Diversified
But it needs more fast-growing firms chasing world markets
Region’s tech sector needs more fast-growing firms chasing world markets
WATERLOO REGION — The region’s growing technology sector has diversified roots in more than 60 different sectors of the economy, but small firms with lots of potential are not growing fast enough.
Those are two trends found in a survey of the region’s technology sector, the third largest in Canada, that was completed by Lee Brooks of Cromulent Marketing.
First, the good news. The technology companies here are active in 66 different industries. Most of the tech companies are developing products for businesses, not consumers.
“There is diversity, which is good for the region,” said Brooks, an engineering grad from the University of Waterloo who worked for 15 years in technology marketing before starting his own firm.
Based on his analysis of selfdisclosed data on LinkedIn, Brooks found 12.3 per cent of the region’s tech companies in information-technology-and-services, 5.6 per cent in computer software, 4.6 per cent in medical devices, 4.6 per cent in marketing and advertising, 3.9 per cent in industrial automation, 3.9 per cent in consumer electronics, 3.2 per cent in automotive, 3.2 per cent in financial services, 3.2 per cent in health-wellness-fitness, 2.8 per cent in hospitals-health care and 2.8 per cent in telecommunications.
“I think that diversity is like an investment portfolio, it protects you from the shocks and gives you exposure to a lot of ups,” said Brooks. “So I see it as a positive thing.”
While startups get lots of attention and support from local, provincial and federal governments more than half of the region’s technology workers are employed by companies founded prior to 2002. Only 10 per cent work for companies that are less than five years old, said Brooks.
Brooks did not include OpenText and BlackBerry in his survey.
While both companies have headquarters in Waterloo, most of their employees work elsewhere. He estimated the total tech workforce in the region at about 25,000. In the past, other estimates have gone as high as 30,000 or more.
A big part of the region’s tech sector works at a relatively short list of high profile success stories, including D2L, eSentire, Eclipse Automation, Sandvine, Miovision, Igloo, Dejero, Clearpath, Kik, Kognitiv, Magnet Forensics, Axonify and TextNow.
Brooks found lower-than-expected numbers of scaleups — small, but fast-growing tech firms with lots of growth potential. Based on his analysis, the tech sector should have more companies with 250, 500 and 1,000 employees. In fact, outside of OpenText and BlackBerry, it appears no tech company headquartered here employs more than 1,000.
“I think it needs to be investigated further,” said Brooks, who calls the lack of mid-size tech companies mighty suspicious.
Both the Canadian Council of Innovators and Communitech have noticed the same trend. Several years ago Communitech started a program specifically for high-growth startups with the potential to quickly scale.
“Certainly there is a lot of focused thinking on what to do to help scaleups because of what they have achieved,” said Greg Barratt, Communitech’s vice-president of strategic growth. Communitech says there are currently 113 scaleups in the region. Those companies are defined by year-overyear growth of more than 20 per cent.
When a startup has more than $1 million in annual revenue, has demonstrated product-market fit and has at least 10 employees then it may qualify for growth coaching provided by Communitech. They get help in hiring, securing customers, marketing and financing.
“They have demonstrated that they are a real business beyond just a cool idea or a cool technology,” said Barratt.