dublin-based Phorest is an online and booking management software platform serving over 155,000 hair, beauty and clinic professionals. Our team provided $12 million in financing to accelerate their growth.

Read the full report on PYMNTS.

 

Podcasts

Stephany Lapierre, CIBC Innovation Banking

Connecting the Data Dots with Tealbook CEO Stephany Lapierre

Listen to the Podcast here.

 

Technology & Innovation in‘sites’ with CIBC Equity Research

T&I ‘Bits & Bytes’

A red vector drawing of a clipboard

Valuation, options, & talent – Tech valuation re-rate and implication for talent retention

With the TSX Software Index down almost 20% YTD, public tech company valuations have seen a significant reset. That reset has yet to impact many private tech companies, especially those that raised money at the ebullient valuations of 2021. However, we are starting to see signs of a private tech market re-rate, with Instacart voluntarily reducing its valuation by almost 40% this week. The timing was interesting given that the valuation reduction was based on a third-party valuation and was not part of a funding round. We expect the move was driven by a desire to retain/attract staff in a tight labour market, and an acknowledgement of the public market returns of comparables such as Uber and DoorDash. We expect other private tech companies to begin to follow Instacart’s lead as concerns around talent retention, coupled with weaker public tech markets, continue.

Read the full article here.

A red vector drawing of apartment buildings on a hill

Tech in the 6 – Toronto named third-largest Tech Hub in North America

The rise of the tech market drew on the strength of centralized talent and skillsets in Silicon Valley and for years the industry has largely remained in cities such as San Francisco, Seattle, and New York. However, the growth of remote work has expanded the tech ecosystem, with sunbelt cities and college towns seeing an influx of tech workers. As reported by the New York Times, Toronto has been a net beneficiary of this decentralization, with the city now the third-largest tech hub in North America, trailing behind only New York City and Silicon Valley. With a vibrant university research sector, strong government support, immigration friendly policies and a lower cost of talent than many U.S. cities, we see Toronto as well positioned to continue to expand as a tech hub.

Read the full article here.

A red vector drawing of a shield with an exclamation point on it

Elevated cyber threats – Cybersecurity becoming a key business risk

Even prior to the Russian invasion, Ukraine was seeing elevated cybersecurity incidents, with Politico noting that hackers had defaced and disabled more than 70 Ukrainian government websites in January 2022. While Russia’s invasion has yet to include a major cyber-attack on Ukraine or other nations, the risk of a global cyberwar has certainly been elevated. Nation states are not the only ones on high alert for a cyber-attack, with companies also rushing to strengthen their cyber defences. What may have been viewed as an “IT-department” problem in the past has been elevated to a full-scale business risk.

Read the full article here.

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

 

Recent technology news

“Winners and Losers in Whirlwind Tech Stock Rout”

Tech stock darlings like PayPal Holdings, Netflix Inc., and Zoom have lost their luster in 2022 with $1.3 trillion wiped out from the Nasdaq 100 Index’s market value at the end of March. While supply chain hurdles, rising interest rates, and surging bond yields have diminished many stock prices, geopolitical tensions and a string of recent corporate hacks have been a boon to cybersecurity valuations.

Read the full article at Bloomberg.

“E-commerce is eating retail. So what are consumers eating?”

Despite the unique challenges that come with grocery products and people’s individualized dietary restrictions, allergies and preferences, grocery stores are bolstering their online services.

Read the full article at Fast Company.

“How Canadian tech can help Ukraine”

Editor-in-Chief of BetaKit, Douglas Soltys with co-host Rob Kenedi interviews Ilya Brotsky, CEO of VanHack; and Darnya Kulya, co-founder and COO of OpenPhone about Ukraine tech, connections to Canada, and the ways we can help Ukrainians fleeing war.

Listen to the episode on 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
Executive Managing Director and Co-Head
Amy Olah
Managing Director, Head of Canada & US West Coast Venture Banking, 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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