PwC's Annual Report on Trends Affecting Emerging Companies in Canada - The Future is Brighter than We Think!

Earlier this month, PwC released its 12^th annual report on the state of emerging tech companies. The Report, entitled "A Nation of Innovators - 2015 Canadian Emerging Companies' Survey," touched upon a number of topics affecting Canadian tech companies, such as the adoption of new customer-focused metrics to measure progress and success, funding challenges and sources of funding, talent recruitment strategies and other trends related to the development of Canadian tech companies.

PwC takes a predominantly positive view of Canada's tech startup environment. In the Report's introduction, Burzin Contractor, PwC's Leader of National Emerging Company Services, writes that if one thing is certain, it is that "Canada is a great place to start and grow an innovative company. And we're confident that more and more of our entrepreneurs will choose to build the next Canadian technology stars right here at home." For the most part, revenues appear to be increasing for tech companies in Canada, as there was a steady increase in the number of firms reporting revenue, as opposed to being at a pre-revenue stage. This is particularly true among firms generating up to $1 million in revenue, and to a lesser extent among those generating $5-10 million and $10-25 million, according to the Report.

The way in which emerging tech companies are measuring success has also changed. The Report emphasizes that in previous years, financial metrics were the principal ways in which emerging tech companies measured success, while in 2015 more companies were focusing on growing their customer and user base. This trend has translated into companies focusing on evaluation metrics that include number of customers, customer engagement and customer acquisition costs, as opposed to total revenue, operating cash flow, etc. Emerging tech firms are also starting to put more effort into recruiting talent, as two out of five respondents said identifying new talent is one of their chief challenges, while more than one in four struggle to provide competitive compensation and benefits. As a result of often limited financial resources, the Report notes that many emerging tech companies are focusing on workplace culture as a means of persuading potential recruits to sign on and, more importantly, stay.

A relatively surprising tendency among startups that PwC pointed out is that close to half of Canadian startups are not taking advantage of sources of government funding to impact their bottom line. The Report references the availability of government funding sources such as the Industrial Research Assistance Program (IRAP), Scientific Research and Experimental Development (SR&ED) tax credits and the new Canada Accelerator and Incubator Program (CAIP), but lamented the fact that so few companies are taking advantage of them. Referring to this trend as "alarming," PwC speculated that a lack of awareness and knowledge among Canadian startups are key factors contributing to so few companies taking advantage of government funding opportunities. It remains to be seen what more needs to be done to reduce the amount of firms leaving these opportunities on the table, but the Report does suggest that startups do all they can to connect with the appropriate ecosystem partners, incubators and accelerators to educate themselves on what is available. Though leaving "no rock unturned" may be time consuming, PwC advises it should be viewed as a necessity in this economy.

For more information about some of the best government grants out there, check out our article on the Top Six Sources of Government Funding/Grants For Startups in Ontario.