Shopify Signals More Billion-Dollar IPOs to Canadian Tech

Shopify Inc.’s almost $2 billion stock-market debut is the first of a wave of Canadian technology companies about to win billion-dollar valuations on public markets, according to venture capital firm Difference Capital Financial Inc.

“I think we have a dozen companies in Canada that can see a clear line of sight to a billion dollar-plus valuation over the next few years,” Tom Liston, managing partner at Difference Capital said at the Bloomberg Economic Series Canada conference in Toronto. “In the 15 years that I’ve covered tech, we’ve never had the breadth of names of this quality.”

Shopify Inc., an Ottawa-based software company that helps merchants set up online stores, climbed 51 percent in its trading debut in New York, bringing its market value to $1.9 billion. That’s up from the $17 IPO price that suggested a market value of $1.27 billion.

D2L Corp., which makes education software, and WP Technology Inc., a story-sharing website known as Wattpad, are two other Canadian tech firms which have attracted millions in private funding from U.S. venture firms.

The founders of both firms said that while they don’t have immediate plans for their own IPOs, Shopify’s success is an example that shows they can pursue that route to grow their businesses in Canada rather than selling them.

“It does a lot to help with the confidence,” said John Baker, chief executive officer of D2L. “They’re leading the path for other young entrepreneurs that are building these tech companies.”

Private Capital

Tech companies have shrunk to account for less than 3 percent of the benchmark Standard & Poor’s/TSX Composite Index but Ivan Yuen, co-founder and chief product officer of Wattpad, said there’s more private capital available for start-ups.

“The biggest difference in the environment today versus five years ago is the availability of early-stage financing,” he said. “What that’s led to is a lot of new companies that are coming up taking that early stage opportunity.”

Venture capital spending in the country dropped to $300 million in 2009, its lowest point since 2003, data from Pitchbook Data Inc. show. By last year that had grown to a record $1.2 billion.

“Ten years ago you built a company, got to C$300 million and sold it,” Liston said. “I think we have a number of examples where we can grow our own and acquire rather than be acquired.”

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