While unicorns may proliferate throughout Silicon Valley, tech companies valued at $1 billion or more have long remained elusive in the Vancouver ecosystem.
Prior to 2021, one would have to go back three years to catch the last public glimpse of a unicorn emerging from B.C. when Motorola Solutions Inc. (NYSE:MSI) acquired Avigilon Corp. for US$1 billion. But that rare breed has been multiplying recently, with four unicorns emerging since late February amid a perfect mix of macroeconomic conditions and pandemic-induced demand for technology.
“There’s been a massive change in the market since the turn of the end of the calendar year,” said David Raffa, president of Valeo Corporate Finance Ltd., whose Vancouver-based firm provides services for mergers and acquisitions and initial public offerings. “Suddenly activity has just jumped.”
The stampede of companies reaching unicorn status in Vancouver kicked off February 24, when New York-based Diligent Corp. acquired software firm Galvanize (ACL Services Ltd.) for US$1 billion.
The next billion-dollar valuation came March 23, when cybersecurity firm GeoComply Solutions Inc. took on an undisclosed investment that chairwoman and co-founder Anna Sainsbury said officially propelled the company into unicorn status.
And by April 27, two unicorns emerged in a single day when online-course creator Thinkific Labs Inc.’s $160 million IPO delivered a $1 billion valuation, and the closing of a US$110 million financing round brought legal-tech firm Clio’s (Themis Solutions Inc.) valuation to US$1.6 billion.
Thinkific CEO Greg Smith said he credits other Canadian tech firms such as Shopify Inc. (TSX:SHOP) and Lightspeed POS Inc. (TSX:LSPD) for paving the way as “ambassadors” that can be easily compared to smaller emerging tech companies in Canada.
“When you have the opportunity for large valuations I think it allows companies to go public faster or earlier,” he told BIV, adding that his goal is to hire about 200 more workers by year’s end to bring his company’s headcount to 500.
“Being a public company gives us a greater platform to attract, retain and compensate exceptional people.”
Raffa said the Vancouver tech ecosystem is benefitting from private equity firms swimming in cash amid the pandemic, while credit markets are wide open and interest rates are at record lows.
“You build a dam dependent on a river and the water is piling up, piling up, piling up. Then the dam bursts. And so that’s what happened.”
Raffa added that, had it not been for the pandemic, that “water” – or investment capital – would have just kept flowing.
On top of that, he said the tech developed by these B.C. unicorns seemed tailor-made to explode during an event like the pandemic as laggard law firms caught up to offering virtual services and small businesses shifted to offering courses online amid lockdowns.
“What you’re seeing is a continued growth in the tech sector in North America and valuations, especially for recurring revenue companies, [which] are very frothy right now,” Raffa said, adding the high valuations for larger Vancouver tech companies may have a trickledown effect on the valuations of local startups.
Meanwhile, the pandemic has “driven 10 years of acceleration and digital transformation in the legal industry over the course of 10 months,” according to Clio CEO Jack Newton.
“Starting around mid-April [2020], we saw an unbelievable surge in demand – what I described as a mass evacuation to the cloud,” he told BIV.
And with its US$1.6 billion valuation and US$110 million in fresh venture capital in hand, Clio is now making strategic acquisitions to expand its growth further.
Newton expects the company will be up to more than 1,000 employees within 12 months as it hires additional remote workers while boosting offices in B.C., Alberta, Ontario and the Republic of Ireland.
But will unicorn activity slow down for the year after such an unprecedented explosion in only two months?
“I’ll bet we’ll get more,” said Raffa.
