Canadian Tech Tortoises

Are we really producing Canadian Tech Tortoises? Recent research we did revealed three critical issues that may be impacting the ability of Canadian businesses to grow rapidly:

  1. Canadian companies wait longer before they start raising funds.
  2. They raise funds less often.
  3. They raise less money over time.

But why do Canadian businesses delay the fundraising process, which is essential to ensuring further growth?  Anecdotal evidence suggests two things:

  1. That many Canadian technology companies wait until their products are completed before raising and spending funds on crucial functions, including marketing and sales (M&S).
  2. That Canadian venture capitalists (VCs) look for evidence of market traction before considering funding.

This is disconcerting because early expenditures on M&S may lead to faster market traction, more solid growth, and earlier VC funding. But practitioners in the Canadian technology scene have observed that many businesses underestimate the importance of M&S in their formative years.

The goal of this study was to determine whether Canadian technology startups do in fact delay funding M&S activities. To this end, we looked at job classifications of employees at over 900 private Canadian technology companies that had received external investments. We could argue that if Canadian firms postponed spending on M&S, we would expect to see no or few employees in M&S roles relative to total employment in the earliest stages of development, followed by a steadily increasing percentage of M&S-related employees as companies grow. 

Job classifications were used as proxy to gain insight into how firms allocate money for various functions within the business. We discovered a striking pattern: while Canadian firms with the lowest recorded levels of external funding (our proxy for growth) have only 13% of their employees engaged in M&S activities, this percentage was significantly higher for businesses that had managed to raise funds. Firms with US$50,000–US$2 million of funding have 24% of their employees engaged in M&S. Thus in the early stages of development, Canadian tech firms are likely to have a larger fraction of their workforce dedicated to research and development (R&D) than to M&S.

A smaller contingent of M&S employees means that less time will be spent on vital startup activities such as market intelligence, product marketing, and business development. Companies that neglect M&S tend to approach the market only when a product is ready, therefore delaying their first revenue and growth.

But how do top technology companies in other countries approach the same issue?

Our analysis of more than 60 tech businesses in the US showed a different recipe for success: firms that scale quickly to US$10 million in revenue spend, on average, 73% more on M&S than on R&D. Leading American firms have 40% of their employees dedicated to M&S.

This is significantly different in Canada where even the highest funded firms only have 31% of their employees in an M&S role. This creates a vicious cycle: fewer M&S employees means less M&S activity, which slows down all the processes needed for customer traction and entry into the market.

Such patterns add to the perception that Canadian companies struggle with commercialization and market adoption. They also led us to conclude that, relative to US businesses, there is a striking difference in philosophy about when to approach customers and markets and that perhaps our technology companies grow more slowly than the leading US companies because they do not spend enough on M&S. Thus creating Canadian Tech Tortoises.

Scientists discover mutant gene that causes entrepreneurship

Scientists from the internationally respected magazine Nurture vs Nature have disclosed that researchers in Silicon Valley have identified the mutant gene that causes entrepreneurship. This disease involves a recessive mutation and leads to extensive market disruption.

Having discovered the genetic cause of entrepreneurship will help its inclusion in the Diagnostic and Statistical Manual of Mental Disorders (DSM-6). Entrepreneurship was not included in DSM-5 as it was felt that it was already covered by the recent inclusion of Internet Addiction, particularly when paired with a Narcissistic Personality Disorder.

The scientists who discovered this genetic variant focused on a region of chromosome 47 that contains several genes involved in the movement of a brain chemical called LEANSU between neurons. One version of the gene, FOUNDR, was found statistically linked (associated) with entrepreneurial success.

Apparently, researchers Hewlett and Packard identified a genetic pattern in their laboratory at 367 Addison Avenue in Palo Alto in the late 1930s. This early genetic discovery was suppressed and not published or patented so that the discoverers and close associates could profit from it. Recent historical research has discovered their original research notes and published these for the benefit of humanity.

The discoverers profited from the research by developing a genetic test that could be used to identify individuals carrying this recessive gene. Having identified carriers, the discoverers would follow up by investing in their technology start-ups. Recipients of investments made resulting from this technology include Gordon Moore, Jeff Bezos, and Larry Page.

Eugene Kleiner and Tom Perkins were early licensees of this technology, which they sub-licensed on a selective basis to co-investors on Sand Hill Road. For many years, the licensees invested in business ideas that had been sketched out at lunch on napkins. According to Vinod Khosla, a recent licensee, the napkins were taken back to secret labs where they could test the saliva deposited on the napkins at lunch, for this mutant gene. Founders with the mutant gene were then cleared for investment by leading Silicon Valley firms.

According to insiders, a recent licensee is Paul Graham. He extended research into the gene using Clustered Regularly Interspaced Short Palindromic Repeats (CRISPR) and has been able to edit the genetic makeup of Y Combinator start-up founders to make them more entrepreneurial, thus improving the success of his investees.

Research is continuing in order to identify a more rare expression of the gene that causes unicorns. Protests are arriving from around the world for full disclosure of this discovery so that other regions can begin to replicate the success that Silicon Valley has had due to the the use of this disruptive technology.