Quebec AI startup Coveo surpasses $1B valuation mark after $227M financing round
Quebec City-based artificial intelligence company Coveo has closed a $227 million investment round led by OMERS that its chief executive says places the valuation of the company well over $1 billion.
But Coveo CEO Louis Tetu doesn’t have much love for the “unicorn” moniker typically attached to billion-dollar tech startups.
“I don’t like unicorn because a unicorn is a mythical creature. Coveo is real. It has real revenue. It has real customers. It creates real value, and it’s in a real market,” Tetu said.
“The important thing is, are we investing to continue to be a leader in capturing the market opportunity that’s in front of us.”
Coveo makes artificial intelligence software that has historically helped companies manage customer relationships, and steered customers towards self-help online services.
Right now, Tetu said the most exciting area for the company is data-powered product recommendations in e-commerce.
In the same way that tech giants such as Amazon and Netflix offer customized user experiences, recommending products based on past behaviour, Coveo is offering similar tools to companies who don’t have tech in their DNA.
“Effectively we democratize machine learning and data science to essentially help every company. We can help Canadian Tire become like Amazon in a matter of weeks and months, and that is what we do,” he said.
“If you called yesterday and you were angry about something, I can actually detect that sentiment in the call transcript, and through machine learning, I will actually use that to tune your commerce or website experience next time around. So every piece of data becomes a signal.”
Tetu said that the company’s subscription revenue is currently growing at around 55 per cent year-over-year, and the $227 million investment will help fuel that growth.
“Right now we’re 500 people,” he said. “We’re hiring around 50 a quarter, so that takes a bit of money to finance, just from a cash-flow perspective.”
Tetu said Visa, Amex, Honewell and Dell are all customers.
I don’t like unicorn because a unicorn is a mythical creature. Coveo is real
Mark Shulgan, managing director and head of growth equity at OMERS, said that he’s looking to invest in companies related to data and analytics because it’s a growing sector, and Coveo was a good fit with an experienced management team and a solid product.
“There’s been more data created within the last two years than all of that created previously in human history, because you now have more products being digitized, you have more sensors, you have more connectivity and all of this means you have a lot more data,” Shulgan said.
“The fact that they’re not consumer-facing, means they fly under the radar a little bit more. When you look at the size of the sales that they’re looking to make into the enterprise (sector), they’re sizeable.”
Coveo is quite a bit smaller, but Shulgan said that he sees a similarities with Shopify Inc., the current darling of the Canadian tech sector, in terms of carving out a market niche. In both cases, he said, the companies offer tech products that allow all sorts of non-tech companies to compete with the giants like Google, Amazon and Netflix.
“I think there are parallels to the Shopify story around initially a lot of companies were going out trying to create their own websites and create the core functionality that went around it, and they discovered it was actually a lot cheaper to farm all that out to a third-party who specialized in doing that,” Shulgan said.