Canadian technology companies have trouble reaching scale because startups in Canada are funded later, and at lower amounts, than their U.S. counterparts, a new report from the Impact Centre at the University of Toronto suggests.
The report, published on Monday, argues that “Canadians are creating financially unattractive tech companies.” The study, which compares 49 of Canada’s largest funded tech companies to 49 U.S. based private companies that are valued at more US$1 billion, found that the Canadian companies wait longer before they start raising funds, they raise less money less often and they raise less money, overall.
For instance, Canadian companies take 10 years to raise what U.S. companies can raise in just four years, the report says, adding that the U.S. companies grow more quickly than the Canadian firms.
“These funding trends create companies that do not look attractive from an investment perspective and could lead to a cycle of underfunding and an inability to scale,” the report says. “[B]y the time these companies reach a point in their development and are ready to scale, it is too late. Non-Canadian investors already see them as relatively slow growing and unattractive investments.”
In order to create companies that are capable of scaling, Canadian startups need to access capital much sooner and more frequently, the report says.
“And if we are successful at speeding up their growth, we may be able to attract enough late-stage capital to turn them into world-class companies,” the report asserts. “Instead of focusing solely on late-stage companies to solve the problems, we need to continue our work with early-stage companies and help them attain a velocity that makes them attractive to potential investors and funders.”