Canada serves as fertile ground for tech startups

Canada continues to be a hotbed for innovators and entrepreneurs looking to turn their business vision into reality, according to PwC Canada’s 12th annual report on the state of emerging technology companies.

As startups continue to grow, so do evaluations for success – shifting in favour of building and growing a healthy and satisfied customer base rather than being motivated solely by revenue. Despite continued growth, owners still focus on getting out of the market through sale or merger rather than planning for longevity.

Despite an increasing focus on the customer, emerging technology companies are also moving from the pre-revenue to revenue stage. Among those surveyed, companies are projecting strong financial results with 56% expecting between $500,000 and $1M in estimated revenue and 11% forecasting between $5M and $25M in 2015.

“While the trend amongst emerging technology companies in Canada continues to be focused on building with the objective of being attractive to potential buyers there is a significant number of them that are looking at remaining in the market,” says Burzin Contractor, national emerging company services leader, PwC Canada. “While access to capital investment continues to be among the biggest challenges facing entrepreneurs, the sector continues to grow pointing to the world-class caliber of innovators and the right economic environment in Canada.”

While emerging technology companies continue to see strong momentum, leaders are still building with the objective of exiting the market in the short term. In fact, 63% of companies surveyed expect to be acquired as part of their exit strategy and 58% expect to do so within four to six years compared to 23% who plan to stay in the market over the long term.

Nearly half of companies surveyed (43%) said that finding the right investor is the biggest funding challenge facing emerging technology companies with most turning to angel investors (44%) as the transaction is often faster and less complex.

Funding challenges are linked to concerns around attracting and retaining top talent with more than one in four citing the inability to offer competitive compensation and benefits as a barrier to successful recruitment.

“Always innovative, emerging firms are increasingly more resourceful when it comes to creating compelling career opportunities. They’re focused on defining a corporate culture that juxtaposes them to larger enterprises and the opportunities for growth inherent to this type of environment – greater investment in individual employee development, greater transparency and engagement, increased autonomy and opportunity for advancement.”

In stark contrast to last year’s report, the presence of women in Canada’s emerging technology firms is on the rise. This suggests that more women educated in business or engineering are choosing the path of entrepreneurship. The number of women in management roles amongst emerging tech firms has increased by 23% and by 33% in marketing and sales roles.