Scaling-up in New Brunswick
In business, once you start up, you need to scale up.
Creating a company that makes a profit in the first place is hard enough, but to make that success continue, most companies need to have bigger ambitions. Those five employees need to grow to 50, then 500, then more.
Some think that being based in the Maritimes makes that harder, if not impossible.
But Dave Grebenc doesn’t think so, and he might know. He’s done it himself.
When he and his co-CEO Roxanne Fairweather purchased Saint John-based Innovatia from Bell Aliant in 2009, the company had 220 employees and was not in the best shape.
“We bought it and our largest client, over 90 per cent of our revenue, was associated with Nortel,” Grebenc says. “Nortel was in bankruptcy . . . so things weren’t looking that rosy.”
Just over six years later, Innovatia is at 600 employees with a diverse client base in the IT, finance, industrial and energy sectors.
“We’ve come a long way,” he says.
Grebenc and Fairweather aren’t the only ones in the province to scale in a short amount of time. The stories of Radian6 and Q1 Labs are the go-to examples of New Brunswick success. In 2011, Radian6 was acquired by Salesforce for $326 million and Q1 Labs was bought by IBM that same year, for an undisclosed but thought to be highly lucrative amount.
But that was in 2011. What has New Brunswick done lately? Aren’t we due for another big deal?
Grebenc says yes – eventually.
“I think we got some cool companies that have come up here that have a lot of opportunity in front of them,” he says.
He cites companies such a Resson, Swept and Gemba (which is owned by Innovatia) as very promising prospects.
“These companies have huge potential and there’s little doubt in my mind that you’ll see some very good successes here,” Grebenc says. “You can’t expect the Radian6 or a Q1 Labs every year. You got to look at that over a span of 10 years . . . it’s a step process and I think we’re really taking the right steps along all of that for sure.”
Anita Punamiya, the CEO of Atlantic Canada startup accelerator Propel ICT, shares this view. She says massive acquisitions don’t happen over night, they take a few years. She says if New Brunswick sees just one or two in the next five to ten years, that would be a success.
“There are multiple factors that create what’s known as the ‘unicorns,'” Punamiya says. “If you look at it as funnel, there will always be many players coming into the funnel and they’re lesser and lesser in the final tip of the funnel. It will always narrow down. You cannot have everybody becoming a billion dollar company.”
But it’s not just time that’s needed for a significant scale-up. Punamiya says one of the biggest growth challenges companies face is getting out of the region.
“The market they need may not necessarily be big enough in the region. So by necessity, you have to go outside [the region],” she says. “You can’t be limited by region, so once you know you have to do that you’re also competing with all the others that are playing in the bigger space.”
And that has a whole other set of challenges.
“How do you validate your idea and how it plays in the larger space? Is there a large enough market? How do you stand against the competitors? What’s your unique advantage? Exploring and exposing them to those outside markets also helps them with what changes they need to make to their business plan . . . or perhaps forging partnerships with others in the space,” says Punamiya.
Grebenc, who is also the chair of Propel ICT, says another thing that can be holding many companies back is lack of proper sales experience.
“[With] business development, there’s an art and there’s a science and even just to do business development locally is a challenge. You have to be able to clearly articulate that value proposition. You need to be able to build that relationship and you need to be able to close,” he says. “Doing that in a different culture, in geography quite far is just multiplied significantly in terms of complexity. That is for sure a skills set that we are lacking.”
Propel ICT plans to help companies with some of these challenges with its new Growth program. The program is still in the planning stages.
“It’s aimed at companies who are scaling and we want to help to grow faster and scale faster. So assist their trajectory towards higher revenues than they may currently be at,” Punamiya says.
Propel is currently consulting with their network of mentors, stakeholders and alumni to see exactly what the program will need. One of those things is flexibility.
“Because it shouldn’t be what we think they need, but what they actually need,” Punamiya says. “So we can tailor and customize what we offer that will help the most promising companies to expand beyond the Atlantic Canadian region.”
Though such programs will be valuable in helping companies in the region grow, Grebenc says bigger challenges facing Atlantic Canada need to be addressed in order to see economic growth and change that lasts.
“This is about changing our culture. This is about changing our climate here and taking it to a new level, to a new economy. I think startups are a key element of that . . . that becomes a nucleus that can really snowball . . . If you have 5,000 or 10,000 people that are thinking about creating businesses and solving challenges in an economy the size of Atlantic Canada, that really makes a big change,” he says.
“That’s what this is all about, changing the economy, creating that next significant entity for Atlantic Canada that can be an anchor to drive this long term and change that underlying dynamic of who we are and how we are from an innovation and growth perspective.”