Nfld. & Labrador

N.L. tech startups had a wildly successful 2019. Can they keep it up?

One St. John’s-based software company saw hundreds of millions of dollars this year and millions more were invested into other new technology businesses. 

1 St. John’s-based software company saw hundreds of millions of dollars this year

2019 saw millions of dollars invested into the local tech startup economy.

One St. John's-based software company saw hundreds of millions of dollars this year and millions more were invested into other, newer technology businesses. 

The province's tech startup industry went gangbusters in 2019. 

Office space was outgrown, new products were launched, and jobs were created. 

Even the spaces where many of the local industry's burgeoning businesses got their start were internationally recognized this year. 

Here's a recap.

Largest-ever venture funding deal 

Verafin inked the largest-ever venture funding deal in Canadian history this year worth more than $500 million. 

From its office in the east end of St. John's, the company uses artificial intelligence to fight financial crime across Canada and the United States.

Verafin co-founder Brendan Brothers says the company has tried to stay under the radar. (Eddy Kennedy/CBC)

Nearly 3,000 banks and credit unions use the cloud-based software platform to detect fraud and money laundering that could be connected to things like human trafficking, drug trafficking and terrorist financing.  

According to the company, in the first quarter of 2019, Verafin hit $100 million in annual recurring revenue — an 87 per cent growth in two years. 

"We've been able to build something really special here and I think it's a testament to the fact that you can do this here," Verafin co-founder and product specialist, Brendan Brothers, told CBC in September, shortly after the $515-million equity and debt recapitalization deal was announced. "For us to be able to do it here and provide that example to some of the other companies that are here I think is really important." 

Verafin hired on 152 people this year, bringing its total number of employees to 517. It's expecting to hire on another 150 people in 2020.

Mysa named top 20

Mysa is following Verafin's lead — looking to anchor and grow its smart thermostat business in St. John's. 

"I would like us to see 10 Verafin-scale companies here in Newfoundland," said Mysa CEO Josh Green. "I think that's a number that a lot of us in the community are saying."

Mysa CEO, Josh Green, has hired a recruiter to hire even more people in the new year. (Katie Breen/CBC)

This year, the Canadian Innovation Exchange named Mysa one of its top 20 early-stage startups. 

Since 2017, the business has sold tens of thousands of smart thermostats for electric baseboard heaters. This year, the company launched a new smart thermostat for in-floor heating. 

In May, Mysa raised a $2.3-million venture capital round from investors based in the province and in other parts of Canada. 

The company went from having 30 staff to 52 and is expecting to hire on more in 2020.

"We've got some ambitious plans for next year to continue that growth and we just hired someone whose sole job is to help us grow our team."  

$2.7-million deal for CoLab Software 

CoLab Software is also hiring. CEO and co-founder Adam Keating is expecting to double his 22-person staff in the next year. 

The company raised $2.7 million in new funding this fall after spending the summer at an exclusive accelerator program in Silicon Valley.

Adam Keating, one of the founders of CoLab, expects to start setting the industry standard for engineering collaboration next year. (Katie Breen/CBC)

CoLab was the first Atlantic Canadian company accepted into Y Combinator — a prestigious three-month program designed to mentor startups and help them refine their pitch to investors.

Raising the last funding round from local, Toronto and California-based investors, Keating said, will allow CoLab to keep its current clientele happy while also expanding into the next set of customers.

The business is trying to reinvent the way engineering teams design and build products. It's currently working with a number of Fortune 500 customers. 

We've seen incredibly strong entrepreneurs in Newfoundland and Labrador.-Chris Moyer, director of Pelorus Venture

"We're at a place where we just released CoLab 2.0 — a huge product milestone for us — and over the next year, I think, we're going see that we start to set ... the industry standard for engineering collaboration, globally," said Keating. 

CoLab recently moved into a new office space to accommodate the growth. Keating said he's seen a shift in how workers perceive the startup industry.

"I think two years ago when we started, people thought it was cool that we had a company but I don't think they thought it was legitimate as an option for their career," he said, noting he now receives equal interest from new grads and people 20 years into their career. 

"That change has been super evident over the last year or two years. I think in 2020, especially with Verafin setting the pace, I think it's going to pick up even more." 

Rally and BreatheSuite lock in major investment 

Like many local tech entrepreneurs, Rally co-founder and CEO, Scott Stevenson, sees the tech sector as the clearest way to diversify Newfoundland and Labrador's economy. 

He just landed $750,000 in venture capital investment from inside and outside of the province to help build his legal software company. 

Rally CEO Scott Stevenson says this is the pre-seed round and the first major injection of capital for his company. (Katie Breen/CBC)

BreatheSuite founder and CEO, Brett Vokey also earned $550,000 in venture capital funding this fall. 

He invented a device for asthma and COPD patients that trains them to properly use their inhalers with the goal of getting more medication into their lungs. 

After the investments, both businesses planned to hire about five people and double their staff.

They both credit the local startup network with helping them build on their ambition.

"Being able to learn from them has been very important," Stevenson said of the mentorship he's received from some of the more established technology companies in St. John's. "I think it also enables our company to be taken more seriously by investors here and elsewhere when they see that we really can build a company headquartered in St. John's that can have impacts on the world."   

Brett Vokey couldn't stop smiling after it was announced his company had landed $550,000 in venture capital funding. (Eddy Kennedy/CBC)

Vokey said other local company founders have helped save him from repeating some of the mistakes that they've made. 

"I think that's one of the biggest differences between Newfoundland and some of these other, bigger ecosystems," he said 

"I just hope that we're sort of able to do the same as we continue to move forward and the ecosystem continues to grow." 

Memorial Centre for Entrepreneurship a global leader

In September, the Global Consortium of Entrepreneurship Centres named the Memorial Centre for Entrepreneurship (MCE) one of the top five emerging entrepreneurship centres in the world.

MCE counts CoLab, Mysa and BreatheSuite among its success stories.

Florian Villaumé​​​​​​​, the director of the Memorial Centre for Entrepreneurship, says there's more exciting student ideas coming in 2020. (Katie Breen/CBC)

It helped foster those companies from the idea stage. 

Florian Villaumé has been the director of MCE since its inception three-and-a-half years ago. 

He says with the success, there's been more interest in the entrepreneurial workshops and the guidance that the centre offers from its space in Memorial University's engineering building. 

"There's a very strong pipeline coming up so be careful," he said. "Because 2020 is going to be awesome as well."

International recognition for Genesis

Genesis could be considered a step after MCE. It provides guidance and office space to entrepreneurs with a semi-established business they're looking to grow. 

In November, at the World Incubation Summit in Doha, Qatar, University Business Incubators (UBI) Global recognized the centre as a "top challenger" in North America.

In its world rankings report, UBI defines top challengers as programs that "stand out due to their impressive overall impact and performance achievements relative to their respective regional peers." 

Genesis hosts a number of up-and-coming businesses, including Rally. Verafin also got its start there 16 years ago.

'Incredibly strong entrepreneurs' 

Chris Moyer, the director of Pelorus Venture Capital Limited, has a financial stake in the success of the local tech startup industry.

Over the last four-and-a-half years, Pelorus, which is backed by the provincial government, BDC Capital Inc. and angel investors, has invested $7 million in 9 startups including Mysa, CoLab, BreatheSuite and Rally. That investment has helped generate an additional $21 million in private investment for those companies.

Chris Moyer, the director of Pelorus Venture Capital Limited, expects the momentum around the Newfoundland and Labrador tech startup industry to continue building. (Katie Breen/CBC)

"We've seen incredibly strong entrepreneurs in Newfoundland and Labrador," Moyer said. 

The Newfoundland and Labrador Association of Technology and Innovation values the industry at $1.6 billion. 

Moyer believes it can grow and the momentum seen in 2019 can continue, provided funding and entrepreneurial education remains in place. 

Pelorus will stop investing in new companies in May but will continue contributing to businesses in its existing portfolio for another seven years.

It's raising funds to create a second round of investment that will allow the group to start new investments again. 

"It's an early ecosystem," Moyer said of the province's tech start up industry. "It's one that's rapidly developed over the past five years. It's generated incredibly high-quality entrepreneurs and companies that are now leading the way to really bring a lot more people into the ecosystem.

"I think there needs to be some mechanism where this incredible growth — this prosperity into the future, this story — needs to get out." 

Read more from CBC Newfoundland and Labrador


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