A 'Phenomenal' Year For Canada's Young Tech Companies

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TECH STARTUPS CANADA 2012
Overall, Canada's tech sector has just finished an excellent year and the prospects for 2013 look at least as good. (Getty Images) | Getty Images

Overall, Canada's tech sector has just finished an excellent year and the prospects for 2013 look at least as good.

That's the picture that emerges from conversations with the CEOs of four young Canadian tech companies that were identified earlier this year as potential "tech darlings" in a CBCNews.ca story.

Given the changing calendar, we asked for their take on the year that was and the year to come, both for Canadian tech and for their own companies.

Mike McDerment, the CEO of FreshBooks, an online accounting company based in Toronto, told CBC News that 2012 was "the best year ever, absolutely phenomenal" for Canadian tech companies.

McDerment and the other three CEOs credited some of the success to an improved financing situation, something that had been a significant problem for Canadian tech start-ups in the past.

"Tech start-ups now have access to capital that they weren't seeing before," said Ryan Holmes, the CEO of HootSuite, a Vancouver based company best known for its social media dashboard.

In the past, some good ideas died on the vine because financing couldn't be raised, but now there is often competition among investors to get involved in a tech start-up, he explained.

"There's more angel investments, more people getting comfortable investing in tech, even if that's not where they made their money," added Shopify CEO Tobi Lütke.

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And Judy Sims, CEO of Shopcaster, noted that 2012 was "a big year for growth," with over a hundred start-up incubators in Canada.

"A lot of people are getting trained in early-stage start-ups, in moving really quickly, in testing, in methodology."

Shopify in Ottawa and Shopcaster in Toronto are both e-commerce companies, with Shopfiy selling a platform to operate an online business and Shopcaster providing a platform for brick and mortar stores to sell their products online.

Worried about RIM

The CEOs did identify one big issue of concern going into 2013, the fate of Research In Motion, arguably still Canada's true tech giant, although in the doldrums for almost two years now.

For Canada to have a company of RIM's size and significance means "there are literally thousands of people who know how to do stuff in a technology world and for the tech community, having that to draw on as you build your teams... and build new companies altogether, is just exceptional," McDerment said.

McDerment, for one, has been saddened by the lack of faith and support for RIM in Canada. As RIM shows, "tech companies build up quickly and they can encounter massive problems quickly as well," he says.

"It takes a lot of support and a lot of excitement to build one of these companies and to get through bad times, it takes that as well."

RIM's future should become clearer after it launches Blackberry 10, its new operating system, on Jan. 30.

Promising year ahead

The coming year for Canadian tech should build on the successes of 2012, according to the CEOs, especially if the corner has been truly turned on the financing problems of the previous few years.

Sims said that for start-ups, it's all about the talent, "where the talent's going and where the talent's getting trained." And she says that today's talented young graduates and recent graduates prefer to work in start-ups more than older companies.

Local universities also play a big role in whether a city will become a successful tech hub.

Holmes hopes to see an increase in the number of graduates this year because of an emerging "shortage of talented engineers." He's also concerned about a tech talent drain from Canada to the U.S., especially to Silicon Valley.

For his part, Lütke is concerned about what are called "exits," in industry jargon, after 2012 saw a number of successful Canadian entrepreneurs sell their companies.

The latest takeover – announced two weeks ago – saw California-based Oracle willing to pay $871 million US for Eloqua, a Canadian cloud software company that went public last year.

His concern is that too often the exits take place too early, while the company still has major growth potential.

However, McDerment views the large number of successful exits in 2012 as a proof that Canadians "can build very successful and attractive companies."

Small business approach

Looking at the broader e-commerce sector, McDerment expects to see more innovative products available for small businesses.

Noting that the internet "has made the network of small business owners cost-effective to reach," especially now that many tasks are better done over network-based cloud-computing, "small businesses are going to benefit enormously in terms of productivity, efficiency and what not."

"We've seen an amazing paradigm shift in how the world communicates and does business," adds HootSuite's Holmes.

He argues that the shift has been consumer-led, with business following along. "Because there are so many people on social media right now, businesses need to be there."

He expects the trend to the social business will be huge in 2013.

For Holmes, that means increasing corporate demand for social media management systems, more use of social media tools inside companies and big things for companies that cater to social media on the mobile internet.

'Canada's smartest company'?

The CEO's of these four potential tech darlings were clearly upbeat about their own company's prospects.

Shopify has just finished a year in which the December issue of Profit magazine called it "Canada's smartest company." It was also ranked the number three online retail website, after Amazon and eBay, in a recent study. Lütke said he was a bit surprised by the finding, noting, "it's slightly disingenuous to take Shopify as a whole and then compare us to Amazon," since Shopify offers a platform that has allowed others to create something like 40,000 separate online stores.

Shopify doubled its revenue last year and Lütke expects it will do that again in 2013. Staff numbers have also doubled, from 70 to 140.

HootSuite also had a year of rapid growth. The company beat its financial projections, took over Seesmic, a smaller competitor, and opened offices in London, U.K.

HootSuite staff numbers went from 100 to 235 and its new Vancouver headquarters will be able to house 500 employees.

Holmes said HootSuite will be pushing more international expansion out of North America in 2013 and hinted at new products that could change the market.

Shopcaster, the youngest of the four companies and not yet two years old, also hopes to go international this year.

Sims told CBC News that 2012 "was a big growth year and also we had major pivot in the late summer, from a product browsing and sharing application to an e-commerce site."

Shopcaster also added the 'e' to their name, Sims replaced fellow founder Matt O'Leary as CEO, and the company Shopcaster was one of three winners of the Canadian Technology Accelerator award from the Canadian Innovation Exchange.

Shopcaster works with stores in Toronto, Vancouver and Montreal and has just begun launching in New York City.

Cross-border shipping will be in place by the end of January. San Francisco is next and then Sims says the company will open up the site to stores anywhere, as long as they have a bricks and mortar existence.

For its part, FreshBooks made the move to cloud accounting in 2012 and McDerment says it has been "extremely well-received," with November, the latest month with complete data, their best month ever.

Pointing to the mobile apps that FreshBooks rolled out in 2012, he said that their focus next year will be "about reminding small business owners that there's choice in the products that they use."

TOMORROW: The four CEOs tell us about some of the other Canadian tech companies that impress them.

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