Year In Review: Kathryn Lockhart On The Beauty And Challenges Startups Faced In 2022
To cap off 2022, Huddle sat down with some of the key figures in Atlantic Canada’s business community – folks representing everyone from tourism operators to energy producers to the startup world.
We asked each to reflect on the challenges, successes, and surprises that most impacted their industries and the lives of Atlantic Canadians this year.
In the latest of several conversations we will bring you before the new year, Trevor Nichols, Huddle’s editor based in Halifax, chatted with Kathryn Lockhart, the CEO of Propel.
Her answers have been edited for length and clarity.
Q: What was the most significant challenge your industry faced in 2022 and hat impact did it have?
For founders, they are transitioning through an impending recession. The market has shifted and that means that funders — they are still looking to invest their capital, they are still looking to drive to ten-ex outcomes, however, the shift is not growth at all costs. The shift is more towards revenue and a really good line of sight to profitability.
So founders need to be, now more than ever, really focused on their metrics, really focused on early customer traction, and they really needed to be very careful about their burn rate. It’s always been important for founders to be metrics-driven, but if they’re at the stage where they’re raising capital it’s critical. VCs are honing in on actual revenue within a market that they’ve validated and asking: is it repeatable and scalable? If founders haven’t gotten that locked in, then it’s been hard to close rounds. So it’s been a big shift for our founders.
Q: How does that shift manifest in the way founders are running their businesses?
I think we’re very fortunate to be in Atlantic Canada where founders have access to non-dilutive funding because they’re able to access that on many fronts, whether it’s hiring specific demographics of, you know, students or staff. They can stretch those dollars and match those dollars better in our part of the world than in some other parts of the country.
So, leaning on the non-dilutive funding support that we have here in the region is critical. And then taking it to the next level — and you really want founders to take it to the next level. If they’re looking for that aggressive growth, venture capital is often part of that equation. Not always, but to make that leap from leaning on non-dilutive up to venture capital, that has been a shift so they need to stretch those dollars and be really careful about hiring. You can’t hire too soon until you have enough traction, and hopefully customer revenue, funding those decisions.
So we’ve really seen founders leaning on non-dilutive funding, being just very, very careful about their burn rates and really making sure they have enough runway, which is easier said than done in a market where VCs have pulled back a little bit and they’re refocusing on what milestones and criteria they need to see before writing those checks.
Q: What does all this mean for the number of new startups we can expect to see in the region in 2023?
It’s really interesting. I would not say that a recession-style market prohibits new startups from taking that leap. What we’ve seen in Propel is very consistent numbers, actually increasing numbers over the past year. We served 130 founders so far in 2022. This is a record. We’ve had our biggest cohort ever; we have 24 founders kicking off and the mix of them has been fascinating.
The mix of these founders is telling us a lot: 54 percent of our companies have new Canadians amongst the founding team; 40 percent of the founders are over the age of 40; 48 percent of our founders are at least second-time founders. So we’re seeing an evolution and maturity in what’s happening and we’re seeing that our founders are upping the game.
Our new Canadians are bringing international experience, they’re bringing a global perspective, they’re bringing a lot of hustle. Our seasoned founders, so they’re second-time founders, they’re bringing experience and wisdom to the table. The bar is raising organic quite organically through the quality of the founders that we’re seeing.
The other thing that our coaches have observed is that because of the seasoned founders that we’re seeing, or the experienced individuals who are choosing to be entrepreneurship as their career, they’re solving problems that they’re incredibly knowledgeable and passionate about. So they’ve experienced things for the last 15 years themselves. So they know there’s a problem in the market and they believe they can solve it.
So we have this balance between “I’m going to step into an entrepreneurial career later in my life,” and those really keen, fresh graduates who are like “I’m going to be an entrepreneur. Let me find the problem I can solve.” So it’s a really cool balance and having that diversity within our cohorts. We’re seeing a lot of magic happening. That’s for sure.
Q: What is the coolest thing that happened in your sector in 2022?
It’s a tough one but, honestly, I would say that we got to spend time face-to-face.
We are a virtual organization, Propel, and we love the opportunity to connect as a team, so that was pretty special for us because it hadn’t been the case for a long time. After I joined the organization, I didn’t meet my team for the first 18-plus months. So, just spending that quality time with various organizations was a bit of a highlight of the year for me.
Q: How do you think your industry most impacted the lives of Atlantic Canadians this year?
What we hope to see is that more Atlantic Canadians choose entrepreneurship as their career path. There have been lots of great success stories in the industry but none of these success stories happen overnight: none of them had a perfect path forward. It is a journey and it takes hard work, no matter what the journey has been.
We have seen some of our alumni, for example, have some real breakthrough moments, whether it’s companies like Passiv or snapb2b or VidCruiter or Alongside. They all showed a lot of grit and hustle through a longer journey and are really seeing that payoff.
So what we hope is that the entrepreneurs who are hustling, who are really focused on solving customer problems, that they’re that they are demonstrating to other Atlantic Canadians that this is the way to shape our future. And the existing ones are doing just that. There’s also lots of great support for anyone who’s interested in taking the plunge either as a brand-new entrepreneur out of school or someone who’s got really interesting industry experience and is frustrated with a problem but interested in solving it. That’s what we’re seeing more and more of.
Q: What excites you the most about what’s going to happen in your industry in 2023?
I’m really excited for certain partnerships that are coming next year. At Propel, we’ve always put the founder first and there are ways for us to support their journey in a more comprehensive manner, with certain partners, locally and not locally. So we’re recognizing the full length of the founder journey and making sure that there are complementary efforts being wrapped around the founder.
We’ll be able to announce more, probably, by the end of Q1.
We are enhancing the support that we can offer to founders and really leaning on our coaching model, which is inherently that’s our DNA. Our coaches spend north of 16 hours a month with each founder. They get to know those facts; they know what keeps them up at night. So, how do we leverage those curated relationships where you’ve got a coach in your back pocket, who’s in your corner is consistent, who keeps you accountable?
What we’ve learned is that our graduates, they all tell us this and it’s fascinating, they say “I came to Propel for market development and validation but I stay for accountability.” So we’re hearing really loudly from our graduates that the relationships they build with the coaches and having that trusted guide on their journey is what they need.
Q: Is there anything else worth mentioning as you look back at the last year in the startup scene?
This is just a fun fact, but my team had a look at our zoom stats and, as a team this calendar year have had 2,259 Zoom meetings, lasting over 7,200 hours. And this doesn’t include any other invites that come from someone else on a different platform. The virtual model, and the time spent on Zoom. might really nauseate some people but it works in supporting the founder journey. And we were just blown away by some of these numbers.
The other thing that I’ll add, because it’s something that we’ve noticed as a trend within Propel, the coaches have noticed founders have become more real and vulnerable with each other.
As founders, when they’re in a peer-to-peer group meet up, they would have been very professional and transactional five years ago. But now there’s somehow a real connection and bond and vulnerability — like, there’s tears sometimes in these sessions, where they get really quite real about what they’re going through and what they’re excited about and what they’re struggling with. And that bonding, even though it’s a virtual community, is making a really big impact. It may be the influence of more seasoned founders, it may be the influence of our new Canadians, it may be the more experienced individuals, we’re not sure. But we’re liking it because we know the value in these closed private live sessions is really helping the founders through what is inherently a very challenging journey.