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Novisto Inc., a Montreal startup that helps large corporations track and report on their environmental, social and governance performance, has raised US$20-million in venture capital.

Montreal’s Inovia Capital led the equity deal, with investment from other new financiers Portage Ventures and French reinsurance company SCOR SE and past backers White Star Capital and Diagram Ventures. The deal represents a “substantial” increase in Novisto’s valuation over 2021, when it raised US$8-million, said White Star managing partner Jean-François Marcoux.

It shows that, despite the great shakeout under way in the tech sector, investors are still keen to back companies with both good growth prospects and promising unit economics that didn’t reach for overly rich valuations during the pandemic bubble. The deal did not involve any complicated terms, which financiers have increasingly demanded from cash-strapped startups to guarantee a larger share of proceeds when companies sell. “It’s a clean deal – there’s no structure,” Mr. Marcoux said, adding that Novisto’s valuation, which was not disclosed, is in line with venture deals prior to the 2020-21 bubble.

“Even if the macroeconomic situation is difficult right now, good companies with a strong total addressable market, strong teams and strong moats get funding,” Inovia partner Magaly Charbonneau said.

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Novisto, founded in 2019, sells online “system of record” software to collect and organize a company’s internal data to prepare automated, auditable environmental, social and governance (ESG) reports, which are increasingly demanded by governments, regulators and other authorities. The company had early luck signing on Canadian companies such as Bombardier, Bell, Intact, Manulife, TMX Group and CAE, then expanded globally, adding JetBlue, Moderna, Danone, AB InBev, Sanofi and Facebook parent Meta among others.

The startup checks a lot of boxes for startup financiers, who are far pickier than they were during the bubble. For one, it is in the nascent but growing space of ESG reporting. “We were obviously lucky to be in the ESG space, which is hot and effervescent, but in the end we also had the metrics,” said Novisto chief executive officer and co-founder Charles Assaf in an interview.

The company also uses artificial intelligence to help clients benchmark their ESG performance, by automatically gathering and presenting publicly available data published by their peers.

With its global client base, Novisto has “really proven they can win RFPs [requests for proposals] anywhere in the world with big public companies,” Mr. Marcoux said. For the moment it has just one main competitor, publicly traded Workiva Inc.

Novisto also has experienced management, led by Mr. Assaf, who was previously the chief revenue officer at Explorance. Chief technology officer Dan Pham got his start as a software developer for Nortel Networks 25 years ago, and chief ESG innovation officer Marie-Josée Privyk is a former financial analyst who advised corporations on ESG matters for three years before joining Novisto in 2020.

The company has had ample support from local investors, starting with its hatching from Montreal incubator Diagram and 2021 financing led by White Star. That helped convince Inovia to lead the latest deal. “The original investors are people we know and trust and have co-invested with for a long time,” Ms. Charbonneau said.

She added that Novisto has been efficient with its capital; the 130-person company surpassed $5-million in annual recurring revenue in its last fiscal year, ended March 31, and is on track to generate $12-million to $14-million this fiscal year. Novisto didn’t raise money at the peak of the market, which would have saddled it with an overly rich valuation, making it tougher to raise money now. Instead, its previous two financings were done at “reasonable valuations” and before the company had proven it could win international clients, Mr. Marcoux said.

Mr. Assaf said, “I’m glad we never raised” at the height of the bubble “because it was completely disconnected from fundamentals. We held off, stayed the course and focused on execution for almost two years. After we crossed the hype period and when we felt we had the metrics and the fundamentals, we were ready to scale the commercial engine” and raise funding.

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