The past decade told a clear story: if you wanted the best returns, you went private. Venture capital, private equity, and direct deals dominated capital flows, while public markets, especially at the small-cap end, were often dismissed as inefficient, illiquid, or simply picked over.
That story is now changing.
Not because private markets have suddenly become unattractive, but because a new opportunity is emerging at the intersection of private and public investing, particularly in Canada.
The private market still has a real edge - at the low end
There is a segment of the private market that remains highly attractive: smaller, sub-institutional businesses. These typically have an enterprise value of between $2M–$20M, are founder owned, cash flowing (often 3–6x EBITDA) and operating in fragmented, underfollowed industries.
In this part of the market, inefficiencies are real. There is limited competition from institutional capital, pricing is often rational, and value can be created through execution, not just financial engineering.
For investors willing to do the work, this is where true alpha still exists, where there can be significant operational improvement, add-on acquisitions and capital allocation discipline. This is fundamentally different from both venture investing and large cap private equity.
But private markets are not a free lunch
The same characteristics that create opportunity also introduce constraints. Private investments lack price discovery (valuations are negotiated, not tested daily), they lack liquidity (capital is locked until exit) and they lack continuous feedback (mistakes can compound unnoticed).
This matters more today than it did five years ago.
Exit markets remain uneven. Many private portfolios are sitting on unrealized gains that depend on future liquidity events. Secondary markets are growing rapidly because investors increasingly want flexibility. Private markets are still attractive, but they are no longer easy.
Meanwhile, public markets, especially microcaps, are being overlooked
While capital has flooded private markets, public microcaps have been starved of attention and capital. This has created a different kind of inefficiency. Today, in public markets, you can find profitable, cash-flowing businesses at modest multiples, recurring revenue models trading below private comps, and high return on capital companies with limited coverage. Importantly, public markets offer transparency, liquidity and potential for immediate price discovery.
For years, public investors were at a disadvantage because the best companies stayed private longer. Now, that dynamic is beginning to reverse.
The emerging opportunity: bridging private and public markets
This is where the most interesting opportunity exists today. It is not simply about choosing between private and public investing. It is about combining the two. Acquiring or building high quality small private companies and then taking them public in Canada.
Why Canada matters
Canada still maintains a functioning ecosystem for small public companies through the TSX Venture Exchange and the Canadian Securities Exchange. These exchanges serve a critical role that has largely disappeared in other markets: they allow small, growing companies to access public capital early.
For the right business, this creates a powerful pathway including growth capital, liquidity for founders and acquisition currency (public shares).
The valuation gap and why it matters
In certain cases, a meaningful disconnect exists between private and public valuations. You can often acquire a private business at 3–6x EBITDA and transition it into a public vehicle trading at 6–10x EBITDA
That spread is not guaranteed, but when supported by clean financials, credible management and a clear growth strategy…it becomes the foundation of a microcap compounding strategy.
What types of companies work best
Not every business should go public. In fact, most shouldn’t. We believe some of the best candidates include:
1. Niche industrial and service businesses
Inspection / NDT
Marine technology
Environmental and infrastructure services
These industries are fragmented, essential, and often overlooked.
2. Hardware-enabled recurring revenue models
Monitoring systems
IoT-based platforms
“Hardware-as-a-service” businesses
Public investors increasingly understand and reward recurring revenue, even in industrial contexts.
3. Platform companies with acquisition potential
Start with a strong base business, then:
Execute disciplined add-on acquisitions
Allocate capital effectively
Build a long-term compounding model
This is a smaller scale version of what companies like Constellation Software have done, applied to less efficient sectors.
The risks and why many fail
This strategy is powerful, but not easy.
Public markets are unforgiving. Weak reporting, inconsistent performance, or poor governance will be reflected immediately in the share price. Liquidity requires effort and a public listing does not guarantee investor interest. Companies must actively build a shareholder base and communicate effectively. And finally, timing matters. Going public too early can trap a business in an illiquid, undervalued state.
A structural imbalance is creating opportunity
At a high level, private markets are capital rich but opportunity constrained and public microcaps are opportunity rich but capital constrained. That imbalance is where opportunity lives. High quality small businesses exist in the private market. Capital and liquidity exist in the public market. The bridge between the two is underutilized.
The bottom line
There are compelling opportunities today in smaller private companies, particularly where inefficiencies are real and value can be created through execution. At the same time, public markets, especially in Canada, are offering underappreciated valuations, structural liquidity and access to growth capital. The most effective strategy in this environment is not to choose one over the other. It is to combine them. Acquire or build high-quality small businesses in the private market. Scale and professionalize them. Then selectively transition them into the Canadian public markets. Done right, this approach captures the inefficiency of private markets and the valuation and liquidity of public markets.
In a market environment where both sides have clear limitations, that combination may represent one of the most compelling opportunities available to investors today.
