Borderless Investments: The Path to Acquisition

This article is the 2nd in a series that highlights how to properly go about funding and growing your startup.

While we know US corporates are driving the majority of Canadian company exits, it is helpful to understand how Canadian ventures are actually attracting the attention of these acquirers. Is it through strategic relationships―or is it, as we believe, through a company’s investors?

To examine this, we looked at the 23 VC-funded high-tech Canadian companies that had been acquired in 2012. Of these companies, 65% had received non-Canadian investment prior to acquisition, and 57% had received investment from US VCs.

This reinforces the need for Canadian companies to look to the US for late-stage financing. It also presents a possible correlation between obtaining US investment and ultimately being acquired.

This data visualization maps the 23 companies, along with their respective investors and acquirer. The map was created with the aim to help illuminate what connections may have led to a company’s acquisition.

The map makes clear some important insights:

• 19 companies were bought by non-Canadian firms, of which 13 companies (or 68%) had obtained investment from VCs located in close proximity to their acquirer.

• Ottawa’s Blaze Software raised money from two Boston-area investor groups, only to be sold two years later to Massachusetts-based Akamai Technologies.

• Waterloo’s BufferBox obtained seed funding from both Y Combinator and Google Ventures, having made their initial connection with Google during a Communitech event. A short time later, the company was acquired by its early investor, Google. This was only the second time Google has purchased a Google Ventures portfolio company.

• Toronto-based Dayforce was acquired by its early investor and distribution partner, Ceridian.

• Halifax-based GoInstant was acquired by Salesforce one year after receiving investment from several US VCs. One of these VCs was Greylock Partners, whose investing partner, Reid Hoffman, is the founder of LinkedIn.

• Localmind, based in Montreal, was referred to Year One Labs by former GoInstant VP and Year One Labs founder, Ben Yoskovitz. Shortly thereafter the company raised money from several Canadian and US VCs and was eventually sold to Airbnb.

• Vancouver’s Context Media Solutions obtained seed funding from Valley-based Accel Partners, only to be acquired two years later by Twitter.

In conclusion, location matters. These few examples illustrate the connection between a company’s investors and its end acquirer, which is that in most cases the two parties are located in close proximity.

This data also proves the importance of developing the right relationships early on, and, more importantly, just how critical it is to have the right VCs to enable your company exit.

This content was originally published on MaRS.