Another foreign private-equity firm has developed a taste for Canadian technology companies.
Sumeru Equity Partners said Wednesday it was buying significant stakes in two Canadian enterprise software companies, Tasktop Technologies Inc. of Vancouver and Toronto-based Loopio Inc., that are facing growing competition. The combined value of the investments is US$300-million.
The deals are the first in Canada for Sumeru, a San Mateo, Calif.-based spinout from Silver Lake Partners now investing out of its US$720-million, third growth-equity fund. It joins a slew of other foreign private-capital firms that have backed emerging technology giants in Canada in recent years, including JMI Equity, HG Capital, Norwest Venture Partners, Warburg Pincus LLC and Thoma Bravo LLC.
Those investors have mostly had the market for investing in larger, advanced-stage Canadian tech firms to themselves until recently. However, in the past few years a handful of Canadian players have moved into the space, including Georgian Partners, OMERS and Inovia Capital. Former OMERS Ventures head John Ruffolo is launching Toronto-based Maverix Private Equity and is in the process of raising his first, US$500-million fund.
“We think Canada is a great place to grow technology companies,” said Sumeru managing director Jason Babcoke. He said the fact both deals were in Canada “is a bit coincidental … we don’t approach deals based on geography. But I think landing these two investments will certainly help [establish Sumeru] in the Canadian landscape in terms of radar and recognition. I’d hope to do more investments in Canada than we’ve tried historically.”
Tasktop makes software that enables information-technology leaders in large companies to track large-scale software development and digitization efforts and highlight where there are bottlenecks and delays, ultimately hastening project completions. Tasktop’s blue-chip customers include BMW, CGI, E*Trade and T-Mobile and it generates more than US$20-million a year in revenue. The company has slightly fewer than 200 employees
Tasktop’s digital offerings were conceived by chief executive officer Mik Kersten as part of his computer science PhD work at University of British Columbia in 2007 under the supervision of professor Gail Murphy, his company co-founder. After self-funding the company for several years, he raised close to US$30-million in venture capital led by Vancouver’s Yaletown Partners and Elsewhere Partners of Austin, Tex., to scale up the company.
Tasktop created the category of enterprise software known as “value-stream management,” but now it has competitors. “Thanks to the investment from Sumeru we can go from a leadership position to being the category killer globally for value-stream management,” Mr. Kersten said. “Sumeru knows our vision and they are product-centric investors … and the perfect match for the next stage of the company.”
Sumeru is investing an undisclosed sum for majority control of Tasktop. Combined with the value of equity existing investors are “rolling over” to stay invested, the deal is worth US$100-million.
Seven-year-old Loopio sells software used by companies bidding for contracts from large corporations and governments, enabling them to streamline and automate their preparation of request-for-proposal (RFP) submissions. The company, which previously raised US$9-million in venture capital from Boston-based OpenView Partners, has 165 employees, and its software is used by more than 1,000 companies, generating revenue in the range of US$20-million a year.
Sumeru and some of its investment partners are buying an undisclosed stake in Loopio worth US$200-million, with OpenView selling out as part of the deal. Mr. Babcoke wouldn’t confirm whether the deal gives it control of Loopio, but noted Sumeru usually buys majority stakes when it invests.
“This was really an opportunistic [funding raise]”, said Loopio CEO and co-founder Zak Hemraj. “We’ve been a very cash-healthy business for a while. It was really about market timing, the opportunity ahead of us and the competitive landscape heating up. We see a huge market opportunity for RFP-response software that is very underpenetrated.”
Sumeru typically invests US$25-million to US$200-million in fast-growing companies with between US$10-million and US$30-million in revenue that sell technology to large corporations and governments and that have established strong market demand for their products. “I think both [Tasktop and Loopio] have the potential to go public and both will garner strong strategic interest over time,” Mr. Babcoke said. “It just depends how well we execute.”
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