Louis Têtu is one of the best quotes in Canadian tech. He’s also the CEO of Coveo, one of the few Canadian tech IPOs in the last few years to have survived the public markets. The company just posted its fourth straight quarter beating analyst expectations based on significant revenue growth year-over-year.
Ahead of his SAAS NORTH talk on the BetaKit Keynote Stage, we sat down with Têtu to discuss why Coveo continues to buck tech trends, and tease some of the predictions the CEO will provide in Ottawa next week.
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Your revenue is up, and so is your share price. That is not common among tech companies right now. What is Coveo doing that other companies aren’t?
Têtu: I think we’re not the only ones. Technology companies can be very agile and nobody should miss that opportunity. It’s kind of Darwinism, right? Only the most adaptable survive.
When you look at the current economy, we built a thesis on how the economy would unfold. We don’t have a crystal ball, but we try to make long-time educated guesses on what’s going to unfold, and then our strategic response is accordingly.
We built the thesis at Coveo that the economy would go really bad, actually a year ago, and frankly, there’s a bit of luck in there. But, that’s not foreign to the fact that we went IPO right at the peak. We obviously didn’t necessarily need to raise money. But, you don’t raise money when you need it, you raise money when you can, and it’s at the peak in order to prepare for the bad days.
We built the thesis around the fact that business priorities would tighten up, that companies would only focus on high ROI solutions, etcetera. You need to build a view of the way that customers will behave six months, a year, a year and a half from now, and then adapt accordingly today, and not hope that things will always be the same.
Coveo went public right at the close of the window, and there were some other Canadian tech companies who were looking to do it and that window was shut right in their face. How much of Coveo’s IPO was luck? Timing? How much of that was predicted through your thesis?
Têtu: I’ve been with some of my partners here—CEO, CFO, COO at Coveo—have been working together for 33 years and we were involved with three public companies.
We’ve seen cycles, we’ve seen four different periods. We’ve seen 1990 to 2000, which was obviously a growth period all the way to Y2K, and the frothy period, we’ve seen to 2000 to 2005/2006 when it was sort of a little latent period of sorts. We’ve seen 2008 to 2011, which was a crisis. And we’ve seen [2011 to 2021], which is essentially 10 years of growth that was unheard of. With the cost of capital load [being] close to zero, this can’t last forever.
I’m old enough to have seen my parents with an 18 percent mortgage back in the 70s to 80s. When you think about that, was it luck? Yes to a degree. You can’t time the market perfectly, but we certainly had a view last year that this wouldn’t last forever and that it was time to capitalize on this.
We know that in a tough environment, cash is king and strong balance sheets are king. Coveo is obviously sitting on $300 million of dry powder and continuing to invest, and has managed to adapt its value proposition to one that we think will be robust in a recession environment: being a leader in the AI platform space.
Coveo is still hiring when a number of companies have been making significant layoffs or at least freezing hiring. Is this a reflection of the capital you have on hand?
Têtu: The capital we have on hand is not a proxy for spending, not at all, quite the opposite. Actually, you need to be very cautious with capital. In fact, I would say we take a lot knowing that we can take advantage of the companies who don’t. How often do you see companies raising a ton of money, and then starting a spending spree irresponsibly? We’ve seen a lot of that exuberance and that irresponsibility.
At Coveo, we didn’t play the game. Even last year, when we still had a lot of capital, we didn’t play the game of inflation, etcetera. And we had to stay very, very disciplined.
I would say, right now, we’re hiring because we’re growing. We’re hiring because we have a value proposition that we think is going to continue, in ecommerce, that will sustain the test of recession because when we put our technology into a retailer or B2B commerce company, those are large brands, typically we increase their revenue.
So even if you’re in a recession, if I hand you a bag of dimes and I asked you for a nickel, you’re gonna give it to me. [It’s the] same in customer intelligence. Companies are looking to preserve. They’re in a recession environment. The first order of priorities for companies is to keep their customers happy, because that’s the cheapest source of revenue. And if they can do that without growing the cost, which is exactly the value proposition of Coveo, then we can continue to sell that.
It’s one thing to predict where the market is going, and it’s another thing to execute. How have your predictions informed products or sales decisions?
Têtu: We drive change. Basically, your buyer for the next year is the CFO. No matter what you sell, there is an extra level of scrutiny. A lot of companies say sales cycles are elongated and etcetera, it boils down to something very simple: no matter what you try to sell, there will be a CFO at the end of the line who will say, ‘Wait a second, how much is that saving us? Only the things that bring revenue or save us money are going to make the cut, period.’ So, your buyer is a CFO.
If you think about it in those terms, you got to quickly adapt your value proposition, number one. Number two, risk tolerance in an environment when the economy is tougher diminishes for our customers. You got to remove friction.
Did it change your sales message? Was there a moment when your customers finally started hearing you a little bit better? Or did you get better at changing the way that you were communicating?
Têtu: Your question was did we adapt? Yes. If you believe that the economy is going to get tougher, and that only the CFO is the buyer and only ROI matters, basically tone down the workplace.
We’re very pragmatic, we’re being responsible. I always say I wish every Canadian citizen would experience being alone in an office at night and walking through an office and seeing the pictures of the families and the babies and so on, on the desks and etcetera—there is a responsibility. And so our responsibility is toward our employees, because we can’t serve our customers unless our people are well. Number two, it’s towards our customers, because they’re the ones that we need to create value and be relevant to. And number three, and in that order, to our shareholders, because unless we do one and two, we can’t be good for our shareholders.
Can you give us one prediction for people who might want to show up and listen to you talk in more detail at SAAS NORTH?
Têtu: AI is going to revolutionize the world of business in ways that have never been seen before. AI or die, it’s my summary. Everything today is a digital interaction and people expect digital interactions that are highly personalized and that are actually even prescriptive that will tell them things they didn’t even ask for.
In every business, the difference in today’s world versus five or 10 years ago is that we’re all a browser window away from getting a better experience. We are in the experience economy. Digital is old news, it’s 10 years ago. We’re in the experience economy and that economy is powered by data and AI.
Businesses are confronted with two choices: they can adopt AI and deliver the experiences people expect, or they can elect to compete against companies who do, it’s that binary. Companies who understood that were companies like Amazon, Netflix, Spotify, Wayfair, Booking.com, and to a degree, Walmart, Target, and the ones who could afford herds of data scientists.
These companies have built amazing market share and differentiation through their experiences. We’re in a world where technology is being democratized right now, and the world is going to be adopting that at a very fast pace. That story is unfolding in front of our eyes, I would say, within the next three to five years.
Do you have any advice for Elon Musk?
This article has been edited for length and clarity.