U.S. strategic buyers, venture capitalists and growth equity investors have historically had limited insight into British Columbia-based technology companies, resulting in sporadic investment in the region. To remedy this situation and achieve a consistent flow of opportunities, B.C. companies must understand how to best showcase their businesses to U.S. investors and build greater awareness of viable technology companies in the region.
First, let's examine the type of investors looking to enter the B.C. market. The venture capitalists who have experienced successful exits with their portfolio companies over the last several years are looking at the B.C. region as a new investment opportunity.
Based on their past wins, these firms will continue to successfully raise capital and evaluate new opportunities across the border.
Second, we see widespread interest from growth equity firms looking to enter the B.C. market. Prior to the economic downturn, growth equity investors raised billions of dollars.
However, given the state of the market, they have not had an opportunity to deploy those funds.
These firms are looking for growth investments and, consequently, are aggressively competing with each other to make new investments. This has caused a supply and demand gap within the market. As a result of this gap, growth equity funds have been forced to become more flexible to seek out new investments.
They have become geographically agnostic, focusing on areas where the high-value companies are located, whether it's Canada, Europe or Asia.
They have also become flexible in terms and more innovative in structuring deals.
Based on this shift, growth equity firms are now competing with strategic acquirers for the same high-value companies.
The companies that have become desirable to the corporate acquirers are the identical companies that traditionally sought growth equity investments.
The current market makes it an opportune time to be a seller of equity because the competition will drive high valuations and deal terms.
To attract the attention of these U.S. investors and take advantage of current market dynamics, B.C. technology companies must ensure they are providing a complete picture of their market potential.
Companies that are leaders in their segment, with large revenue (more than $25 million) and high growth rates (more than 25%) are an obvious choice for investors and are typically the ones creating the most buzz in the market.
However, there are many other factors that play into a company's potential for success from an investor perspective.
For example, companies that have a unique or niche technology or service are highly valuable because strategic buyers would rather acquire an existing technology versus developing one.
A company can also become a valuable asset to a strategic buyer or of interest to a growth equity fund if it is a differentiated player or if there is a high barrier to entry for new players in that segment.
Companies should also showcase their management team and the group's past successes. We have seen many companies in the technology sector acquired based on the calibre of their executives.
Additionally, B.C.-area companies can increase their visibility with U.S. investors by forming partnerships with U.S. companies, garnering coverage from a U.S. analyst firm or by building relationships with investment banks that have ties with growth equity firms long before they intend to receive financing.
