Capital Innovation recently organized a conference in Montreal about venture capitalism in the technology sector. Capital Innovation and the International Venture Forums grew since their launch in 2008 to become the largest innovation investment program in Quebec, supporting one of the most important networks of angel investors and venture capital managers in Canada.
One of the panels consisted of Chris Arsenault of iNovia Capital; Louis Tétu, CEO and Executive Chairman at Coveo and former CEO and Executive Chairman at Taleo Corporation; and Robert Talbot, VP Investments at Anges Québec.
According to the panel, the sale of Taleo to Oracle in early 2012 for $1.9 billion is having positive effects on the Quebec startup ecosystem.
First, Taleo employees turned millionaires are launching new startups and are investing also as angels. Second, foreign and Canadian venture capital investors and angels are becoming more enthusiastic about the potential of Quebec startups—the idea of investing in a successful Canadian startup is stimulated by the recent sale of Taleo. Third, Taleo imported business and technology knowhow from US to Canada. Thus, in order to grow fast, Taleo became a public firm and moved operations to San Francisco to be closer to their customers, while maintaining a research and development centre in Quebec City. However, Taleo admitted to becoming public one year too early.
Some winning conditions must be met in order to see a similar success in Canadian entrepreneurship. Thus, exit deals over $100 million are rare and represent an inflection point in their existence. More capital is required in order to startup to build scale and grow revenues significantly.
Louis Têtu gave the recent example of Jive Softwave. The market value is at $1.6 billion, around 60 times revenues. In order to reach $70 million in revenues, Jive Software raised $90 million in capital.
“These are the new rules of the game," he argues. "Canadian venture capital must compete with the same weapons than US venture capital. Canadian entrepreneurs need easier access to competent venture capitalists in order to grow fast."