Charles Plant

Rotman Management Magazine - - FROM THE EDITOR - ED­I­TOR’S NOTE: The Im­pact Cen­tre’s re­ports, “The Class of 2008”, “A Del­i­cate Bal­ance” and “The Land of Stranded Pliots” can be down­loaded at­pact­cen­­cover

Se­rial En­tre­pre­neur and Se­nior Fel­low, Im­pact Cen­tre, Univer­sity of Toronto

IN CANAD our start-ups rank very high in the world on ‘num­ber of ex­its’, but we don’t rank very high on the value achieved from those ex­its. When you look at the re­turn rate for our ven­ture cap­i­tal­ists, it’s pretty low in com­par­i­son to the U.S. — al­though it has im­proved in the last few years, par­tic­u­larly since 2008. We are now hav­ing more suc­cess­ful ex­its by sell­ing them later, af­ter higher growth and big­ger rev­enue, so we’re get­ting more money for them; but we can do bet­ter.

Peo­ple fre­quently com­plain that there’s not enough money for en­trepreneurs in Canada, but I don’t be­lieve that. The fact is, high-growth com­pa­nies will at­tract cap­i­tal from any­where in the world. If our com­pa­nies aren’t get­ting that cap­i­tal, it in­di­cates that there aren’t enough of them grow­ing fast enough to at­tract large-scale cap­i­tal. Our big­gest chal­lenge is to fig­ure out how to grow com­pa­nies a lot faster.

In my view, we’re not in large-enough mar­kets — not just ge­o­graph­i­cally but per­cep­tu­ally. For in­stance, we don’t tend to start con­sumer-based com­pa­nies. Many large-scale tech com­pa­nies are con­sumer-based: Uber, Airbnb, Face­book, Ama­zon, Google, Ap­ple. We have Black­berry, but we just don’t start enough com­pa­nies in con­sumer-based mar­kets. The minute you ig­nore those mar­kets, you cut your growth po­ten­tial down sig­nif­i­cantly.

So, what has to change? First, we have to un­der­stand what it takes to scale. We should be try­ing to grow com­pa­nies by a min­i­mum of 100 per cent a year. Sec­ond, we’ve got to ap­ply cap­i­tal to that, which means we have to change the way our in­sti­tu­tions cap­i­tal­ize. We have too many small funds and not enough large ones that can write big cheques. Third, we lack the re­quired mar­ket­ing and sales tal­ent here, so our mar­kets should be for­eign and we should be hir­ing for­eign mar­ket­ing and sales ex­per­tise in those mar­kets — peo­ple who un­der­stand the nu­ances of a mar­ket. The com­bi­na­tion of th­ese three things, I think, would have a great im­pact on the growth of Cana­dian start-ups.

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