Key Takeaways
- Quebec mid-market commercial customers have made a shift: innovation now includes management discipline, not just a growth lever.
- Executive management increasingly understands the complementarity of available funding sources: non-dilutive capital, debt and venture capital.
- Artificial intelligence plays an increasing role in operational efficiency and in accelerating product development.
- Businesses whose transformation is successful distinguish themselves through execution: well-established priorities, discipline maintained over time and alignment between technology, finance and operations.
For years, growth meant speed. New markets, new product lines, sometimes even before the foundations are solid enough. For financial institutions that support Quebec businesses, particularly in the technology sector, this chapter is over. Now, transformation and ambition go hand in hand with financial discipline.
From Growth at Any Cost to Calculated Growth
"Just a few years ago, there was a lot of talk about growth at any cost," sums up Vincent Baldwin-Côté, Regional Director, Technology and Innovation, Quebec, at Roynat Capital. This Scotiabank subsidiary specializes in loans and investments to businesses, including those operating in the technology sector. "Valuations did not necessarily reflect fundamentals, hiring decisions were less margin-driven, and expansion plans sometimes targeted new markets even before a solid position was established in Canada."
This context has changed. Companies seeking financing now have a vision of profitability over a shorter horizon. They think about operational efficiency from the outset and understand the importance of margins, in addition to revenue. And even in the start-up phase, where losses are not uncommon, they can already demonstrate their roadmap to profitability. “I'm very impressed. They are already very structured, very disciplined," said Mr. Baldwin-Côté.
Artificial intelligence has changed the development equation: improving margins and accelerating time to market no longer necessarily requires hiring a large team of engineers. This transformation in mindset is reflected in financing discussions. According to Mr. Baldwin-Côté, anyone arriving with an undisciplined growth strategy risks cooling investor and lender interest.
A Case History: Investing Where the Competitive Advantage Lies
The preferred approach today is the phased approach: quickly test, measure, then deploy what works on a large scale.
To illustrate an ideal approach, Mr. Baldwin-Côté cites the example of an AdTech sector client operating in a highly competitive environment, with increasing pressure on acquisition costs and profitability. Its search for financing had a very specific objective: to strengthen its data and artificial intelligence capabilities. Specifically, it aimed to improve its recommendation algorithms, use customer data more intelligently and optimize user journeys. What convinced Roynat was the clarity of the plan. "Their use case was very specific, with an improvement aimed at maintaining an advantage in their market." Performance indicators were defined, and deployment was planned in phases. In short, all the difference between a solid case and a request with more blurred outlines.
Financing Innovation: Structure and Pitfalls
Beyond more refined growth planning, businesses now arrive with an integrated financing strategy: cash flow, non-dilutive capital (tax credits and subsidies), bank financing and venture capital. In addition, executive management increasingly understands venture debt, which frequently accompanies equity financing and helps limit dilution of founder ownership. "It's become automatic. A company can raise $20 million with a fund and then turn to technology financing institutions to obtain a certain percentage in debt,” explains Mr. Baldwin-Côté.
In return, this increased sophistication of entrepreneurs has changed lenders’ approach. Understanding a client's total addressable market, knowing the ecosystem of potential investors, and being able to facilitate connections with other players – that's what's now expected of a financial partner, he says. The teams themselves have transformed, welcoming professionals from the venture capital sector and former entrepreneurs. The relationship with the founders and understanding their ecosystems, both in strong moments and during more difficult periods, are integral to the analysis.
What Sets Successful Companies Apart
After years of financing technology companies, Mr. Baldwin-Côté observes the same common thread in those that sustainably benefit from their investments: the quality of execution. This is based on three key elements:
- Clear prioritization: teams that spread their efforts across several markets or products simultaneously may limit their ability to achieve their budget targets.
- The importance of being opportunistic while demonstrating discipline.
- Alignment across technology, finance and operations: businesses that manage this trio well generally achieve better results, and technology is rarely the problem.
The Quebec Ecosystem: A Structural Asset
The advantage of having a partner well-rooted in the ecosystem makes perfect sense in a region like Quebec, where resources are both numerous and well-structured around hubs: Montreal for AI, with Mila and its approximately 1,000 specialists; Sherbrooke for life sciences and quantum computing; industrial hubs around Polytechnique Montréal and École de technologie supérieure; and the Université du Québec network for regional SMEs. Not to mention government institutions, tax-advantaged funds and specialized divisions of large banks.
According to Mr. Baldwin-Côté, it is precisely the collaborative approach between these stakeholders that is unique to Quebec. This proximity directly benefits businesses, which can more easily access connections, partnerships and additional sources of financing. For example, Roynat manages a fund of funds representing approximately $500 million of committed capital. These are divided among 38 funds, ranging from venture capital for start-ups to buyouts by private equity funds.
The ecosystem provides the resources. What makes the difference is the ability to mobilize them methodically: clear priorities, phased deployment and sustained discipline, even when conditions are favourable.
To explore how innovation and planning can support your business’s long‑term growth, speak with your relationship manager or get in touch today.
Disclaimer
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