Here are three private technology companies to put on your watch list. They’re not public yet, but soon “could take on the world by storm” say CIBC’s Todd Coupland and Valery Heckel.
CIBC’s first-ever virtual tour of Quebec’s leading technology companies featured three private tech companies that could take on the world by storm. Meet Coveo Solutions Inc., Dialogue Technologies Inc. and Talent.com.
Collectively, these three companies have raised a total of at least US$465 million. Investors heard about their business plans and required growth capital at the online event, hosted by CIBC, in addition to each company’s impressive Software as a Service (SaaS) offerings and growth metrics to date.
Coveo Solutions Inc.
Coveo provides artificially powered search capabilities used on websites and in e-commerce. Its solutions allow enterprises to personalize digital experiences for partners, dealers and employees.
Last November, the company raised $227 million in a later-stage investment round, led by OMERS (Ontario Municipal Employees Retirement System) Growth Equity. This followed the $131 million raised in 2018 in a financing round led by Evergreen Coast Capital.
The company is one of Canada’s leading unicorns [a private start-up company with a value exceeding $1 billion] with a valuation of $1.46 billion per its November 2019 financing. The company is used by more than 1,500 customers, employs about 550 employees and boasts impressive SaaS metrics.
During its presentation, Coveo revealed that the company generates more than US$100 million in revenue annually, of which 93 per cent represented recurring subscriptions. In 2019, its SaaS revenue growth was 52 per cent and represents a compound annual growth rate (CAGR) of 45 per cent since the first quarter of 2017.
The company’s lifetime value per customer acquisition cost (LTV/CAC) is 6.8 times with a SaaS gross margin of 82 per cent, and recent financing will allow the company to be opportunistic in mergers and acquisitions.
It recently hired a new head of corporate development and vice-president of sales to help them with those plans.
Dialogue Technologies Inc.
Meanwhile, Dialogue Technologies provides its users with access to a large network of medical professionals on a virtual healthcare platform. The company considers an initial public offering in 2021 to be conceivable if it remains on the same growth trajectory.
Users of the platform first go through AI-driven triage, which is available in three to four minutes. More than 1,200 symptoms and 550 pathologies are covered. Users receive an in-depth consultation and within seven days, the same medical professional will follow up with the patient.
According to The Globe and Mail, the number of users with access to its platform has increased 12-fold, to five million people, this year.
The company raised US$43 million in July 2020 (in a financing round led by Sun Life Financial), US$40 million in June 2019 (led by Caisse de dépôt et placement du Québec), US$12 million in 2018 (led by White Star Capital) and US$4 million in 2017 (led by Diagram). In 2020, users are expected to rise another four times. Net customer retention is more than 100 per cent.
The company suggested the growth of annual recurring revenue will be 93 per cent from 2019 to 2023, based on their per-employee-per month (PEPM) pricing model.
Dialogue’s customers (employers) pay a fixed price per month based on the number of employees that have access to the platform, regardless of utilization. Pricing is reviewed with customers on a regular basis.
Unsurprisingly, the company has successfully attracted investor interest.
The third company to attract investor interest connects employers and potential employees via one of the fastest-growing employment websites in the world.
Talent.com seeks to centralize all jobs listed on the Internet through the use of artificial intelligence.
By the end of 2019, the company was posting approximately 30 million jobs available in over 75 countries and receiving 70 million hits each month from users across the world. It operates in 77 countries and has offices in Europe and Latin America, in addition to its Montréal headquarters.
As of last year, Talent.com experienced 5,556 per cent growth over five years and was ranked 14th in Canadian Business magazine’s 2019 Growth 500, which recognizes the fastest-growing companies in Canada.
The company raised a combined total of US$96 million in 2018 and 2019.
Co-Founder and Co-CEO, Lucas Martinez’s presentation was eye-opening and unexpected. The company’s possibilities, and success to date are impressive and not well understood. It was a pleasant surprise to cap off our virtual tour with this impressive conversation.
Talent.com is focused on blue collar employment. Its customers are impressive and include companies from Amazon to Uber, Carvana (an on-line used car company) and the US Army, to name just a few.
While it has a global vision, it employs a country-by-country approach. The platform also has tech features from salary search to a tax calculator (calculates country-specific after-tax income) that has proven to be quite popular.
In 2020, its business rebounded following the initial COVID-19 lockdown. Currently, the annual run rate for revenue is well above the company’s targets for 2020. As a result, it is hiring again and has increased staff by 16 per cent to 250 through September.
Talent.com outlined its next steps in a three-point plan:
First, it is focused on scale and adding differentiating features, such as the tax calculator or salary search.
Second, it wants to maintain its current growth rate at 50 per cent.
Third, Talent.com plans to raise funds, targeted at raising brand awareness among both enterprises and small- to medium-sized businesses.
Despite the COVID-19 crisis, there are a number of technology themes that continue to prevail. E-commerce has been pulled forward, enhancing data movement in the new work-from-home environment, applied artificial intelligence, telemedicine for our physical and mental well-being, and employment opportunities are just a few examples.
These companies who are pursuing their business plans will not only survive the crisis, but are likely to emerge stronger.
We were impressed with the level of innovation in Quebec’s technology sector. Coveo, Dialogue Technologies and Talent.com are each substantial in its own way and worthy of your consideration.
We suggest you get to know them better as they each have businesses that are scaling globally.
Todd Coupland is the managing director of technology and innovation strategy at CIBC Capital Markets. The financial analyst previously worked as an equity analyst in CIBC’s technology sector. Valery Heckel is an equity research associate at CIBC Capital Markets. She previously worked in strategic investment research with British Columbia Investment Management Corporation (BCI).
This is an edited version of an article that was originally published for subscribers in the October 16, 2020, issue of Investor’s Digest of Canada. You can profit from the award-winning advice subscribers receive regularly in Investor’s Digest of Canada.
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