The biggest way governments could help Canadian entrepreneurs is to buy their companies’ products and services, entrepreneurs and founders said at Research Money’s annual conference in Ottawa.

 Canada also needs a mechanism that brings together potential investors with innovative companies and their customers, as well as marketing of top Canadian firms to foreign investors, they said during a panel session titled “Success Stores and Lessons from Canadian Entrepreneurs.”

“Sales fixes everything,” said Caitlin MacGregor (photo at right), co-founder and CEO at Waterloo-based Plum, which offers a platform that helps companies assess job candidates and predict employees’ performance using industrial organizational psychology.

“If you look at the success of innovative countries, if you look south [at the U.S.] in terms of their success rate, there is a common trend that the government is one of the largest purchasers of innovative technology,” she said.

MacGregor said although she has raised $19 million during 13 years so far of building her company, “ I don’t need to raise $19 million if I had some of that in sales.”

She said she doesn’t necessarily need free mentorship or government grants to hire people. “If the government was buying my technology and I was making revenue, then I could solve all those other things on my own.”

“If you have sales and you’re really growing based on proven growth rates, it gets a lot easier to attract investors,” she added.

MacGregor said Plum has had the opportunity to do some “really small pilots with the government, to work with some really fringe agencies.”

But it takes more than 18 months to get the first purchase order and the pilots are too small to make the case for a bigger sale and wider deployment of the technology, she said. “The red tape is insane.”

It’s easier for the federal government to buy from LinkedIn, which she noted houses all its data in the U.S. and doesn’t meet any of Canada’s security requirements, than it is for her company to get through all the Canadian requirements in place, she said. And that’s despite Plum working with Canadian financial institutions and passing all their security and privacy requirements.

 “The biggest, biggest mistake that’s happening right now in Canada is that our federal and provincial governments are not buying Canadian innovation,” MacGregor said.

Nicole Janssen (photo at right), co-founder and CEO at Edmonton-based AltaML, said the Alberta government offered a grant for a program where AltaML helps the different provincial departments identify the cases for using artificial intelligence to solve their most pressing problems. The departments compete with each other in having their use cases selected and operationalized.

“We haven’t worked with a [provincial] department yet that we haven’t created immense value in,” she said.

However, AltaML has been trying for three years to persuade the federal government to buy the company’s services, Janssen said. “I’ve had so much interest at the federal level, so many people are so excited by this concept. But in three years, no one can tell me who the buyer is.”

“There’s a ton of very talented, well-meaning people [in government] who are trying to support entrepreneurs like us,” she said.

But a lot of the government innovation support programs don’t fit and require a company to adjust its strategy to fit the program, whereas the entrepreneur is focused on delivering to customers, Janssen said. “I can’t be focused on how do I meld my business to get that next government cheque.”

“Raising capital in Canada is incredibly hard, particularly in technology spaces,” she noted. “You can raise all kinds of money in real estate. It’s a space that Canadian investors know.

But it takes a lot of education to get people to invest in AI.”

Lack of respect, procurement support for Canadian tech companies

Janssen said the U.S. has been much more receptive and welcoming to what AltaML has to offer than Ontario, where AltaML has an office.

“To get attention in Ontario is very, very challenging if you’re not from Ontario,” she said. “I would say that one of our biggest mistakes was expanding east before expanding south [to the U.S.]”

Canadian tech companies “face a serious challenge to be considered of equal nature to any counterparts that might exist,” said Duncan McSporran (photo at right), co-founder and former chief operations officer at Kognitiv Spark based in New Brunswick.

“The geographic area of resistance is really [from] Toronto to Montreal,” he said. Challenges include overcoming skepticism, including the attitude that “if you’re in Fredericton, New Brunswick, somebody somewhere else can do it better than you.”

McSporran pointed out that IBM’s global security team is based in Fredericton and was led by Canadian Sandy Bird, who took the team to more than $2 billion in annual revenue.

Bird, now with another company he co-founded called Sonrai Security, “will tell you that the one thing that he had to do that he learned very quickly was to open an office in the U.S. so that he could sell into Canada. That is the reality of what we face,” McSporran said.

Kognitiv Spark, which McSporran and his co-founder bootstrapped nine years ago, offers augmented reality headsets that enable front-line workers to get support in real time in real environments. The company is the sole provider of augmented reality systems to the U.K. Ministry of Defence.

“There is no program to help small and medium-sized businesses penetrate the [Canadian] defence market,” McSporran noted. “And we’ve got some of the world’s leading technologies coming out of our universities and our colleges.”

Last week, One9, an Ottawa-based venture capital fund focused on defence technology, urged business leaders in an open letter to press the federal government to invest more money in defence tech startups and the funds that back them, and to establish a new public-private organization to adopt Canada-made defence technology.

 MacGregor said: “There’s nobody marketing foreign investors to Canada, saying ‘These are the best companies that you can invest in.’”

“It’s every single entrepreneur, with their very busy schedules running businesses, going out and creating brand-new Rolodexes every time they have to fundraise. It’s very time-consuming and it takes away from actually growing the business,” she said.

In contrast to Canada, McSporran noted that an organization called MissionLink in London, U.K. brings together potential investors and customers in national security and defence with SMEs that have innovative technologies – including Canadian companies.

“They recognize that Canadian companies are undervalued by up to 40 percent,” which represents a “phenomenal opportunity” for venture capitalists and VC funds, he said.

“We don’t have anything like that at all – not even at the smallest level – in Canada, but we should have.”

He said Canada’s five global innovation clusters were created to encourage Canadian companies’ deep research and innovation to get to commercialization.

But he said he has just seen one of the innovation clusters give a contract to a company to develop work that the cluster had already paid Kognitiv Spark to do, “which is indicative of the fact that it [the cluster] is not being industry-led. It’s just program for program’s sake.”

McSporran urged governments to “know what you’ve already done and what taxpayers’ money has already gone into with Canadian teams that can deliver that capability at scale and can deliver it as needed.”

Janssen said another problem is what seems to be a “massive divide” between research and industry in Canada. “We don’t have Canadian companies coming forward and supporting our researchers.”

She said AltaML, which also helps grow startup ventures with AI products at the core, tried to find a researcher at one point to do some work and the researcher’s response was:  “I couldn’t be associated with industry. That would be embarrassing.”

“Somehow we’ve got to create a better relationship in Canada between research and industry so that we’re all benefitting,” Janssen said.

She pointed out that the countries that developed many of the technologies during the Industrial Revolution weren’t necessarily the nations that actually won in terms of growing GDP and productivity.

Rather, the winning countries were those that actually adopted and deployed the technologies, Janssen said. “The countries that were able to link the research with industry most effectively were always the countries that won.”

Attracting talent and being part of a community

When it comes to attracting talent and retaining it in innovative tech companies, Janssen said AltaML has benefitted from being in the same city as Amii, one of Canada’s three national AI institutes, and from Canada having “an immense amount of AI talent that a lot of the world doesn’t know exists here.”

Her company hasn’t had to compete as much with large multinationals that are scooping up AI talent. AltaML also has an internship program that takes 20 interns every quarter to work on real-use cases.

As AltaML expanded into Ontario and beyond, the company has been hiring for other types of roles out of the U.S. because of the mindset of U.S.-based marketing and sales personnel, Janssen said. “It’s a little bit more driven and a little bit more open-minded and bigger thinking.”

McSporran said with Fredericton being a small, largely rural community, Kognitiv Spark in the short term had to look elsewhere in Canada to fill its technical positions.

However, the company also put in place a longer-term talent strategy with the New Brunswick government, the University of New Brunswick (UNB) and the regional Atlantic Canada Opportunities Agency.

McSporran was able to secure funding from Raytheon Canada, a large defence company, to put into Kognitiv Spark to help develop technical capability but also to invest in a laboratory at UNB. The lab is now producing the Masters-level students required for Kognitiv’s development team as well as highly qualified personnel for Canada’s defence industry.

MacGregor said Plum has trained a lot of its talent, including upskilling junior software developers to become senior developers. “We’ve really benefitted from bringing people outside of tech into tech and training them internally.”

She also underscored the importance of and value for entrepreneurs in having a supportive community.

“This is a very lonely job,” she said. “There’s a lot of throwing spaghetti at the wall and seeing what sticks.”

She recalled when she started Plum making 2 ½-hour commutes several times a week from the small town of Petrolia to Waterloo – “with a seven-month-old on the arm and a bucket seat and my husband with me who was my co-founder” – to get support from Communitech’s accelerator program.

Plum received $40,000 from the Hyperdrive fund, which was administered by Communitech and backed by external investors.  That was enough for MacGregor and her family to relocate to Waterloo for four months.

“That was the community that we needed at the time,” she said. “We ended up getting the credibility of the network,” which got Plum in front of angel investors, grant money and other things that enabled the company to grow.

However, Waterloo is still really struggling to bring back that community post-COVID, “and it plays a really critical role in our journey and our success and not feeling so alone,” MacGregor said.

She also noted that when she started in Communitech’s accelerator, out of the 11 companies there were only two that had women CEOs. Out of 55 employees across all 11 companies, only three were women.

“At the beginning, it was really hard to find other women mentors, other women that have done what I was doing,” she said.

When MacGregor raised the first  $5 million for her company, there was less than a handful of women who had ever raised $5 million in one go, based on research by the BDC Women in Technology Venture Fund.

“I have found a lot of benefit and support and been involved in a lot of initiatives to bring other underrepresented founders into the ecosystem,” she said.

The need for “swagger” and a strong salesforce

MacGregor said a couple of years ago, there was a “scale-up playbook,” based on scaling companies in Silicon Valley and New York City, where the belief was you could raise $20 million and exit for $100 million.

“In the last two years, that playbook is in the trash,” she said. “That playbook and that entire decade of easy access to capital . . . I don’t think we’re getting back to that era.”

Instead, the new model for scaling companies is how to get to $100 million in annual revenue with less than 100 employees, she said. “Now there’s this badge of honour of being able to do more with less.”

In that kind of environment, it is crucial for entrepreneurs and founders to train effective salesforces for their companies, the panellists said.

McSporran said Kognitiv Spark’s biggest challenge in terms of expertise is in sales. “Because we’re such humble people as Canadians, we’re really bad at selling in a very direct way.”

“Some really good effective training at an early stage would probably have helped us overcome some of the more costly lessons that we learned,” he added.

MacGregor said she spent countless hours as CEO of Plum learning how to fundraise and pitch the company to investors.

She said if she’d had more sales and marketing training and been given more support to grow these components in-house, “I think that would have paid a lot more than learning how to fundraise, which was the sole focus for the first 10 years of running the business.”

As a CEO, the job was to fundraise. But, she added, “as a CEO, you should be the best salesperson in your entire organization because you’re going to be able to iterate and change and adapt as fast as the market is changing.”

Because of the lack of sales training, scaling companies are often compelled to hire very expensive sales talent “to come in and figure [out] how to wrap a story around what we do,” MacGregor said.

Americans are really good at telling and embellishing a story and putting swagger and confidence behind the story, while Canadians are really good at building high-quality products, she said.

“At the end of the day, we think that the high-quality product is going to sell. But it’s actually the story that has all the confidence and swagger behind it that sells better.”

“There is definitely a need to train a salesforce of people in Canada to help take these really amazing innovations and sell it and spin it and create that new narrative and create that excitement,” MacGregor said.

Janssen pointed out that whether an entrepreneur is in a startup stage, scale-up “or any part of this journey – because I’ve been on this journey a few times – it’s tough, it’s hard, it’s a slog.”

“There is no, ‘We hit the scale-up stage, let’s celebrate.’ You just keep going forward,” she said.

 She agreed with MacGregor that “we need entrepreneurs who have swagger in Canada,” rather than thinking that the be-all and end-all is selling to a U.S. company instead of growing a big company here.

“We’ve got to start having swagger about the strength we have in AI and telling the world how incredible we are,” Janssen said. “We’ve got to have swagger and get out there and stop letting all of the things we build get sucked out of our country.”

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