Much has been made in the press about the tech heavyweights moving into or increasing their presence in Vancouver.  Facebook, Google, Amazon, Microsoft and Sony Digital to name a few.   While this is a very positive indicator about Vancouver’s place in the technology ecosystem — and the job opportunities are well appreciated by people in the sector — it does only speak to one side of the equation.

In many cases these moves are temporary, providing only short-term benefits.  Indeed, when Facebook announced they were moving into Vancouver to hire an initial 150 workers, they said it was only a temporary office and would be used mainly to train overseas employees for future transfer to other offices, expected mostly to be in the US.   Short-term benefits for Vancouver for sure, but not a significant contribution to the elusive tech cluster status the Vancouver tech community pines for.

Perhaps a better indicator of the strength and breadth of our tech cluster status is to look at homegrown companies achieving success, and there are many.  In the public sphere, Avigilon (TSX:AVO) recently announced Q2 resultswith revenues of $65.2M, nearly double the $39.2M of comparable period in fiscal 2013. Avigilon now has a market cap of over $850M, not too shabby.

On the private side Hootsuite continues to make lots of noise, offering repeated job fairs for local talent.  Similar hiring sprees are going on at Global Relay, Mobify, Unbounce and BuildDirect.  These are just a few of the rapidly growing locally based tech companies.

BC’s Tech Sector: Where the World Comes to Shop

Another measure of success and the one where I spend most of my time is  in M&A activity.  Looking back a year, a nice run of exits for locally founded technology companies started with Layer 7 Technologies (security and management products for API integrations) being acquired by CA Technologies for a healthy $155M in the last half of 2013.

Shortly after the Layer 7 deal and also late in 2013, Rosetta Stone announced it was acquiring Vivity Labs (better known by its product name, Fitbrains), a brain training game developed by local neuroscientists.  The acquisition was a cash deal for $12M.  Vivity Labs revenues were not made public at the time, but their brain training app was advertised as one of the highest grossing brain training apps in the Apple iTunes App Store.

Calendar 2014 started off with Sierra Wireless acquiring In Motion Technologies, a company specializing in provisioning mobile networks, for an announced price of $21M (although I understand the full price will be closer to $28M).  Interestingly, with announced revenues of $15M and a gross margin of 50%, the valuation seems somewhat modest.

May saw GE acquiring local company Wurldtech, a cyber security company.  While terms were not publicly released, the sale is rumoured to have been for around $55M.  Following along in June, a partial liquidity event with private equity firm Primus Capital investing in hyperWallet, a local company that built a payments platform for B2C and P2P customers.  While terms were not announced, it is rumoured that Primus paid $65M for just under half of the company with shareholders taking money off the table and receiving shares as well.  hyperWallet had shown nearly 100% year over year growth during the past three years.

July saw Retsly being acquired by Zillow, again terms not publicly announced but rumoured to be in the $8M range.  This one was notable in that Retsly was a portfolio company of Growlabs, a locally based incubator which just recently completed a merger with Extreme Startups out of Ottawa.  Two positive events back to back for the Growlabs team.

The Evolution Continues

Most recent deals (August) include Scorpion Software, a password management company, being acquired by Kaseya, a large Boston-based technology company.  Terms were not announced but the smiles on the founders’ faces indicated it was all good.

Other deals include Strutta.com and Wyley Interactive being acquired in 2014.  Terms were not released but they were believed to be smaller deals.

Think Bigger

What does all this mean for Vancouver’s tech community?  Is Vancouver finally growing up, and becoming the hub of innovation we’ve always thought it could be? If M&A activity is any indicator, the last year has been a pretty good one.

Next time, I’ll look at recent public market activity and discuss the opportunities for locally-based technology companies to finance through the public markets and achieve liquidity through that route.