Much has been written about the record year in funding for Atlantic Canadian startups last year, but one facet of startup fundraising in the region has been largely overlooked: the growing role of the stock market.

For the first time, high-growth innovation companies in Atlantic Canada are turning in a meaningful way to the stock market as a source of capital. Several forces have converged to make publicly listed companies a more important component of the community.

Atlantic Canadian companies raised more than $24 million by selling shares and derivatives on the stock markets in calendar 2018. Aside from that, Entrevestor recorded $166.6 million raised last year from private capital sources, including founders, friends and family, angels, venture capital and strategic partners. That means the stock market accounts for 12.5 percent of the total capital raised by Atlantic Canadian high-growth companies last year.

There are not a lot of transactions by the publicly listed companies, but several deals since the beginning of 2018 have been noteworthy:

• In August 2018, Halifax-based Sona Nanotech listed on the Canadian Securities Exchange, choosing the alternative exchange rather than the TSX Venture exchange. The company raised $2 million during the listing.
• Kraken Robotics of St. John’s closed a $2.3 million sale of shares and warrants to its customer Ocean Infinity in June, 2018. The company then raised further capital six months later when it sold $6 million worth of shares.
• In February 2018, Halifax-based IMV announced that it had closed a bought deal to raise $14.4 million. The share sale was successful and the financial groups working on the deal exercised their over-allotment options in full. In March 2019, IMV closed another share sale, which raised an additional $26.7 million. CEO Frederic Ors told Entrevestor the company now has enough capital to last it through to late 2020.
• Appili Therapeutics, a fast-growing drug discovery company based in Halifax, listed on the TSX Venture Exchange in June. As it announced the pending listing, the company raised $3.6 million from investors. 

Barring a stock market crash (which is a real possibility at this point in the economic cycle), the stock market will become an increasingly important facet of the Atlantic Canadian startup community.

Metamaterial Technologies Inc. is planning a CSE listing this year., and other companies are known to be considering listing. 

The driving force behind this interest in public listings is the longevity and strength of the current bull market. Eleven years have passed since the financial crisis and the stock market seems to some like a dependable and profitable place to raise capital.

The Canadian tech sector has performed well and investors are looking for small tech companies the way they used to look for penny stocks in the mining and oil and gas sectors.

There is a cautionary note about the stock market listings. At the Mentorcamp event in Charlottetown last month, Surepath Capital Partners Founder Mark MacLeod was discussing large exits when he was asked whether he considered a stock market listing a viable exit for tech companies.

He responded that the companies he worked with weren’t “masochistic” enough to consider stock market listings. The TSX-Venture exchange is notable for its lack of liquidity, he said, and companies that list on the public markets are burdened with excessive compliance duties.