Coveo Solutions closed its $215-million IPO on the Toronto Stock Exchange Wednesday, marking the second time CEO Louis Têtu and CFO Jean Lavigueur have taken a Quebec City tech company public. The listing gives the AI firm a cash injection to fuel its growth, and it can use its now-public stock to pursue M&A opportunities and recruit top workers.
Other Canadian tech firms have received a lukewarm reception on the public markets, downsizing their offerings and trading below their offering prices. But on Wednesday, Têtu told The Logic he wasn’t worried about his company’s timing. “The narrative has been negative for a reason that we ignore—just because there was a couple of small IPOs that didn’t work out,” he said.
Here’s what Têtu and Lavigueur had to say about going public, competing for talent with foreign tech giants and the possibility of a U.S. listing.
This interview has been edited for length and clarity.
Why did you go public?
Têtu: For us, it’s really a question of global scale. We’re creating a global tech leader in AI.
You want to have enough float in the market to attract a critical mass of institutional, quality investors. [Coveo’s IPO] book was way oversubscribed, well above a billion dollars, and we filled very, very quickly. Part of the reason is [we] floated a quality company, from a governance perspective—legal, finance, compliance [and] predictability [are] very solid.
[The IPO] gives us some additional capital. We already had a strong balance sheet—US$115 million of cash and short-term assets, and hardly any debt. But we believe we can make use of the capital for investing [in growth]. We’re not condemned to acquire, but [can] pursue acquisitions such as Qubit.
It becomes harder and harder for a company of our scale to compete for talent against [foreign public] companies that, unfortunately, have been sometimes a little too easily attracted to Canada. [They] are using the Coveos and [other] private companies as farm teams to recruit. [As a private company,] you can’t fight back with restricted stock units. Now, we can.
There’s no shortage of private equity or growth-stage money available in Canada, and now you’ve got crossover investors like Tiger Global coming into the market aggressively. Did you consider alternative routes to finance the company, or was it always going to be an IPO?
Lavigueur: We did consider all alternatives. Historically, we’ve raised six rounds and over $250 million for Coveo. Certainly, it could have been a seventh one. We just felt that there were a number of advantages [to going public]. Granting restricted stock units is something that only a public company can do [to] benefit your employees. The Qubit acquisition was [a] 100 per cent cash deal, because for [their] shareholders to swap shares of a private company for another private company—how much better off are they? So that’s another option [with a public stock]. We were certainly ready, size-wise, predictability-wise, [to IPO].
Têtu: We’re one of the few companies that made artificial intelligence work at scale in a repeatable way, in a packaged way, in business. That’s recognized throughout the U.S., parts of Europe and in Asia. A TSX company 15 years ago didn’t have the [same] clout. Today, look at Shopify. I’m on the board of [Alimentation Couche-Tard]—the 11th-largest retailer in the world, TSX-only.
You get to a point where you’re ready for that kind of recognition, plus access to the capital. To us, it’s a natural evolution. We’ve done it before. People ask us sometimes, “Why not NASDAQ?” My answer is, “What’s wrong with being a strong TSX company and a proud Canadian technology leader?”
Your books are in USD. You sold 40 per cent of this offering to U.S. investors. Is a U.S. listing on the roadmap?
Lavigueur: When you look at Lightspeed, Nuvei, I think you’re probably hinting at their roadmap [of] starting in Canada [and] moving to the U.S. No promises, no commitments whatsoever. We will debate it at the board in a year or more. But certainly it is a path that has been very successful for those two companies.
The digitization of commerce during the pandemic has accelerated your business. Has the future come faster than you expected?
Têtu: The pandemic initially froze everything, and then right after accelerated everything, because suddenly there [was] no other option than going digital. There’s a realization that personalization in digital is really an expectation.
You have to cater to people the way they want to be served, and [that’s] individually. That’s what they get at Wayfair and Amazon and Netflix. The first question being asked when you log on Netflix [is], “Who’s watching?” Based on that, Netflix assembles the experience for you. [That’s] what we enable in commerce and service and so on.
If you look at the history of Coveo, from 2012 to 2017, the majority of our customers were the tech companies in Silicon Valley. They were the early adopters [that] knew the capabilities of AI. Now it’s become mainstream. I was with a garage door manufacturer in the Midwest the other day that was talking to me about using AI to personalize the customer journey across all channels.
[Our] industry is very exciting [and] we’re standing in an ideal position from a tech stack standpoint. What we do is not easy—the barriers to entry are pretty high. We’ve been working 10 years at it, with now 250 developers improving the platform all day, every day. For all those good reasons, we think we’re right at this inflection point of growth.
