The Caisse de depot et placement du Québec (CDPQ) will add $40 million to the Montreal seed fund Teralys, three years after having entrusted it with $50 million. The influx of new capital is timely for this “fund of funds”, since Quebec entrepreneurship has never been so dynamic despite the clouds gathering on the horizon in the venture capital sector.
The global economy is emerging from one crisis to better enter the next. COVID-19 is giving way to an anticipated recession that is chilling investors. These are less generous to new technology companies, often the first investment sector to pay the price of a slowing economy and high interest rates. It shouldn’t look too much by Christmas, but 2023 and maybe even 2024 should be a bit more difficult for entrepreneurs and start-ups, warns the founder and senior partner of Teralys Capital, Jacques Bernier.
“Several small businesses are now scrambling for capital, before it gets even more difficult,” Bernier told the To have to. The current year should end well, but the next two promise to be more complex. »
Jacques Bernier is not worried, however. Teralys Capital was created at the end of the financial crisis of 2008-2009. He also experienced the techno crisis of the year 2000. He recognizes certain similarities between the three eras… and, according to him, at least two of them are auspicious.
The first: it is under greater pressure that the most beautiful jewels are formed. “Crises are times when you see great companies appear. There is more competition for less capital. This leaves less room for these companies that will sell dog food on the Internet, as we saw in the 2000s.
The second: it is often those who have recently lost their job during an economic contraction who decide to go into business. The adage in tech says people are never out of a job. They are entrepreneurs…
Quebec, from IBM to Hopper
The Caisse de dépôt has a dual mandate: generate returns and help the Québec economy grow. Its investment in Teralys complies with the second directive without penalizing the first too much. A “fund of funds” invests in smaller, but also more targeted funds. The risk is better distributed. Moreover, Teralys says it can operate without public money, even if the help of the Caisse reassures private investors.
The Caisse thus hopes to detect the large companies of tomorrow very early on, says the first vice-president and head for Quebec of the CDPQ, Kim Thomassin. “We help innovative companies that are not at the stage where we can invest directly,” she says.
Companies like Montreal-based Hopper, which in recent years has become a global travel and tourism giant thanks to a software platform that includes a price comparison service, insurance services and vacation packages popular with consumers. Hopper — which today is worth more than US$5 billion — was first financed, in 2012, by the Brightspark Capital fund, itself backed by Teralys, before receiving direct aid from the Caisse in 2016. .
Will the current decade see the birth of the next Hopper? The odds may be better than in the past 20 years, says Jacques Bernier. Statistics on this subject tend to show that never before have so many young Quebecers wanted to go into business.
The School of Management of the University of Quebec at Trois-Rivières noted at the beginning of November that entrepreneurial activity in Quebec has never been so dynamic. Quebec is seeing a record rate of emerging entrepreneurs these days, rising from 9.5% in 2013 to 17.6% in 2021.
It’s a huge cultural change between 2002 and 2022, observes Jacques Bernier. “Before, parents told their children to go and work at IBM. It is less the case. We have seen a change in culture over the past 15 years. There have been a lot of efforts in Quebec to promote entrepreneurship, we can see the effect today. »
This bodes well for Teralys, which, in addition to the $90 million received from the Caisse since 2019, will be entitled to part of the $350 million prize pool awarded to four Canadian funds by the federal government as part of its Venture Capital Catalyst Initiative. The exact amount remains to be known, but it should allow Teralys to be very active in its target sectors: information technologies, energy transition, life sciences and diversity.