Talking with unicorns

This fall, KPMG presented a panel discussion with a handful of top tech entrepreneurs in Canada, who shared insights into the trajectory of their businesses—from their successes and challenges to lessons learned.

It’s been a challenging year for venture capital investment, with deal activity slowed by soaring inflation and interest rates, as well as concerns about a possible recession. Despite this, funding activity in Canada reached US$2 billion in Q2—the second-highest quarter on record—with an emphasis on areas such as artificial intelligence, fintech and cleantech.

Our panel was based on a study by Innovate BC and the Vancouver Tech Journal of B.C. companies reaching $1 billion valuation through private investment, acquisition or initial public offering. The study, which gathered data from 12 unicorns, did a deep dive into factors and conditions that led to their growth, in an effort to help all businesses grow and succeed.

When it comes to job growth in the technology sector, Vancouver is leading the way, with more than 28,000 new jobs created in 2020-2021—placing the city ahead of Toronto, Montreal, Seattle, Austin and other North American tech hubs. It’s also seen a surge in unicorns: British Columbia is now home to 14 private companies that have reached $1 billion in valuation—more than any other province in Canada.

Is that the direction your company is trying to move? Here are some of the key takeaways from the panel to help you plot your course:

Adaptability to changing market conditions
With a potential economic downturn on the horizon, many businesses are now facing a subsequent downturn in the funding ecosystem. But these conditions have also affected the types of solutions the market is demanding. That has driven high-growth, high-performance companies to adapt and look beyond hype cycles at what will move the needle in their market or industry. There’s also an increased focus on accelerating sustainable solutions—from clean tech to agribusiness—to help solve broader global problems. Panelists recommend finding investors and board members who believe in your vision and values from the start, rather than simply looking for investors.

Gaining access to diverse talent
Along with access to capital and markets, a key ingredient in growing a company is access to talent. But it’s also one of the biggest challenges. Panelists say that in some cases their growth has been constrained by the inability to bring talent on board fast enough. That’s why—today more than ever—it’s important to carefully consider where you’re headquartering your company, where you’re growing your talent base and what approach you’ll take to supporting remote work. A major factor that has contributed to their success, said our panelists, is access to a diverse employee base. Canada, in particular, has tremendous diversity of cultural backgrounds and experience, and out of that comes new ideas, new perspectives and new solutions.

Staying relevant by listening to customers
When founders first start a business, they’re typically concerned with finding investors and telling their pitch story. But as your business grows and gains customers, the panelists said it’s imperative to keep your ear close to the ground and listen to what your customers have to say—not just your investors. Technology evolves and the economy fluctuates, so it’s key to ensure your company—and your products or services—are still relevant and meeting the market. While the panelists said there’s a lot of ‘fluff’ on various social channels, there’s also value to be found if you look for it. And while the customer isn’t always right, they do provide feedback and insights you can use to make your product or service better.

How to reverse-engineer unicorns
Two things cause start-ups to fail: (1) the founder giving up (2) the company running out of cash. Government support can help to create bridges between start-ups and venture capital, but also to create density in the Canadian ecosystem of investment and make the country more attractive to investors. For example, one provincial Crown agency has provided $500 million to invest in innovative funds for B.C. businesses with high-growth potential. The investment ecosystem here has also matured, with a generation of successful founders who are giving back by providing mentorship, partnership and investment relationships, making Canada an attractive place to start and grow a tech company—perhaps even the next unicorn.

Key strategies to scaling up include:

• Having enough capital to withstand economic downturns and business changes.
• Treating your customers like partners and growing alongside them.
• Looking beyond your immediate talent pool and hiring internationally.
• Understanding your market and operating in optimal market conditions.

Some say unicorns don’t exist. But we know better, so does B.C.—and we’re betting so do you. But if you need help believing, give us a call.

KPMG is looking to bring a rich ecosystem of new ideas and fresh solutions to corporate clients. KPMG Ignition Vancouver is an innovation and digital hub designed to drive the end-to-end innovation lifecycle, using exponential technologies, human-centred thinking and business model innovations to unravel core business challenges and seize opportunities in an era of rapid and disruptive change.