Export Development Canada has led a US$72-million investment in Calgary warehouse robotics startup Attabotics Inc., part of a recent strategy by the Crown corporation to boost support for globally-minded medium-sized companies.
The federal government’s export financing arm is leading the investment, while Ontario Teachers’ Pension Plan, which led a US$50-million of convertible debt financing to Attabotics in 2020, has converted its stake into equity and invested another US$11-million as part of this round.
It’s the first deal involving Teachers’ venture growth unit since its $95-million investment in cryptocurrency exchange operator FTX vaporized last week. Other Attabotics investors include Honeywell International Inc., Coatue Management, Comcast Ventures, Forerunner Ventures and Werklund Growth Fund. Attabotics also received $34-million from the government’s Strategic Innovation Fund in 2020.
Attabotics, founded in 2015, makes automation equipment used to fulfill orders that transforms product warehouses into high-density, vertical and scalable storage structures inspired by ant-colony frameworks. Instead of moving goods from aisle to aisle, Attabotics robots move up and down vertical structures, grabbing goods with extendable arms, then bringing them back to workers who prepare them for packing and shipping.
The company has worked at seven sites across North America with customers such as Canadian Tire, Gordon Food Services, Pan Pacific Pet and Modern Beauty Supplies to perfect the technology. Now it is in rapid expansion mode, expecting 300-per-cent revenue growth in both this year and next, fuelled in part by distribution deals with partners in Europe and South Korea.
“We have a big focus on moving our technology out beyond North America and into the rest of the world,” chief executive officer Scott Gravelle said in an interview. He said the company is also looking to introduce a recurring revenue model where customers pay as they use the technology, in order to provide a stream of cash that is steadier than one-time installation contracts.
The investment comes during a difficult year for the technology sector. Valuations have collapsed and financiers have pulled back from funding deals or tried to impose onerous terms that give themselves downside protection.
Mr. Gravelle said “it’s been a long, drawn-out grind” to raise the money since the 300-person company went to market in February, as some prospective investors asked for aggressive terms, such as multiple-liquidation preferences, meaning they could get a minimum guaranteed return several times their investment ahead of other backers if the company was sold or went public.
In the end Export Development Canada (EDC) “didn’t just come in and try to take advantage of the situation” but made “a really fair, good offer,” Mr. Gravelle said. “Those are rare right now. It’s a very Canadian offer.”
He said the EDC-led financing doubles the company’s enterprise valuation on paper, representing a rare increase at a time when many companies are raising money at flat or reduced valuations compared with their last fundings.
Asked if EDC gave more generous terms than the market, Guillermo Freire, senior vice-president for the mid-market segment, replied that while his Crown corporation was “not solely focused on internal rates of returns,” it could also be more patient than private-sector financiers.
“But at the end of the day, we’re not here to subsidize” companies. “We need to look at companies that have good prospects of success, then do what we need to do to allow that to happen.”
For EDC, the Attabotics investment is a centrepiece of a recent strategy under CEO Mairead Lavery to use its balance sheet to help revive Canada’s weakening trade performance. Canada’s share of global exports slid from 4 per cent in 2000 to 2.3 per cent by 2018, near the bottom of nations in the Organization for Economic Co-operation and Development.
EDC’s strategy is to throw its weight behind mid-sized companies with $10-million to $300-million in revenue and which represent 8 per cent of exporters but generate 21 per cent of export volume. Sectors of interest for EDC include advanced technologies such as robotics, digital and clean technologies, plus “resources of the future” and agrifood.
”They are also the companies that, with the right support at the right time, can scale up into global champions and spur more trade,” EDC’s chief business officer Carl Burlock wrote in a LinkedIn post last week.
As part of that, EDC, which provides loans and other financing options to exporters, has sharply increased its direct investments into companies, to $577-million in 2021, up from $203-million in 2019.
EDC’s financial exposure from its investments has increased to $3.6-billion as of last Dec. 31 from $2.1-billion three years earlier, largely because of increasing private-equity stakes. In that time, EDC has increasingly focused on later-stage investments rather than earlier venture-capital bets, Mr. Freire said.
EDC invests $10-million to $75-million directly in companies but limits its stake to 25 per cent, he said. Its approach is similar to the Canadian Business Growth Fund, which is backed by Canadian financial institutions and seeks to provide a friendly, patient financing option to later-stage Canadian startups.
Mr. Freire said Attabotics “has a compelling value proposition. They’re solving challenges faced by urban retailers while reducing their footprint with reliable, simple technology that works and can be deployed on a larger scale. We see it growing internationally, continuing to develop their product to do that, and grow in Canada, support and benefit the growth of the robotics ecosystem in Canada and remain Canadian. That’s a very important aspect of what we’re doing here.”