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
| EV / NTM revenue multiples 1 | LTM sector price performance 1 |
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Source: FactSet and Pitchbook; as at October 28, 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 13 deals with no announced value are omitted from deal value.
3 8 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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C$150M |
Software |
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US$67M |
Software |
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US$66M |
Software |
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US$56M |
Software |
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US$55M |
Chemicals & Gases |
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US$40M |
Software |
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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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Nearly 80 per cent of Canada’s population growth, and almost all of Canada’s labour force growth, depends on immigration.” |
How Canada can win the war for talent and become richer too.
The ratio of Canadian workers for every retiree, which was about seven to one about 50 years ago, will soon hit three to one. Evidence of the labour market crunch is all around us, as businesses struggle to find and retain employees across a range of skill categories. Canada’s backlog of unfilled jobs and our strategy in the global war for talent require continued increases in our annual immigration targets.
Read the full report on the Financial Post
4 Article is co-authored by Elder C. Marques, Partner at Blake, Cassels, and Graydon LLP.
T&I @ CIBC
Deal Activity
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HealthJoy – Growth Financing CIBC Innovation Banking participated alongside Endeavour Vision in HealthJoy’s recent $60M Series D funding led by Valspring Capital. HealthJoy is a digital platform that helps HR departments reduce the underutilization of benefits, allowing employees to track their available opportunities and access on-demand healthcare support through HealthJoy’s virtual care suite. As of October, this brings HealthJoy’s funding total to $108M. |
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PROCEPT® BioRobotics – $52M Debt Refinancing CIBC Innovation Banking provided a five-year $52M loan arrangement for PROCEPT® BioRobotics, a surgical robotics company focused on advancing patient care by developing transformative solutions in urology. The use of proceeds will retire a $50 million debt facility with another lender and provide the company with greater financial flexibility while reducing their annual interest expense by approximately $2.8 million. |
Announcements
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IEFA Toronto Global Forum 2022 Government partners and organizations from around the world congregated at this year’s Toronto Global Forum to “chart out the new economy.” Vice-Chairs of CIBC Capital Markets Global Investment Banking, The Hon. Lisa Raitt and The Hon. Navdeep Bains spoke on various topics including developments in the mining sector and how current trends such as remote work and digitization are impacting the immigrant workforce. |
Podcasts
Technology & Innovation in‘sites’ with CIBC Equity Research
T&I ‘Bits & Bytes’
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U.S. Midterms: gridlock the likely outcome – Slightly better sentiment on Energy and little else The Republicans are expected to flip at least one chamber of Congress on November 8, with the House of Representatives the most likely. Historically, gridlock is positive for equities but today’s market is ultimately Fed and inflation focused. Across sectors, GOP policy is most beneficial to Energy. More uncertain however, is the outlook for Big Tech and ESG. Big Tech is likely more at risk of regulation under the Dems, but the sector is increasingly in the crosshairs of GOP legislators – largely around social media censorship of free speech. The GOP’s anti-ESG stance is also widely advertised. However, SEC proposals for mandatory climate-related financial disclosure were never a guarantee to start with and still seem likely to end up in court. |
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Shooting their shot – Big tech’s trash is late-stage start-up’s treasure As big tech firms shift into a new phase of generating value by operating more like cash-cow businesses than focusing on growth at all costs, expense management is more in focus than ever before. With GOOG, MSFT and META all missing Q3 EBITDA expectations this week as a result of inflationary pressure and slowing advertising spending, big tech firms are taking a more measured approach to hiring and headcount growth. Tech giants are backing off their previous approach of hiring nearly every qualified engineer in Silicon Valley, leaving start-ups and earlier-stage companies in a good spot to pick up talent that would have previously been inaccessible. |
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Racing to grab attention – Uber and Netflix turn to ads to boost revenues The digital advertising market has recently been hit with headwinds as inflation and an uncertain economic environment lead companies to reevaluate advertising budgets. Meanwhile competition is heightening, with Uber and Netflix two of the recent entrants in the space. With digital advertising viewed as a barometer of the consumer demand environment, we will be watching Q3 earnings updates closely. |
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Chips are falling – No shortage of headwinds for the semiconductor industry Semiconductor stocks haven’t been able to catch a break recently as concerns around a slowing economy and rising rates have been compounded by new restrictions on exports to China. A bundle of the seven largest Semiconductor stocks by market cap is down 50% YTD and 20% in October. Recent earnings misses from AMD and Samsung have signaled further downside risks, including IDC’s recently released datapoints on the slowing PC market. |
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VC money vanishes – Start-ups look to venture debt to extend cash runway 2022 Y/Y public and private market comps look bleak with 2021 marking a record year for valuations. The difficult market has slowed the pace of venture capital cheques as the VC firms digest the bearish IPO exit market and public market sell-off. As a result, many start-ups are turning to venture debt to 1) ease their liquidity pain; and, 2) avoid setting a new, lower valuation through equity down rounds. But debt comes with its own costs and risks, and raising too much of it can be cause for concern. |
Recent technology news
“Tech’s biggest companies are sending worrying signals about the economy”
U.S. tech companies’ recent round of quarterly earnings led analysts to have a negative outlook on the sector, with Microsoft, one of the most reliable performers forecasting a slowdown in revenues through to the end of the year. While traditionally tech companies have driven significant U.S. economic growth over the last decade, inflation, interest rates, and other factors contribute to their poor market performance today.
Read the full article at The New York Times.
“Why startups are better off prioritizing growth instead of cloud costs”
For many founders and leadership teams this year, the topics of conversations have been on cost optimization and extending runways. However, several investors surveyed by TechCrunch+ advise startups to consider foregoing certain cost-cutting ventures due to the manpower, resources and time it may take to find and implement more cost-effective alternatives.
Read the full article at TechCrunch+.
“There’s been only one company IPO this year on the TSX, and that’s a problem”
In 2021, 33 operating companies had initial public offerings on the TSX. In 2022, there has been only one. The drop in IPOs this year was unsurprising to most, but perhaps fewer noticed that the IPO market has been slowly declining since 2000, according to researchers at the University of Calgary – not only in Canada but in most developed countries world-wide.
Read the full article at The Globe and Mail.
“Amazon shares skid on weak outlook amid recession”
Despite reporting a 15% increase in Q3 sales Y/Y, the e-commerce giant’s shares fell by more than 13% in premarket trading in late October, with the company projecting that next quarter’s sales will be far below expectations. The company’s recent $2.9 billion net income is its first quarterly profit in 2022, which is still 9% lower than the same period last year.
Read the full article at The Wall Street Journal.
“The VC slowdown has young investors sweating”
For those just starting out in venture capital, from analysts, associates, and principals reporting to general partners and managing directors, today’s startup climate has them anxious about their future career prospects. Kate Clark of The Information agrees they should be.
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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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