Scaleup Capital Research
The Path to IPO
Over the last four years, there have been substantial changes in IPOs in the software world. Firms tend to wait longer to go public, while raising larger late-stage private rounds and eventually experiencing high public market valuations. We wanted to take a closer look at this trend with the objective to gain some insights into current practices. To that end, we looked at the results of 58 software companies that have gone public in the US since 2013.
The Class of 2008
Our objective for this report was to analyze the ten-year trajectory of tech companies launched in 2008 in select jurisdictions around the world. We looked in detail at 983 companies created in 2008 in Canada, the US, France, Germany, and the UK. The analysis shows some progress we are making and points out some areas of concern.
In several prior reports we looked at the impact that smaller VC deal sizes has on the slower growth of Canadian companies and on the availability of late stage capital. For this report, we wanted to look at whether smaller deal sizes may be as a result of any action that entrepreneurs themselves are taking.
The Rich Get Richer
Canadian VC deal sizes continue to lag those in other countries and at the same time, the returns of Canadian VCs also lag American VC returns. Canadian VCs made a strategic decision to invest the way they did as they could just as easily have chosen to invest twice as much in half as many companies. This begs the question; does the smaller deal size result in smaller returns?
If Canada’s problem now is our ability to create large, public and industry leading world-class companies, then we thought in this scaleup research it would be worthwhile to examine the ability of BDC’s venture capital division and MaRS Investment Accelerator Fund to pick and nurture world-class companies. What we found was that while they are effective at picking successful companies, they both lack the requisite funding at early, mid and late stages to turn these investees into world-class companies.
Failure to Scale
Policy experts and innovation practitioners have criticized Canada’s innovation system for its inability to grow and scale companies. This has been a baffling issue because Canada’s technology sector has been successful at starting companies and generating innovations with high potential. In this study we wanted to determine whether the way in which Canadian companies raise funds also adding to the scaling problem?
Canada’s VC Puzzle
The lack of venture capital in Canada has been denounced consistently in studies and think tank reports, and by the media, entrepreneurs, and even venture capitalists themselves. But while the general consensus is that Canada does not have enough venture capital, we somehow manage to rank #4 in the sale of technology companies.