Lightspeed’s Historic Series D Round Marks Turning Point in Canadian Tech Startup History
“It’s less the amount that’s impressive than the attitude behind the alignment of interests of the VCs, large institutions and management towards building on a long-term plan. This is cool.”
Dax Dasilva didn’t set out to become a poster child for Canadian startup success. Yet, more than a decade after he founded Lightspeed POS Inc., Dasilva and his Montreal-based team have created what’s being described as a watershed moment in Canada’s technology startup sector.
Lightspeed, which provides point-of-sale, cloud-based services for restaurants and retailers, just landed the largest venture-financing deal in Canadian history recorded by the CVCA since Hootsuite’s US$165M Series B round in August 2013. The US$166M (about C$210M) Series D funding round was led by the Caisse de Dépôt et Placement du Québec (CDPQ), with participation from Investissement Québec, iNovia Capital, and a credit line from Silicon Valley Bank.
The CDPQ’s total contribution is US$136M, the largest investment it has made in a tech startup since the dot-com tech bubble. The financing also means Lightspeed is now majority owned by Canadian investors and its employees. As part of the Series D, CDPQ bought out the stake owned by Silicon Valley VC Accel Partners, Lightspeed’s first investor back in 2012.
“We didn’t set out to set a record for Canadian tech investment but that is something we are pretty pleased with — and that we have the confidence of our investors,” says Dasilva, who bootstrapped the company for the first seven years. “This is a real affirmation that our investors are ready for the company to go to the next stage, and they’ve given us the fuel to do that.”
Since the $61M Series C was announced in September 2015, which is when the CDPQ first got involved, Lightspeed has doubled its customer base to 50,000 merchants worldwide and grown from $10B to $115B in gross merchant volume. About 60 per cent of the company’s revenues today are in North America, with the rest coming other countries around the world.
The new funds will be used to help Lightspeed grow internationally and get it IPO-ready by 2019, should it chose to go that route. “We are only scratching the surface in terms of market opportunity,” says Dasilva.
The Series D round was announced after about a year of Lightspeed considering various alternatives, including unsolicited expressions of interest from potential buyers. “We ran a process. We had a lot of options,” Dasilva says. “We learned a lot about the company in the process. I knew that we were doing something unique in terms of digital transformation for retailers and hospitality for small business.”
Dasilva says he didn’t want to sell the company and when CDPQ came along he felt it was the best choice for the company’s next stage of growth. “We really feel like masters of our own destiny,” says Dasilva. “The future is quite bright.”
Thomas Birch, CDPQ’s vice president, funds and technology, says his fund “proactively” sourced the deal and priced it, signalling its confidence in Lightspeed’s future and its management team.
“It’s all about the math,” says Birch in describing the CDPQ’s business model and growth plans.
“They understand their online acquisition costs; they have a beautiful sales and marketing machines that sells SaaS-oriented software to the retail and restaurant sectors.”
iNovia managing partner Chris Arsenault says the financing represents a turning point in Canadian tech startup history for the size of the deal as well as the Canadian-led backing.
“It’s less the amount that’s impressive than the attitude behind the alignment of interests of the VCs, large institutions and management towards building on a long-term plan. This is cool,” says Arsenault.
“We’re excited because we’re finally seeing large Canadian institutions backing growth-stage Canadian technology companies, instead of just following foreign leadership who eventually want to take the whole financing round or buy the company out. As a tech ecosystem, we are growing out of a phase where our high-potential companies were getting acquired early, into a new phase of growth with investors supporting long-term vision and execution.”
Arsenault says it’s still important for Canadian startups to attract foreign investors for their financing, experience and relationships, “but we also have to believe in our own companies and put our money where these opportunities are across Canada. This is an opportunity to inspire other entrepreneurs and investors to continue to do the same.”
Dasilva is proud of how far Lightspeed has come since it was founded in his Montreal apartment in 2005, as well as any role its success to date is playing in helping to boost Canada’s tech startup ecosystem.
“This is a very special moment in Canadian tech history,” says Dasilva.
Lightspeed Disclosed Financing History:
2012: US$30M – Accel
2014: US$35M – iNovia Capital, Accel and Hercules Technology Growth Capital
2015: US$61M – led by CDPQ, iNovia Capital and Investissement Québec
2017: US$166M – led by CDPQ, Investissement Québec, iNovia Capital, and a credit line from Silicon Valley Bank
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