Investments in Canadian technology firms are on the rise. Could that mean a flurry of new options for CIOs?
The Canadian Venture Capital Association (CVCA) released its latest report on venture capital funding at the end of July, and found a healthy market. The number of deals for the first half of the year had increased 21% to 244 over the first half of 2014. The value had also increased, too, by 21%, to $939m.
Most of the deals were ICT-focused. 66% of the investments made were in that sector, up slightly from 64% in 1H 2014. The deals were smaller, though, as the amount of money ploughed into ICT firms decreased to 58% of overall investment value, down from two thirds in 1H 2014.
Why should any of this matter to Canadian CIOs? One reason is that it could herald more ICT products and services available from Canadian companies, many of which will be relevant to them.
For many CIOs, buying Canadian could be more about smart business sense rather than patriotism, said Mike Wollatt, CEO at the CVCA.
For a start, it’s often easier to conduct due diligence on a company if they’re located nearby, he argued. Site visits become simpler, and support may be easier, especially if representatives from the supplier or service provider need to visit the CIO’s site.
In some cases, CIOs can take this to its logical conclusion, recruiting someone from the supplier if the product or service becomes strategically important enough. “We see a lot of that – you use a product so much that servicing it becomes a full time equivalent,” he said. “So we hire someone from the company. You can see that with Internet provider and web development kinds of stuff, and in some of the B2B space.”
More generally, promoting local ICT providers can help to spur the local tech economy, creating a situation in which everyone wins, he suggests.
“It takes a few winners to create real ecosystems. I would argue that the folks in and around Silicon Valley benefit from being there,” he argued. Similarly, creating such ecosystems in Canada requires some local investment by customers, and the creation of a tight-knit community.
Then, there are specific concerns around data sovereignty. Many CIOs working in sensitive or highly regulated industries who want to use SaaS or other hosted services may prefer to keep their sensitive data on local soil, stewarded by domestic firms who aren’t susceptible to the excesses of the US PATRIOT Act.
What kinds of relevant products and services are these investment dollars funding? Internet software and services came top of the list by far, with 94 deals worth $263m. Ecommerce came second, with 25 deals worth $95m. After that came electronics and semiconductors, computer hardware and services, mobile and telecommunications, and non-Internet, non-mobile software.
Things are set to continue, said Wollatt, who is bullish about the tech sector in Canada. “You see in on B2C and in B2B: SaaS, cloud computing, mobile, and fintech is interesting.” He said. “The VCs I talk to tell me that there’s no shortage of good companies out there right now, and no shortage of entrepreneurs.”