Something unexpected is happening in Atlantic Canada’s technology and innovation community: as these companies become larger, they are in total growing more quickly than when they were literally a bunch of startups.
What we’re seeing among high-growth innovation companies in the region is the development of a core of larger companies that are actually accelerating their growth. We’ll still call them startups for lack of a better term, but in truth the region is developing a club of high-growth corporations.
That was the major find of Entrevestor’s annual analysis of startups in the region, which we publish today. For the past three years, we’ve been surveying these locally-owned, high-growth innovators, and the results for 2015 show that the community is starting to mature.
The data revealed two important trends, the first being the development of bigger startups. We estimate there are now more than 130 startups in the region that have more than $100,000 in annual revenue. And of these, about 30 have more than $2 million in revenue.
It is these larger companies that are creating the second major finding: overall revenue growth among startups is actually accelerating.
Revenues increased about 30 per cent in 2013, then 37 per cent in 2014 and 66 per cent in 2015.
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As these companies grow in size, they develop stronger sales teams and refine their products to better meet market demand.
That means that many are increasing their growth rates as they get larger, and that is amplifying their economic impact.
A company booking its first sales looks great in terms of growth for that company.
But the economic impact is far greater when that company boosts its annual revenues from, say, $500,000 to $1 million.
We identified 368 startups at the end of 2015 and surveyed as many as we could.
Some 152 companies replied to the survey, including 127 that provided data on revenue.
While we in the media often highlight funding by startups, the growth in revenue is the surest indicator of a company’s health.
What we’re finding is that startups are coming to believe that they have to at least double their revenues to be taken seriously.
“In Silicon Valley, your revenues should be tripling or you’re not growing fast enough,” Sean Fahey, CEO of Moncton-based Vidcruiter, said.
He added that his company is “trending toward that and I don’t think I’m an outlier.”
These startups are remarkably optimistic about revenue growth in 2016, forecasting revenue growth of 120 per cent.
We conducted our survey mainly in the second-quarter, so many respondents had a pretty good idea of how the year was shaping up.
The reality is many will likely fall short of their expectations but the important point is that there is strong momentum for sales growth.
Overall, the growth in sales is aiding the growth in exports.
The survey respondents said they made only 20 per cent of their money in Atlantic Canada in 2015 — about the same as the previous year.
About 19 per cent of the revenues came from the rest of Canada and 62 per cent from outside the country.
If there is one reason to be concerned about the revenue picture, it’s that the region’s startups are far too focused on just two markets — Canada and the U.S.
Only five startups of 58 respondents discussing their primary market listed countries other than Canada or the U.S.
