Why Canadian Startup CEOs Aren’t Looking for a Quick Exit

When Wojciech Gryc co-founded data-mining analytics startup Canopy Labs, exiting the market wasn’t on his mind.

“The only time we started thinking about exit was when we were fundraising,” says Gryc, CEO of the Toronto-based company. “We had to convince investors we were worth their time and money.”

And he’s not alone. According to a PricewaterhouseCoopers survey released in early May, only 44 percent of Canadian startup CEOs are eyeing a buyout or merger as an exit strategy, down from 76 percent a year ago.

The “Report on Emerging Canadian Technology Companies: A CEO Perspective” also found that 30 percent of startup CEOs don’t have any exit plan.

“People are still thinking about the exit just not in the short-term,” says Eugene Bomba, national emerging companies leader for PwC.

According to the report, 44 percent of startup CEOs said their companies are planning to stay in the market for at least four years, while 32 percent are planning an exit within three to five years.

Bomba says this is because buyouts of companies with less than four years in the market are often “aqui-hires,” with the buyers “looking for talent, not the company.”

The PwC survey suggests that CEOs are focusing on building revenue, with an eye toward profitability, rather than focusing on the exit.

That’s certainly Gryc’s view. “Thinking about exit before you’re sustainable is getting ahead of yourself,” he says.

Like many other CEOs, he’s thinking long-term. “We want to build a big sustainable company,” he says. “We’re not going to be in this for 18 months.”

There’s another reason startups need to be thinking about revenue, says Bomba, investors like companies that are already generating results.

He says, “companies that are getting investments were getting a lot of traction before.”

And it’s not just investors who are drawn to companies with solid performance, it’s also staff.

“You can attract a great team but you need traction and revenue,” Bomba notes. “The best way to attract and retain talent is to pay talent.”

But it’s not just about money, according to Gryc. He says that because there are a lot of career options for people with the skill to launch a startup, those who do tend to be looking for a “broader meaning and purpose.”

He says that when he talks to other CEOs, “quite a few of them want to make a difference.”

“Building a big business is really hard, the hours are long and there’s a lot of risk,” Gryc says. “If you’re doing it for any reason other than passion, why would you do it?”

Image: PwC