I’m wondering when Canadian firms are going to realize that getting their initial revenue in Canada is slowing down their progress and that they need an export first mentality. Yes, this is a rant. I met another example yesterday. When we were starting Synamics as a telecommunication software provider, we obtained some crucial advice from an individual who, at the time, was the CEO of Nortel. His advice was that we should learn to swim in our own bay before trying to sail in the big lake. He actually used this expression and what he meant was that we should build a big business in Canada before going to the US to expand it. We dutifully followed this advice for many years and kept running into a revenue ceiling we couldn’t break through. Finally, getting fed up with lackluster growth, we just started selling in the US and England and lo and behold, growth took off.
Most Canadian tech firms I meet get their first revenue in Canada and only proceed to the US or other foreign countries when they feel better about the risk. But starting in Canada is starting in a small market and a critical component in creating large companies is a large market: larger markets result in larger-sized companies. (Duh!) Look at Shopify for proof. Only about 3% of its ‘stores’ are located in Canada. If it had not chosen to get out of Dodge, its revenue would be under $200 million instead of over $5 billion.
For Canadians, launching in Canada first is typically the easiest route to early revenue. But this strategy slows down company development. Canada is not a big enough market within which to build a large firm. And Canadian buyers buy for different reasons and differently than say Americans. US companies are larger and thus their operational needs are different. They are subject to different regulations and different competitive forces. There are differences in consumer habits as well, mostly related to competitive pressures. Thus, the solutions they need will be different from the solutions a Canadian buyer will need.
A startup that launches sales first in Canada will get revenue, but it won’t learn enough about competitive differentiation or product/market fit from that launch. It may end up having to change its product when finally going to a bigger market as well. Thus, a launch first in Canada will inevitably slow down the growth of the firm as it must learn two markets instead of one and even perhaps build two different products.