Few Canadian tech entrepreneurs can boast they have created $1-billion software companies based in their home country. Louis Têtu says he is well on his way to doing it for a second time. And he wants to keep control of this one north of the border.
On Wednesday, Mr. Têtu’s Quebec City-based Coveo Solutions Inc. will announce U.S. investment giant Elliott Management Corp. has bought a 27-per-cent stake in the fast-growing enterprise subscription software company for $100-million through its Silicon Valley-based private equity arm Evergreen Coast Capital. The deal values Coveo at $370-million.
With Coveo generating more than $50-million in annualized revenue and expanding by 50 per cent a year, Mr. Têtu told The Globe and Mail the company “is on a trajectory” to be worth $1-billion within three years and in a position to go public sooner than that.
“Are we going to keep [the company] in Canada? Yes. Because it’s important to me,” he said, noting that all of Coveo’s $75-million in previous funding came from Quebec sources. “We have to prove that we can create wealth here and stop exporting the wealthcreation. We’re not going to pay for the next hospital by luring Amazon to Canada or giving away our engineers to Google. We’re going to build the next hospital by creating wealth here. That doesn’t preclude us from working with U.S. investors [that] can bring value, but we want to keep the majority of wealth-creation here in Canada.”
That’s not what happened to Mr. Têtu’s previous two companies, Taleo Corp. and Berclain Group, although his Canadian-based shareholders, including long-time backer and veteran tech and telecom entrepreneur Charles Sirois, were richly rewarded. Taleo was bought by Oracle Corp. for US$1.9-billion in 2012, seven years after it went public on the Nasdaq market. Berclain, a supply chain software firm, was bought by Dutch software firm Baan Corp. in 1996, six years after he co-founded it.
Mr. Têtu said the Canadian technology and investment environment “is way more mature now than it was 15 and 25 years ago,” giving the option to Canadian companies to remain Canadian-owned and controlled in a way that was not possible when he was building his earlier ventures.
Mr. Têtu’s latest company is considered by global research firm Gartner Inc. to be the leading provider of artificial-intelligence-powered search-engine tools known as “insight engines,” counting tech giants Dell, Adobe, Honeywell and Salesforce.com among its 1,500 customers. Corporations embed Coveo’s search tool in their websites to provide personalized search recommendations to customers or employees based on their prior behaviour. For example, an experienced user of Adobe Photoshop would get different advice through the program’s Coveo-powered help function than an infrequent customer asking the same question. “We’re in the ‘what-you-need-next’ business,” Mr. Têtu said.
Mr. Têtu started out as a seed investor in Coveo 12 years ago, when it was spun out of another Quebec City firm. He soon became chairman, then joined as CEO in 2012 at the invitation of co-founder Laurent Simoneau, now president and chief technology officer, after he left Taleo. Several of Mr. Têtu’s fellow executives from his previous ventures joined him, including chief operating officer Guy Gauvin and chief financial officer Jean Lavigueur. “We’re a bit of a one-trick pony – enterprise software, high growth,” Mr. Têtu said. “We understand that game, we deploy that game globally, that is what we do.
Evergreen managing director Isaac Kim said his firm “focuses on fast-growing technology companies that have proven customer traction and a clear opportunity to win in growth markets. With Coveo’s evident leadership in the machine learning applications space, the company clearly fits that bill. ... We see this market leadership only accelerating in the future.” RBC Dominion Securities acted as placement agent for the financing.
Mr. Têtu would not disclose how Evergreen’s funds would be split between Coveo and some early shareholders who are selling out, but did say the deal would leave Coveo with more than $50-million cash and no debt, to hire developers, invest in sales and marketing and possibly fund acquisitions. Coveo has about 350 employees.