MISE & Agrave; DAY
While experiencing strong growth in 2021, startups are reaching unprecedented valuations in the financial market, sometimes exceeding ten billion dollars. And it is the dynamism of the Quebec investment ecosystem that is good news for startup owners.
In 2021, a record amount of more than $ 437 billion was invested in American startups, according to the CB Insights database. The data aggregation platform Crunchbase lists thirty startups, including Grammarly and Canva, have even been elevated to the rank of “décacornes”, that is to say that they are valued at more than $ 10 billion each, without be subject to public market regulations. These creatures themselves come from “unicorns”, a term that appeared around 2013 to designate startups reaching a valuation exceeding $ 1 billion in the market.
Driven by their increasingly important fundraising rounds, which allow them to continue their growth, the “unicorns” and “décacornes” no longer feel the need to trade in the public market. Before, explains Vincent Grégoire, associate professor in the finance department of HEC Montréal, fast-growing companies almost systematically took this route to gain access to even greater financing potential: a larger pool of capital is available on the public market. , where everyone, including individuals, can invest. & nbsp;
Against access to this basin, the company sacrificed a part of flexibility. The IPO implies indeed major changes for the operation of the company. It is accompanied by numerous administrative processes and is framed by laws and regulations intended to protect investors, which can complicate the structure of the organization and the conduct of future fundraising, thus limiting the growth of the company. & Nbsp ;
As the startup's fundamental goal is to always grow, this loss of flexibility is no longer advantageous in front of the many investors ready to participate in fundraising before the IPO. They can therefore maintain increased flexibility which allows them, for example, to rapidly increase the company's payroll, to offer more attractive working conditions in order to counter the labor shortage.
“Peter Pan” effect among startups
The pandemic has had an influence on the legendary amounts raised by these American giants. & nbsp;
“Market returns have been very, very good over the past year, a lot of money is available to invest at all stages. Interest rates have also remained low, it is a favorable market for investors, ”explains Vincent Grégoire.
Philip Hazeltine, owner of the Quebec startup Neolegal and administrator of the investor group Anges Québec, foresees a year full of opportunities for investors and entrepreneurs in Quebec, calling the startup market a “world in turmoil”. Shocking events, like the pandemic, create opportunities, he says. A job loss, for example, can turn into a business plan. & Nbsp;
Vincent Grégoire agrees: “A lot of people gathered at home with a lot of time. They said to themselves: now I have time to start this project. Certainly when you see that there is a lot of funding, you think to yourself that maybe now is a better time than 5 years ago. According to them, the fields of technology and health will be the fertile ground for this coming revolution.
• See also: NFT: overview of the biggest deals of 2021
Growth, subversion and customer capture: what is a startup?
For Vincent Grégoire, “a startup is not a start-up company, it is a growing company. Philip Hazeltine insists that “strong growth is what defines the startup the most: it grows 10, 20, 30, 50%, per month, in its turnover. “& Nbsp;
The startup must also be subversive and seek to transform the ways of doing business in a field. Philip Hazeltine cites the example of Uber, which had to capture taxi customers all over the world while developing new technology. “We have to invest colossal sums to capture the market and convince customers,” he adds.
These colossal sums are acquired from various types of private investors, with targeted, ambitious and forward-thinking fundraising rounds. For Philip Hazeltine, it is essential to be ahead of the parade in the field of startups, otherwise, “you get passed by someone else.” & Nbsp;
The Quebec ecosystem
Even though the Quebec market is smaller, Philip Hazeltine talks about opening up to the American market. “When you create a startup, you look for an almost global market, which can be of interest to all North American investors,” he explains.
The investment ecosystem in Quebec has something to do with enthusiasm, according to Philip Hazeltine. “Today it's very structured. We cover several stages of financing [from the start]. »Several types of financiers, including banks, government programs, parapublic and private organizations such as PME-MTL or Anges Québec, contribute at various stages to business growth. The year 2021 saw the birth of several government funds, the funds of which will be deployed in 2022, including the Women in Trade fund of Export Development Canada (EDC).
Vincent Grégoire insists on the quality of this ecosystem, which supports Montreal startups in the digital and artificial intelligence fields. “Investors put money into a project, but they also provide support and a network of contacts. Often, he points out, investors are former owners of startups who have acquired special expertise and who want to encourage the next generation. & Nbsp;