Canadian startups staying put and looking to thrive: PwC

TORONTO—A new PricewaterhouseCoopers survey shows finding a buyer may no longer be a key exit strategy for Canadian startups.

The annual Emerging Canadian Technology Companies: A CEO Perspective report found only 44 per cent of those surveyed are looking for a merger or acquisition to exit the market, compared to 76 per cent last year.

“Emerging companies in Canada are in a good place, and the prospects for profit are high,” PwC national emerging company services leader Eugene Bomba said in a statement.

“Larger businesses are more willing to work with, and give a chance to, startup ventures, and this friendly climate is helping CEOs to truly develop their businesses while growing their revenue on home soil.”

Only 21 per cent of business leaders polled anticipate a partial sale of their company, according to PwC, while another 30 per cent have no plans to exit at all.

The survey also suggests CEOs are staying put for good reason.

PwC said 36 per cent of respondents reported having reached profitability, while another 28 per cent expect to get there within one year, and another 26 per cent within two years.

Startup CEOs are also staying close to home when it comes to seeking future revenue growth.

With Canada’s economy continuing to grow at a steady pace, nearly seven in 10 respondents said they generate most of their revenue in Canada, well ahead of the United States (23 per cent) and overseas (nine per cent).

However, even with the future looking bright for emerging companies in Canada, startup CEOs are still uncertain about today’s market.

Survey results show startup leaders cite revenue generation (41 per cent) and funding (19 per cent) as their biggest concerns, ahead of attracting and retaining talent (11 per cent).

“The outlook is positive for Canadian startups, but it is crucial that CEOs not rest on their laurels,” PwC’s national technology sector leader Chris Dulny said.

“Tech services are in high demand, and smart operational and financial decision making are the tools to bringing a company’s vision to life and seeing it thrive.”

The survey also found that, at 64 per cent, private funding from family and friends continues to be the primary source of funding for the majority of respondents, compared to 16 per cent who rely on angel investors and nine per cent who sought private venture funding.

Almost half (46 per cent) of respondents said they didn’t need to raise funds at all.

Government funding continues to be key for Canadian startup CEOs, with 50 per cent tapping into at least one government source.