Q&A: Hockeystick founder Raymond Luk on fostering scaleup ecosystems in Canada

A new annual international conference on scaleup ecosystems will convene leading thinkers and practitioners in Waterloo, ON, to make connections, debate strategies and share data, says conference organizer and venture capitalist Raymond Luk.

The inaugural DRIVE conference, to be held February 20-22, is presented by Toronto-based Hockeystick and Wilfred Laurier University’s Lazaridis Institute for the Management of Technology Enterprises. “DRIVE is bringing together policy-makers, researchers, accelerators and successful tech CEOs from around the globe to compare best practices and highlight bold ideas,” explains Luk, founder and CEO of Hockeystick, a data analytics company serving founders and venture capitalists.

RE$EARCH MONEY is a media partner with the DRIVE conference. We spoke with Luk on the phone to discuss the challenges and opportunities facing Canada's scaleup ecosystems, and what he hopes DRIVE can contribute to innovation and entrepreneurship around the world.

RE$EARCH MONEY: In Canada, there’s a growing consensus that innovation programs and ecosystems need to shift their focus from startups to scaleups. What has precipitated this change in emphasis?

Raymond Luk: To start, I think that you need both: If you don't have startups, by definition you won't have scaleups. But in Canada, it's partly a good news story. The reason the shift is happening here is that we've never had more innovative companies reach the stage where they are truly scaling.

There’s also a shift of focus that we don't want to just invest in research and the creation of IP, and then expect the rest to take care of itself. If we don't also invest in commercialization, export, and all the things that fit under the umbrella of scaling, we will have companies that are only Canadian for a short period of time before they get bought. Or we'll just be out-competed by places that might not have as many strengths as Canada does, but are better at commercialization.

I think the scaleup discussion now also partly stems from the fact that people are finally willing to say, Let's not be afraid to bet on the winners. In the startup world, you don't have to worry about that issue because it's "the more, the better": more jobs, more entrepreneurs, more IP — that’s great. But when it comes to commercialization, you don't want to invest in the mediocre companies, because then you're not going to be investing in the companies that are truly taking off and becoming those unicorns. Even in the federal government, there's more acceptance that if a company is really taking off, let's get behind it.

R$: So do you think the Canadian government should be in the business of "picking winners"?

RL: When I talk about picking winners, I’m talking about supporting winners. The government doesn't need to decide if Hockeystick is a good company, but Hockeystick can prove that it is scaling and that it has commercial success. Then it's about how can the government support and accelerate — in their own way — Hockeystick's growth. I'm seeing more and more government programs that are willing to say, Hey, since these people are already showing great progress, what can we do to get out of the way so that there's less red tape?

R$: Speaking of red tape, what do you think are the biggest barriers to creating homegrown scaleups in Canada?

RL: The big challenge for Canada companies, unlike American companies, is that we live in a market where the company that may acquire us or be a strategic partner for us, they're most likely not Canadian. Not being where your upstream partner or acquirer is, it's always a disadvantage. Capital is also a challenge, though it's a lot less of a challenge now than it used to be. I'm really happy with the state of capital, but there are markets where there's a lot more capital. And then population. Even though we've got world-beating talent and some of the top entrepreneurs and engineers in the world, we are a small country and that's not going to change either. Those are issues that Canadians have always dealt with. It's probably contributed to our entrepreneurial successes. We see ourselves as not in the center of the universe. There's ways that makes us better.

But I don't really see a ton of obstacles, frankly, in terms of red tape. Sure, when you apply for funding and grants, there are a lot of hoops to jump through and a lot of things that could be better or more standardized. On the other hand, if you want a million dollars from anybody, you're going to have to do a lot of work. It could be better, absolutely. But I don’t expect to hit a button and get a million dollars.

R$: Some Canadian CEOs describe a drop-off in government support after their companies reach the scaling stage. Have you observed a failure to support companies once they start to achieve substantial growth?

RL: No. I don't see that at all. Compared to 10 years ago, it's never been better. There's never been more late-stage funding. I think that's one of the reasons we're running this conference. This is a phenomenon that's happening. We want to talk about it, we want to study it and we want to learn. Just because it's better than it was 10 years ago, doesn't mean that it's not 10 times better in another country.

I think that the scaleup stage is maybe the last stage where it makes economic sense to throw our support behind those companies. The stage beyond scaleup is when they're truly a global-size company. I believe part of the company's job then is to turn around and give back. I don't see that the company is owed anything by anyone. At a certain point, they need to turn around and say thank you for all your support, and what can we give back to the community, the society, and to the economy? I think the larger tech success stories are certainly doing that.

R$: What would motivate a successful Canadian startup to refuse the big exit and avoid selling to a large foreign company, and instead persist in becoming a domestic scaleup?

RL: I think it's unfair to say that the entrepreneurs who have given their lives to their company — and the investors who have risked their capital — have some moral obligation to remain Canadian. I don't believe in that. If we want people to build great companies here, we need to create the incentives for them to do that. If a company gets an offer from any foreign company, they can always get an offer from a Canadian company as well. I think it's important that we're not creating some kind of additional pressure on people.

The answer for me is not to judge the companies that decide to sell to a foreign company; it's that we need to create more companies. Some, like Shopify, will go public and then be a big domestic company. Others won't. Success breeds success. If we keep focusing on building better companies, it's going to work itself out.

R$: What role can the DRIVE conference play in improving circumstances for Canadian scaleups?

RL: The overall mission for DRIVE is to really move the needle on how scaleup ecosystems are built all around the world, not just in Canada. It’s not something where people come, hear a speaker and then leave. We want them to leave with new frameworks, new research, new ideas, new connections — something that they can take back to wherever they're building and accelerate the growth of whatever ecosystem they're working on. At the end of the conference, we will be publishing our own research by our speakers, recordings of a lot of our sessions, and data.

We really want DRIVE to be something that's known globally as the world's best conference on scaleup ecosystems, and the one that's had the biggest effect globally on building entrepreneurship and building innovation. We might not achieve all of that in the first year. But that's our big hairy audacious goal for DRIVE.

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