The Canadian venture capital and private equity sector has hit rock bottom over the past year. This is an opportunity for Jolt Capital to seize. The European fund arrives in Montreal with the intention of taking advantage of this climate of gloom to establish itself on a North American scale.
Despite a slight improvement in recent months in Quebec, the moment is not the most encouraging for the Canadian venture capital and technology sector. The year 2023 was very difficult and 2024 remains far below the investment and return levels of past years.
In the first quarter of 2024, Quebec did rather well, representing 23% of transactions and 45% of the amounts invested nationally in venture capital. He invested $583 million in 29 transactions over this period. That’s good, but it represents a drop of 50% in the number of transactions at the seed stage and 66% at the post-startup stage, compared to the previous quarter, according to the most recent quarterly data compiled by the firm Réseau Capital. The venture capital market is at its lowest level since 2016.
This bottom of the wave was a bit predictable, believes the CEO of Jolt Capital. Too many investors and too little variety in the type of projects financed have created the depression we currently find ourselves in, explains its president and senior partner, Jean Schmitt.
“The effect when there is too much seed capital is that investors are all looking for the same thing and creates a bidding war that hurts trendy companies,” he explains to Duty on the sidelines of the Montreal Conference, which he came to attend. “For me, now, it’s an opportunity to seize. »
Mr. Schmitt draws a parallel with France, where suddenly a crowd of “unicorns” began to appear, young shoots which quickly reached a book value exceeding a billion dollars, but whose financial reality did not justify such a valuation, he said. “The problem is that companies that break through and achieve good turnover have too many liabilities. When they present themselves to a buyer or at the entrance to the Stock Exchange, their real value is lower than that which they gave themselves. These overvaluations destroy markets. »
“We don’t try to be flamboyant from the start, we only try to win at the end. »
Semiconductors and robotics
Jolt Capital was founded in Paris in 2011 by businessmen Jean Schmitt and Philippe Sereys de Rothschild. It is a growth capital fund that targets established companies with annual revenues between $20 million and $75 million, and the potential to rapidly multiply that revenue. The fund has branches in Europe and Asia, employs more than thirty people and manages assets worth more than 800 million dollars (550 million euros).
The company defines itself as patient. It is giving itself four to five years to deploy sums, which it sets at $200 million, in promising Canadian or American companies. She already has at least one Quebec company in her sights, and expects to announce the details of this investment within a few weeks.
“We have a long-term vision for North America,” assures Jean Schmitt. “We already see a few companies that interest us, particularly in semiconductors, because they create their own intellectual property. In robotics too, there are companies that are interesting, and perhaps a few in AI, without this being the two hundredth generative AI, which we already see too much of. This is just one episode of AI. »
“It makes us a little razor-sharp, perhaps, but we stay away from fashion and shiny objects. This allows us to invest in great successes,” says the businessman whose firm can boast, since its creation, of a return of around 20% on its invested capital.
“It’s not Sequoia Capital, but…” adds Mr. Schmitt, referring to the Californian investment fund which is a benchmark in venture capital, with a return often greater than 30%.
This wink is not accidental: the venture capital market both in Canada and in Europe has been modeled over the years on that of Silicon Valley, in California. And it is currently entering a new phase where growth investors are in high demand.
The arrival of Jolt Capital in Canada in this context is therefore not a coincidence either, since this is its specialty.