Commentators have long criticized Canada’s inability to scale high-tech companies to world-class size. Could our habit of ousting the founder os scaling companies be the problem? According to the Centre for Digital Entrepreneurship + Economic Performance, “Canada continues to struggle to produce the type of sustainable, high-growth firms in knowledge-intensive sectors that policy-makers have identified as crucial to the country’s economic future. While the density of high-tech startups and entrepreneurs in Canada is among the world’s highest, the creation of high-growth Canadian firms continues to lag behind” (deepcentre, A Lynchpin in Canada’s Economic Future: Accelerating Growth and Innovation with World-Class Business Acceleration Ecosystem, 2015).
Although Canada has created an ecosystem that produces many startups, few of these companies grow to become Unicorns. These are defined as privately held companies with valuations in excess of one billion dollars. Certainly, we have had world-leading companies such as Blackberry and Mitel, and more recently Unicorns such as HootSuite and Kik Interactive. But most of our successful startups are sold before they reach world-class size. Overcoming this growth hurdle is crucial to positioning Canadian companies favourably in global markets.
In this study, we are looking at the professional history and experience of technology startup leaders to determine whether specific aspects of their backgrounds limit their willingness or ability to scale the company under their leadership. The analysis is guided by two questions:
- Is Canada limited by the amount of CEO talent needed to lead and grow successful technology companies?
- Do founders make good CEOs, or are they outperformed by professional CEOs?
The second question is based on anecdotal evidence; some of the most successful technology companies in history have been led by their founders well after the companies reached their world-class status. This includes Steve Jobs and Apple, Bill Gates and Microsoft, Mark Zuckerberg and Facebook, Larry Page and Sergey Brin from Google, and Ed Oates and Larry Ellison from Oracle . Many of these companies were founded by young people—some were even without undergraduate degrees—who became successful CEOs of game-changing businesses. We also looked at the issue of founder replacement and compared worldwide practices with those in Canada.
Our findings, while limited in scope by the nature of the data available, suggest that:
- Canadian Founder CEOs are just as experienced as the Founder CEOs of Unicorns in terms of prior experience as serial entrepreneurs.
- Our Professional CEOs are more experienced than Unicorn Professional CEOs in terms of prior experience as founders and as CEOs of venture capital-backed companies.
- Founder CEOs outperform Professional CEOs in Unicorns and Canadian companies.
- While Canadians have a habit of ousting Founder CEOs and replacing them with Professional CEOs 47% of the time, Founder CEOs are only replaced 18% of the time in Unicorn companies.
Our conclusion is that Canadian founders have the right backgrounds to grow successful world-class companies and that our reluctance to scale to that level may be attributed partially to our tendency ousting Founder CEOs and replacing them with Professional CEOs.