It is the first Monday of the last month of 2022!

As we get closer to 2023, two trends are heading in opposite directions; large M&A deals and financing of climate tech companies. Today, we will try to figure out what is going on in the M&A space and highlight a few climate tech companies you should be aware of..

Quick Takes: The Notable Lack of Big Canadian Tech Acquisitions

Typically, we cover recent news in Quick Takes but today we are taking a different approach. We are covering the news that is not happening. The second half of 2022 has had very few large tech acquisitions involving Canadian tech companies. Let's discuss:

Why is this notable?

The previous 18 months saw several trends in Canada:

• Canadian companies aggressively acquired companies. Shopify, Lightspeed, PointClickCare, AlayaCare, and many more Canadian tech leaders were frequently boosting their growth via acquisition.

• Large acquisitions of Canadian tech companies include: Wattpad, ecobee, Canalyst, and others were acquired for nine-figure sums. This provided liquidity and freed up talent to help grow the ecosystem.

• Private equity firms investing or acquiring Canadian companies. Our observation: It seemed like every week there was another announcement of a PE firm investing in Canadian tech.

What have we seen over the past six months?

A couple of notable acquisitions:

Canalyst and 1Password acquisition of Passage Identity, and a few other small exits. However, the pacing of activity and the value of deals have fallen rapidly and significantly.

Shouldn't this be expected given the current tech environment?

Yes and No.

Yes, the value of the deals should be falling.

No, as the pace of deals should not be falling drastically. As funding dries up you expect more companies to sell themselves due to lack of funding.

What do you think is happening?

A few things are possible:

• Small deals are happening but not being announced. There is no reason for either party to announce these deals.

• Acquirers are being patient and waiting for valuations to continue to fall.

• Large tech companies have their hands tied due to falling share prices, making acquisitions more dilutive, retrenchment to core businesses are making new business line acquisitions less likely, and in some cases, they are worried about a regulatory review of acquisitions.

What is the impact on the ecosystem?

Fewer exits reduce the recycling of capital and talent making the ecosystem grow slower, and discouraging fewer people from joining early-stage startups.

Want to learn more about technology acquisitions?

Join us tonight in Toronto to hear a fireside with the founders of Wattpad and ecobee who both sold for $600m+ in the last year. Get your tickets here.

Profile: Stuart Lombard, successful climate tech founder

What did Stuart do prior to starting ecobee?

Stuart was a two-time exited tech CEO (Inforamp and Isolation Systems) and a partner at Venture Capital firm JLA Ventures.

Why did Stuart start ecobee?

ecobee was started to help consumers conserve energy, save money, reduce environmental footprint while making people's lives simpler and better.

How did they validate the idea?

Stuart described his approach to market validation at a previous TechTO:

"How did we do market validation and, how do you do that? So Steven Blank has a great book called Four Steps to the Epiphany. It's probably a little bit of overkill, but that's the basic path that we win and the ideas that you had to go through this customer discovery process and you spend time with your customers and that's exactly what we did.

Part of our product sells through the heating and clean service channel. So we all drove around with service technicians. We went and found the largest HVAC companies in Toronto. We spent a lot of time with them. We went out and we interviewed customers.

Did the comment about if I had asked my customers, I would've built a faster horse? I would argue that what Ford did build was a faster horse. And I think it's about understanding what those insights are. And one of the things that we do quite a bit of market research, and I would say that one of the things that we found is that customers give you feedback. And it's really the insights you drive from that feedback and those insights aren't always the obvious ones. And so sometimes you have to look at; What you're being told in a slightly different way in order to deliver a truly better product experience. And things like focus groups things like doing interviews things like surveying your customers, things like doing conjoin studies; those are all awesome things that deliver. Phenomenal market research and phenomenal insights that you can then use to build a much better product combined with the personas that you have? And so I think really thinking about who are you building this for is super important. Because you can go down the wrong path."

Why did ecobee not launch a second product for such a long time?

Stuart described the importance of focus at a previous TechTO:

"It's really about honing your craft and it's really about persistence. And I know that thought is old-fashioned and not very popular, but the reality is, that's what it's about. It's about focus. And so we've been very focused on making thermostats. Our goal is to be the number one product in a category that matters. So when we think about the connected home, we see three constellations. One is around entertainment, one is around security, and one is around energy. And our goal is to be the number one player in a category that matters. Rather than being the number four or five product in four or five different categories, in which case we don't think we matter so much."

How did ecobee impact the climate?

When ecobee was acquired last November, it revealed that it had two million connected homes and that ecobee customers in North America have saved more than 20 TWh of energy, which is the equivalent of saving enough energy to take all the homes in Los Angeles off the grid for an entire year.

How did ecobee compete against tech giants and eventually get acquired?

We will find out tonight at his fireside at TechTO. Join us here

Other notable Canadian climate tech companies and funds:

• Manifest Climate: The leading Climate Risk Planning solution provider.

• BDC Climate Tech Fund: A $600m fund to help climate tech companies accelerate their growth and get to $100m in annual revenues.

• Carbon Neutral Club: A site that rewards you for taking actions to reduce or offset your carbon footprint.

• veritree: veritree enables you to bring transparency and verifiability to tree planting efforts.

• CarbiCrete: Uses a patented steel slag–based innovation to foster the production of cement-free, carbon-negative concrete.

• Pani Energy: Pani is working towards accelerating the transition to a sustainable water supply.

News and Must Reads

Here is some of the top news and reads from across the ecosystem:

• Lancey secures $2m

• Private AI secures $10.7m

• The Breakout Tech Company of 2022

TechTO Talent

Looking for a job? Here are the ones we think are cool!

Account Manager at Wattpad - APPLY HERE 

Why is this job cool? Wattpad is a global multiplatform entertainment company whose vision is to entertain and connect the world through stories. Since 2006, we’ve been on a mission to use the power of community and technology to unleash the full potential of stories to the world. Every month 90 million people around the world spend over 23 billion minutes on Wattpad to share and discover stories they can’t find anywhere else.

Data BI/Analyst at Mero Technologies - APPLY HERE

Why is this job cool? Mero is bringing transparency to the commercial real estate industry. Their platform combines hardware and software, empowering buildings to minimize their environmental impact, control costs, and help the world return safely to public spaces. Mero is relied upon by millions of square feet of space around the world, including hospitals, offices, stadiums, and airports. Mero’s mission is to foster beautiful, healthy, and sustainable urban environments for all.

Sales Development Rep at Manifest Climate - APPLY HERE

Why is this job cool? Manifest Climate is a leading SaaS (Software as a Service) Climate Risk Planning (CRP) solution built by climate experts to guide companies through climate transformation. They are a company driven by leading experts with a passion to make an impact.

Events and Links

Check out the interesting content, events, and happenings for the community here:

• TechTO Together: Our Last #IRL Event of the year! December 5 - REGISTER HERE

•  OneEleven Fall 2022 Showcase: December 8 - REGISTER HERE

• TechTO Together: January 16, 2022 - Kick-off 2023 with us! - REGISTER HERE

Want to showcase your company, events, and opportunities to 60,000 subscribers across the Canadian Tech Eco-system? Reach out to [email protected] to learn more!