Canadian Tech Companies Are On The Rise!
I had two really unique opportunities this week in my role as Chief Marketing Officer and Co-Founder of a Maple Ridge, BC-based Canadian techn company. Maple Ridge is on the outskirts of Vancouver for my American readers. I throw that little geography lesson and autobiographical statement right there in that first sentence for a reason. It is important to understanding the context of my argument.
The first opportunity was an AceTech afternoon at the BC Tech Summit with Alabama-based
Greg Crabtree, CPA and author of the book Simple Numbers for Better Business Decisions. The second was a 24-hour hackathon undertaken by our teams in Canada and Bangladesh. We had 15 teams, and about 60 people competing.
The Greg Crabtree session made me think. [Remember: this is the interpretation of someone who lives and breathes marketing and product and not someone who marvels at financial spreadsheets… though I do like my traffic acquisition projections and analytics]. To summarize his thoughts, Crabtree speaks of four forces of cash flow: taxes, debt, core capital, and profits. He also spoke with a great comedic touch (especially for an accountant) that each dollar earned in Revenue is not the same as dollars earned in Gross Margin, and that every organization needs to pay attention to the Contribution Margin of key departments, management, teams, or product lines.
And while we covered a lot of accountant-speak (and over 90 slides) throughout the afternoon, my biggest take away was that “success” comes down to the operational efficiency of key management plus labour output and utilization.
And while he is the world-renowned accountant, and I am simply the marketing guy, sitting in the audience, I found myself arguing with some of his logic because of its limitations. I can agree that operational efficiency and team output are important. When we hire, we always say we hire for potential, because, whether you are coming in fresh out of school, or you are well seasoned in your field, we hire talent for where it is going to be rather than where it is presently. Crabtree speaks to some of this, however I felt that a lot of his approach is dedicated to maintaining the status quo and eeking out minor profit changes via cost control and efficiency. There doesn’t seem to be much room for innovation or the value creation that comes from the creative abilities of the team. He did acknowledge afterwards that a winning culture and taking care of employees does attract better talent (at competitive rates), so we did agree on that aspect.
I will come back to Crabtree’s thought process on his bigger points, but I first need to describe the 24hour hackathon we held later in the week. This contributes heavily to my argument in favour of investing in Canadian tech companies, and doing it right now.
This was our second team-wide hackathon. In our vernacular, ‘hacking’ is creative problem solving using technology and marketing. Each project our teams tackle, adheres to a theme [this week’s theme was “Anything mobile”] and the hack starts with a problem that the team is trying to solve. This may be a problem that is faced by the organization, by our existing users/customers, the Community, or other potential users around the world.
We start at concurrent times with our teams half-way around the world. Our team in Bangladesh started at night last time, so this time we started at 8:00PM Wednesday night and went all the way through 8:00PM Thursday night, while Bangladesh went from 10.00 am to 10.00 am. All of us are fueled by coffee, Red Bull, and a whole lot of can-do-anything-is-possible attitude.
A lot of great projects and ideas came out of the event, but the highest value output, for us, is the process and encouraging innovation. It is about risking failure. It is about imagining the impossible.
So why is now the time to invest in Canadian tech companies? Because the low Canadian dollar is creating a labour efficiency that gives companies like ours an unfair advantage over every startup in the USA, especially those in Silicon Valley. The Canadian dollar is at a 13-year low. When you combine this with innovative programs like Canada’s SR&ED tax incentive program (Scientific Research & Experimental Development), the market advantage is even greater. For those that are eligible, a significant percentage of the engineering and R&D salaries can be clawed back, provided the problem being tackled is considered to be, amongst other criteria, “experimental development” and “ work undertaken for the purpose of achieving technological advancement”.
I would, happily, stand our technologists and innovators head-to-head against any idea from Silicon Valley. And it is not just our team of Lefties that I am talking about. The great ideas and talent that were pervasive at the BC Tech Summit should make everyone take notice of what is possible in our own backyard.
So in that way, Crabtree is bang on right. Companies that achieve success will be those that can exploit the market inefficiency, maximize contribution margins, and drive higher output from their teams. The real secret is that technology output is not restricted by geographic boundaries. A tech customer is just as likely to be in Bangalore as they would be on the Jersey Shore. Technology is global.
So why is now a good time to be investing in Canadian Technology companies?
Because we are about to win, eh.