Why Are Canadian Tech Startups Struggling to Scale?

Canada has been consistently falling behind in the global innovation race year after year for several reasons. But more often than not, the tech sector fails because startups fail to scale into sustainable companies. With U.S. President Tump latest immigration order, experts predict that it’s going to be a boon for Canadian tech, but does this mean that anything will change? Maybe yes, maybe not.

Figuring out whether Canadian startups will finally find out how to successfully scale will take time, but things need to put into action now. Although the government has more or less welcomed skilled professionals from overseas to work in Canada, it doesn’t necessarily mean that it will resolve issues like growing a company into a successful world leader.

According to the World Bank, Canada is the second-easiest place to start a business. In fact, the process only takes two procedures and about 36 hours to complete (now that’s fast!). So it makes a lot of sense that there’s a robust startup ecosystem in cities like Montreal, Toronto, and Vancouver (and they’re all in listed the top 20 global startup ecosystems).

So why is there a massive problem with scaling-up?

Startups Are Lacking Innovation Policies

One of the primary issues here could be the fact that Canadian startups innovation performance continues to mostly fall short on an international stage. As a result, this could mean that their innovation policies are quite deficient.

The ultimate goal of the innovation policy should be to build technology that is globally competitive. Further, this could be the result of not paying enough attention to what it really takes to grow a promising startup and enable it to compete in global markets.

Although Canadian startups have grown fast like those in cities like Bangalore, Berlin, and Sao Paulo, most can’t claim to have grown by at least 20% per year.

Although the Global Entrepreneurship Monitor ranks Canada virtually tied with the U.S. in per capita production of startups, most of these fledgling companies never grow into globally competitive enterprises. In fact, less than 5% of Canada’s 36,000 tech firms actually fall into the high-growth category.

So it doesn’t make sense to allow this phenomenon to continue as there’s no point to having vibrant tech startup clusters that never scale.

So What Do We Need to Change?

At a federal level, the rhetoric must change to explore new themes instead of emphasizing old themes of research, development, and procurement while ignoring more pressing problems. This means that the focus shouldn’t just be on highly skilled tech talent as that’s already available (for the most part anyway).

What’s needed now is a focus of energies in developing management talent that will have the knowledge and skills to grow the business and enable it to compete at an international level. A good way to begin this process is to start developing the current level of executives that are already in the country.

But the talent gap doesn’t just stop at management, it also trickles down into marketing, product management, and sales. These are exactly the skills required to grow a small company with a great idea into a multinational behemoth.

For example, when a tech startup looks at expanding, they will have to deal with a whole new set of variables like the following:

Barriers to entry
Duties
Logistical challenges
New and unique culture
Regulatory requirements
Tariffs

So to enter and grow in these markets organically, the right individuals need to be in place to fight and win each market one at a time. So what’s really needed is more opportunities for startups to access the talent they desperately need to scale-up.

Here are some steps tech startups should start thinking about right from the beginning:

Take advantage of immigration to bring in experience scale-up leaders whenever they’re not available locally

Develop relationships with professional educational institutions to access high-level of talent that can perform on a global stage

Create an advisory board to help with global expansion

Seek out tech leaders to mentor others (with a focus on global marketing, product management, and sales)

Further, startups should also look beyond the technical talent and creativity and take the lack of expertise in scaling quite seriously. This is primarily because it will take some time to get the right individuals in place and if you keep waiting for the right moment, you might have already missed out.

Having said all this, it’s also important to mention that some companies are already doing it right. Some startups are ready to scale-up to the global marketplace this year, so it’s going to be quite exciting to see how they perform in the coming months.

These growing tech firms are as follows: