A young Montreal software company that obtained a valuation of one billion after only six years of existence continues its impressive growth and plans to jump on the stock market next year.
Posted at 6:00 a.m.
Valsoft is a company founded by Sam Youssef and Stéphane Manos, two former Concordia University computer engineering students who previously forged a friendship at Cégep Vanier.
The company whose offices are located along the metropolitan highway in the borough of Saint-Laurent made its first acquisition in 2016. Transactions have followed one another since, to the point that Sam Youssef points out that Valsoft today has approximately 2,500 employees “all over the world”.
He argues that Valsoft could end the year with 25 companies purchased in 2022, bringing the number of purchase transactions to 55 since the company began operations six years ago. “We have made about fifteen acquisitions so far this year and we should have a turnover of nearly 300 million by the end of the year. »
The 40-year-old entrepreneur says he realized the consolidation potential of the software industry after first investing in stocks of publicly traded companies like Constellation Software and Salesforce, among others.
Inspired by CGI and Couche-Tard
“Interest in software companies immediately grew,” says the Lebanese-born Montrealer.
“It is a rapidly growing sector. Companies specializing in specific niches can control prices in their market and many generate significant recurring revenue. »
In analyzing the opportunity, he says, “we also studied Warren Buffett and Quebec entrepreneurs who had success in making acquisitions, for example Alain Bouchard, of Couche-Tard, and Serge Godin, of CGI”.
“In Quebec, the market structure and tax rules are very favorable for companies to make acquisitions abroad and we have seen potential for consolidation in the software sector. »
Sam Youssef estimates that 30,000 companies worldwide design software for niche markets (boutique hotels, forestry companies, etc.).
“We look at all the small vertical markets where it is possible to have a pricing power. »
The results seem to prove him right. “Six years later, we’re worth over a billion since the Viking investment,” he says.
Eyes on the stock market
At the beginning of the year, the Montreal company announced that the American investment fund Viking was injecting 100 million into Valsoft in exchange for a 10% stake.
Valsoft is still little known in Quebec, says Sam Youssef, “but it is known in private investor circles in the United States and elsewhere in the world”.
He claims to have received interest from several firms. “But the people at Viking explained to us how they could help us develop our potential and talked to us in a way that convinced us. Until then, we mainly worked with the money of our original partners and that generated by the acquired companies. »
Contacted by The PressViking’s management politely declined our request for an interview, but nevertheless stated that they would read our report “with interest”.
Sam Youssef says Viking’s investment is helping Valsoft grow faster. So much so that Valsoft is considering taking another step.
“It is thought to complete an initial public offering towards the end of 2023 or the beginning of 2024,” he says.
If the two founders remain the main shareholders of Valsoft, there are about 25 other private investors in the capital, mainly employees of the company, says Sam Youssef.
“We have more opportunities than we have money today. Going public would bring capital, which would help us grow faster. In addition, many of our investor-employees would like to have this liquidity option offered by the Stock Exchange. »
Pornography as a springboard
At the end of their university years in the early 2000s, the two founders of Valsoft embarked on affiliate marketing and the management of websites, some of them for adults and notably a household name today. , but from which they wished to dissociate themselves in 2010: Pornhub.
Sam Youssef and Stéphane Manos had grouped their activities in a company called Mansef (combination of the names of the two entrepreneurs).
“Adult products generated more money than the rest. But five years later, it had become a big part of the company and we were no longer comfortable with the industry, so we sold,” says Sam Youssef.
“We wanted to do something else with our lives”, he adds without wanting to reveal the sale price out of respect for his partners at the time.
Aware of the delicacy of the subject, Sam Youssef also prefers not to comment on what Pornhub has become and the allegations of sexual exploitation associated with it.
“It’s a completely different company today. It has nothing to do with the one we created. By selling in 2010, we turned the page,” he says.
From the year following the sale transaction, in 2011, Sam Youssef pivoted to the Stock Exchange with partners to invest and identify opportunities that led to the creation of Valsoft.