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.