May 12, 2020
The “largest amount of financing for growth of tech companies has been done by classical venture financing,” Osler partner André Perey tells Lexpert. André participated in a Q&A panel discussion for a special edition of Lexpert that focused on how the technology sector has fared during the COVID-19 pandemic. The discussion ranged from how tech companies are funding growth now to what COVID-19 will mean to the tech market, both now and in the future. André, a partner in Osler’s Emerging and High Growth Companies Group, explains what’s fuelling growth in the tech space.
“We’ve had an incredible amount of activity in doing equity financing: venture and debt financing,” André tells Lexpert. “The debt piece has really emerged in the last couple of years as an additional way that companies are managing their growth. Every Canadian bank is very actively involved in the tech space, where they weren’t before. It used to be a few companies; now, many are trying to lend into this.
“By far the largest amount of financing for growth of tech companies has been done by classical venture equity financing. [In the deals on which Osler worked], we went from about $900 million all the way to $3.7 billion over a two-year period [2018-2019], which says these companies are raising money at higher valuations.”
André also offered his insights on the subject of tech IPOs.
“We have had, for the last several years, a very healthy ecosystem for different kinds of funding: debt and equity in the tech space,” André tells Lexpert. “It’s been a sustained, quiet period for tech IPOs, and the main reason for that is the availability of other private capital. And they must have a significant story to tell to the capital markets to be able to go public.
“At the moment, between going public vs. continuing to raise private money, you have the obvious costs of going public in the first place and the continuing, ongoing costs of being a public company. There’s a financial and human cost requiring specific personnel and changes in approach to PR, legal disclosure and governance. Those are real costs and more onerous than for the private company.”
Asked about what COVID-19 will mean for the tech market moving forward, André says that “this whole crisis is going to further the likelihood that we’ll see fewer and fewer technology companies go public in Canada, at least in the near term.”
Read the full Q&A discussion, “Financing tech growth,” in Lexpert Special Edition: Technology 2020 on May 12, 2020.