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Canadian Tech Startups Growing Fast, but Still Looking for Exits

Canadian Tech Startups Growing Fast, but Still Looking for Exits

Posted by PanamericanWorld on July 15, 2015

According to PwC Canada’s annual report on the state of emerging technology companies, Canada continues to be a hotbed for innovators and entrepreneurs looking to turn their business vision into reality.

As startups continue to grow, so do evaluations for success, shifting in favour of building and growing a healthy and satisfied customer base rather than being motivated solely by revenue. However, despite continued growth, owners still focus on getting out of the market through sale or merger rather than planning for longevity.

Emerging technology companies are also moving from the pre-revenue to revenue stage. Among those surveyed, companies are projecting strong financial results with 56% expecting between $500,000 and $1M in estimated revenue and 11% forecasting between $5M and $25M in 2015.

“While the trend amongst emerging technology companies in Canada continues to be focused on building with the objective of being attractive to potential buyers there is a significant number of them that are looking at remaining in the market,” says Burzin Contractor, National Emerging Company Services Leader, PwC Canada. “While access to capital investment continues to be among the biggest challenges facing entrepreneurs, the sector continues to grow pointing to the world-class caliber of innovators and the right economic environment in Canada.”

Emerging technology companies continue to see strong momentum, but leaders are still building with the objective of exiting the market in the short term. In fact, 63% of companies surveyed expect to be acquired as part of their exit strategy and 58% expect to do so within four to six years compared to 23% who plan to stay in the market over the long term.

Nearly half of companies surveyed (43%) said that finding the right investor is the biggest funding challenge facing emerging technology companies with most turning to angel investors (44%) as the transaction is often faster and less complex. Funding challenges are linked to concerns around attracting and retaining top talent with more than one in four citing the inability to offer competitive compensation and benefits as a barrier to successful recruitment.

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