As pandemic-fuelled tech valuations drop down to earth and headlines warn of the “coming storm,” now is precisely when we need to step back and level set. It’s at times like these that, with a little perspective, fundamental value breaks through the fog of frothy markets, and that’s good news for Canada’s tech ecosystem and the broader economy.
And as we stare down the barrel of rising interest rates, inflation and weakened growth, the business case becomes more compelling, particularly for certain kinds of technology. In a high-cost, competitive world, the efficiencies that can be gleaned from digitization and software automation will be essential for many organizations.
Enterprise, or business-to-business , software is the backbone of our modern economy – its systems running everything from credit cards, cars and utilities to corporate payroll, insurance claims and supply chains. While it may not be sexy, its predictable revenue, low capital costs and high profit margins have translated into the best risk-adjusted returns of any tech asset class.
Some of the best, most enduring tech companies were built in a down market. Think Google, PayPal, Salesforce and Shopify. Why? Because scarcity forces discipline and focus, investors become more discerning, and talent becomes easier to find.