I recently attended a presentation by a colleague on the state of capital investment in BCâ€™s high-tech sector. He gave a mixed review of the state of the sector. On the positive side, there are a lot of start-ups and small companies that are doing creative work; on the negative side, once they reach a certain size, the exit strategy is to sell.
There are 8,500 tech companies in BC with fewer than 50 employees and up to $10 million in revenue. To a start-up company, $10 million may seem like a lot of bucks â€“ and if you can reach that sum, it makes sense to cash in. And that, according to my colleague, is a problem we Canadians are beset with: thinking small.
There are only 50 tech companies in BC with more than 100 employees. There is only one BC-based company with revenues of more than $1 billion: Telus. On a global scale, a billion-dollar company is considered mid-sized.
On the one hand, you canâ€™t blame for someone for taking the chips off the table once youâ€™ve surpassed the $10 million threshold. And there are several companies come to mind that have done just that.
Flickr, founded in Vancouver by Caterina Fake and Stuart Butterfield, sold to Yahoo for $35 million in 2005. Robeezâ€™s Sandra Wilson sold her shoe company in 2006 for $30.5 million. And in 2007 Jack Gin sold his Extreme CCTV surveillance camera company to German giant Robert Bosch for $93 million.
Now donâ€™t get me wrong, $30 million and $93 million are big sums of money, and I would probably cash out as well. But if BC is ever to be a high-tech hub, it needs one, and preferably, a number of anchor tenants â€“ companies that are worth billions of dollars and serve as the river valleys in a healthy business ecosystem. BC also needs more capital to fund these companies.
There is one company that is worth keeping your eye on: Hootsuite. The owner of the Vancouver-based social media company, Ryan Holmes, is on record that he wants to grow it to a billion-dollar company. He has courageously declined all efforts so far to buy it out.
Hootsuite is said to have recently picked up a round of financing worth $20 million and those in the know have valued it at $200 million. Letâ€™s hope Mr. Holmes sticks to his guns. All of BC will be better for it.
Victor Chew Wong, Publisher, Make It Business magazine