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AppDirect’s Montreal office.

AppDirect

One of the most successful U.S. technology companies founded by Canadians, online commerce software provider AppDirect Inc., has raised US$185-million in private capital led by Quebec pension giant Caisse de dépôt et placement du Québec and backed by past investors.

The investment, which values San Francisco-based AppDirect at more than US$1.5-billion after the capital infusion, highlights the company’s growing attachment to the birthplace of co-founders and co-CEOs Daniel Saks and Nicolas Desmarais, son of Power Corp. of Canada chairman Paul Desmarais Jr.

With the funding, AppDirect plans to hire 150 people in Montreal, where it already has a large presence, and which will become its largest location by staff count.

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“We’re really doing a big surge in Montreal and making that our area of growth,” said Mr. Saks, a Niagara Falls, Ont., native. He acknowledged engineering talent is less expensive in Canada, with additional tax credit support from the federal and provincial governments, but said the choice was based on where the company could find the best talent. "We see strong retention and engagement out of the team there, and really felt it would be a great city for us to double down and build a bigger footprint.”

AppDirect has bought three Canadian companies and held its annual customer conference in Montreal last year. Its early investors and all of its directors are Canadian. “I view this as a Canadian company, founded by Canadians, with a great footprint here in Quebec,” Tom Birch, global managing director, venture capital and technology with the Caisse and an AppDirect director, said of the Delaware-incorporated company. “I think it’s a great Canadian success story.”

If AppDirect should ever go public – which the 750-person company, with US$150-million in revenue last year, is large enough to do – it would consider dual-listing its shares in Canada and the U.S., Mr. Saks said. “We see ourselves as a North American and a global company, which Canada being an excellent spot for us.”

AppDirect sells software to more than 2,000 companies including Deutsche Telekom AG, Comcast Corp., Vodafone Group PLC, Honewell International Inc. and Automatic Data Processing Inc. (ADP) which they use to create and run online marketplaces to sell applications and third-party software to small and medium businesses.

Mr. Saks said he and Mr. Desmarais founded AppDirect in San Francisco in 2009 because it was home to Salesforce and other early online subscription software leaders, rather than in Canada where Shopify and Lightspeed were still in their infancy. “We needed to be in Silicon Valley in order to build the platform we wanted,” he said.

AppDirect subsequently raised US$465-million including the most recent financing, counting JPMorgan, Peter Thiel’s Mithril Capital Management, billionaire Henry Kravis and Canada’s Inovia Capital and Stingray Group Inc. as investors. Given the subsequent flourishing of Canada’s tech sector, “if we could do it again today we’d start in Canada,” Mr. Saks said.

AppDirect got onto the Caisse’s radar through the pension giant’s support of Montreal-based Inovia, one of AppDirect’s first backers. Mr. Birch met with AppDirect’s founders at their Montreal conference last year and “we got serious with the company” after spending time with management in California later that fall, he said. The Caisse eventually agreed to pre-emptively lead a couple of investments in the company this year totalling US$185-million.

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Inovia partner and board member Chris Arsenault said AppDirect is set to have a strong 2020 because of a pandemic-related pickup in demand as more businesses shift online. “They’ve been successful because they’ve executed on a vision they had in 2009” that small businesses would increasingly turn to online channels for their software and infrastructure needs, Mr. Arsenault said.

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