Happy New Year, everyone. As we get into the groove of being back at work, let’s take a look at five things to look out for in the Atlantic Canadian startup segment in 2016.
Herding gazelles
A gazelle, in business-speak, is a company that has increased revenues by at least 20 per cent annually four or more years in a row, starting from a base of at least $1 million. Ten to 20 of these beasts now call Atlantic Canada home.
If the tech-biotech segment in the region is going to make any impact at all, these are the companies that will do it. The existing ones will have to keep getting bigger, and the overall number will have to keep growing. Which brings us to …
International sales growth
Canadian startups — not just those in Atlantic Canada — tend to grow more slowly than international competitors because they rely too much on the domestic market. In 2014, about 64 per cent of the revenue of East Coast startups came from outside Canada.
It’s a lot, but for those gazelles to grow meaningfully, international sales will have to improve. Startups based in Tel Aviv, for example, report that 74 per cent of their customers are outside Israel.
Charlottetown and the Sydney area.
These two municipalities (population 35,000 and 102,000, respectively) have burgeoning startup communities that appear ready to make some noise.
Propel ICT, the regional tech accelerator, is working on holding cohorts for its Launch program in each place. Charlottetown has the Emergence incubator program for life sciences companies. Sydney has the UIT tech program affiliated with Cape Breton University.
Both places seem ready to make some news this year.
Equity crowdfunding
This will be, depending on who you talk to, either the greatest revolution in business financing since the invention of the stock market, or much ado about nothing. In 2016, we should get a clearer idea which it is.
Securities commissions in New Brunswick, Nova Scotia and other provinces are getting ready to enact two sets of regulations that will allow companies to raise equity financing online. Several European countries have launched successful crowdfunding portals that have benefited hundreds of companies. It will be interesting to see how this financing tool develops with Canada’s cautious regulators and investors.
A big deal
I mean big, like nine figures.
This year marks the fifth anniversary since two New Brunswick companies, Radian6 and Q1 Labs, sold out for a reported total of about $1 billion.
Since then, there have been a few big exits, such as Ocean Nutrition Canada of Dartmouth going for $540 million in 2012 and Charlottetown’s BioVectra selling out for $100 million in 2013. But the last two years have been marked by smaller deals, such as the sale of Halifax-area companies Ascenta and SecureReset, neither of which revealed their values.
It’s time for a bigger deal — something to get excited about.
It would be nice to think Atlantic Canada could produce an initial public offering, but it’s doubtful the public markets will be strong enough to produce strong IPOs. The acquisition of a major Atlantic Canadian startup is a possibility. Canadian assets are cheap on the international market, and there are some impressive companies to choose from.