Venture Capital Fuels the Canadian Technology Fast 50

If you ever have doubts about the role of venture capital in fostering innovation and entrepreneurship in Canada, I have four words for you: Canadian Technology Fast 50.

Deloitte compiled the list of the 50 fastest growing Canadian technology companies based on revenue growth over the past five years and announced the winners in November. We’re talking exceptional growth rates. Take the top-ranked company in the 2012 survey, Avigilon Corp. of Vancouver, which expanded its revenues by 29,917 percent. The second-place firm, Burlington, Ontario-based EcoSynthetix Inc., was not far behind, with growth of 25,327 percent.

Along with high growth, Avigilon and EcoSynthetix share another trait in common with over 60% of the firms in the Deloitte Fast 50: They have been backed by venture capital. That’s an impressive statistic. And it’s not unusual to 2012.  Thomson Reuters (publisher of peHUB  Canada) has been cross-referencing the Deloitte Fast 50 with Canadian databases since 2004: On average, 62% of annual winners have been venture-backed.

Some companies are currently venture-backed, while others were part of venture portfolios in the past. Avigilon, which produces high-definition security surveillance systems, obtained financing in 2008 from investors led by Discovery Capital Corp. Three years later, it went public. EcoSynthetix, which develops biomaterial technologies, received startup financing in 2003 from a syndicate of Canadian and U.S. investors, including Cargill Ventures, H.B. Fuller Ventures, Tera Capital Corp., and VentureLink LP. EcoSynthetix also completed an IPO in 2011, raising over C$100 million.

Of the 31 venture-backed companies in the Deloitte Fast 50, over 40% are graduates of portfolios. Some have moved on to other forms of private equity investment. For example, Toronto’s QuickPlay Media Inc. (No. 29), a provider of managed solutions for mobile TV and video services, was acquired in July by Chicago buyout shop Madison Dearborn Partners. QuickPlay’s former investors include General Catalyst Partners, Relay Ventures and Ventures West Capital.

Others companies on the Deloitte Fast 50 continue to expand as venture-backed companies. Accedian Networks Inc. (No. 6), a Saint-Laurent, Quebec-based leader in performance-assured solutions for Carrier Ethernet and IP networks, first received investment as a startup in 2006. Accedian’s last major funding was in 2010, when Summit Partners led a C$20.5 million financing with existing investors Rho Canada Ventures and Skypoint Capital Corp.

Ottawa’s Solace Systems Inc. (No. 11) is another example. Like Accedian, this developer of messaging and middleware appliances, has rapidly expanded since its founding in 2005. The company’s backers include Edgestone Capital Partners, Tandem Expansion Fund, Teachers Private Capital and Wesley Clover Corp.

Notably, almost three-quarters of the venture-backed Deloitte Fast 50 are concentrated in communications and information technology sectors. They are pretty well dispersed by Canadian region, though firms in sector clusters in British Columbia, Ontario and Quebec are the best represented, as they typically are in market statistics.

Photo of flaming tire courtesy of ShutterStock