Good morning. I’m Sean Silcoff. I write about technology and life sciences, and this weekend we published my months-long deep dive into a new wave of scaled-up tech companies. Unlike Canadian tech names of the past, these players have options to run as stand-alone companies. In fact, many of them seem likely to head toward a splashy initial public offering. More on those successes below, but first:
In the news
Retailers and their clients expressed mixed feelings about the GST holiday tax break as the policy entered into force Saturday.
Mail will begin moving again across Canada on Tuesday after the federal government pushed Friday to end the work stoppage at Canada Post.
Hydro-Québec CEO Michael Sabia is pitching last week’s renewable power deal with Newfoundland and Labrador as proof to the United States that Canada should be considered a serious business partner.
The rising business of insolvency is bringing big pay days to bankruptcy lawyers and other industry experts.
Happening today
- Finance Minister Chrystia Freeland’s fall economic update is expected to offer details on how the government will tackle the threat of U.S. tariffs ahead of Donald Trump’s inauguration in the new year.
Anna Sainsbury of Geocomply.Dina Goldstein/The Globe and Mail
In focus
The tide is high but they’re holding on
I’ve covered the Canadian technology scene since I joined The Globe and Mail nearly 13 years ago. When I started writing about the sector, it was pretty moribund: Nortel Networks Corp. was gone, BlackBerry Ltd. was on the decline and tech made up a dismal 1.6 per cent of the S&P/TSX Composite Index.
Companies were small, underfunded, prone to foreign takeovers at bargain prices and venture capitalists were asking for help from Ottawa. Shopify Inc. was still a small startup occupying an old building in the seedier side of Ottawa’s ByWard Market.
But I could see that something interesting was happening. It was much easier to start a tech company than a decade earlier. New opportunities had opened up everywhere, thanks to the explosion of mobile data communications, cloud computing and artificial intelligence.
I convinced my editors that we should really lean into covering the sector, because I felt these trends would power an explosion of successful software companies around the world – and Canada would have its share of them.
Clio’s US$900-million secondary financing this year led by New Enterprise Associates was larger than most Canadian tech IPOs, valuing the company at US$3-billion.The Globe and Mail
By the 2020s, it was evident that this had come to pass. I started in earnest to compile a list of companies that had reached the US$100-million mark in revenues – a sign of maturity and enduring success in tech. Companies that reached that size would have options when the prolonged tech downturn ended – and many of them would go public. By spring, I started to put more effort into figuring out who was missing.
I’ve talked to dozens of chief executive officers, investment bankers, private-equity partners and venture capitalists to compile the list. It’s a lot bigger than I thought it would be – 71 companies, and counting.
Some of them are more than 40 years old and have gotten new life in recent years. Some are rocket ships that are barely a decade old. Most have attracted private-capital backers. And a lot of them want to build “heavy” companies, as Jeff Bezos aspired to do in Amazon.com Inc.’s early days.
The US$100-million club features some of Canada’s best-known tech brands: 1Password, Wealthsimple Technologies Inc., Questrade Wealth Management Inc. and Hopper Inc., the world’s third-largest online travel agency.
Vancouver’s GeoComply Solutions Inc., founded by couple Anna Sainsbury and David Briggs, did well over 100 million geolocation checks for betting apps during this year’s Super Bowl weekend alone.
And that IPO wave would be a lot different than the previous two Canada has seen in the past three decades. The companies would be mature, big, profitable – and valuable. The question is, will many of them skip the Toronto Stock Exchange and just head straight to the New York Stock Exchange or Nasdaq?
Why does a story on Canada’s US$100-million club matter? The narrative about Canada’s tech sector has been exceedingly negative this year. To be sure, the sector over all is in a funk.
But these successes should be a bigger part of Canada’s economic story, too. Tech now accounts for 10 per cent of the S&P/TSX Composite. And falling interest rates are a promising sign of better economic times ahead.
The past five years haven’t given us a ton of new Canadian startups that have seized the imaginations of investors. But the sector now has depth, breadth, maturity and scale it once lacked. In my opinion, it has come of age. Let me know what you think.
Charted
It could be time to bet on a recovery
There has been a lot of grumbling about the weaker exchange rate over the past few months as the Canadian dollar declined from more than 74 cents against the U.S. dollar to a four-year low of 70.2 cents last week. Some investors might give in to the temptation of selling U.S.-dollar assets high and buying Canadian-dollar assets low. For Canadians holding assets that are priced in U.S. dollars, such as U.S.-listed stocks, bonds or exchange-traded funds, the loonie’s downturn has delivered a surprisingly strong tailwind. Read more from David Berman here.
The outlook
On our radar this week
Today: Bank of Canada Governor Tiff Macklem will speak before the Greater Vancouver Board of Trade. Read Mark Rendell’s interview with Macklem here.
Tuesday: Statistics Canada releases inflation figures for November.
Wednesday: The U.S. Federal Reserve is expected to cut rates at the end of its two-day meeting.
Thursday: Earnings include Accenture PLC; BlackBerry Ltd.; Cintas Corp.; FedEx Corp.; Nike Inc.
Friday: Data for Canadian retail sales for October will be released. Also, it’s the last good day to check out the Geminids meteor shower.
Morning update
Global shares edged lower on soft economic numbers from China and Europe as investors waited for the U.S. Federal Reserve meeting later this week for clues on further interest-rate cuts. Wall Street futures pointed marginally higher, while TSX futures were in negative territory as crude prices slid.
Overseas, the pan-European STOXX 600 was down 0.33 per cent in morning trading. Britain’s FTSE 100 fell 0.31 per cent, Germany’s DAX slipped 0.36 per cent and France’s CAC 40 gave back 0.76 per cent.
In Asia, Japan’s Nikkei closed 0.03 per cent lower, while Hong Kong’s Hang Seng declined 0.88 per cent.
The Canadian dollar traded at 70.20 U.S. cents