Billion dollar babies: what Team True North means for Canada

On June 15, the Communitech accelerator in Kitchener, Ontario unveiled its “Team True North” initiative, to identify, promote and support Canada’s top-performing/highest-potential tech companies.

Communitech identified an initial cohort of 35 Canadian firms that it expects, based on objective data, to have the highest probability of reaching $1 billion in annual revenue by 2030.

This stretch goal was inspired by Canada’s Own the Podium program for Olympic athletes. Cathy Priestner, the Olympic speed skating medallist who was instrumental, along with her husband Todd Allinger, in creating the initial Own the Podium framework in 2004, is serving as executive advisor to Communitech’s CEO and president.

At the True Team North launch, Priestner said: “This is the approach we used to put Canada on a path to owning the Olympic podium. It’s a different environment, but the same principles apply: We need to focus on those with the highest growth potential — using data, not just opinion — and put the best coaches, money and training at their disposal, at the speed and scale they need.”

Read more: Canada Looks to Own Another Podium

Research Money thinks our readers would be interested in learning more about these top performers. Today, we’re launching a series to profile some of these firms, featuring Q&A interviews by our writing team with the companies’ CEOs/founders.

Our series kicks off with a Q&A with Chris Albinson, CEO and president of Communitech, who talks about the aim and goal of Team True North and how Communitech intends to support these companies.

Research Money invites business accelerators/incubators across Canada, as well as VC and private investors, to send us the names of tech companies they think are top performers and should be considered for a profile. We welcome any comments on our series.

What motivated Communitech to launch Team True North — what’s the purpose of the initiative?

It’s very much like “Own the Podium.” Canada has got all the fundamentals to lead innovation, much as we had [for Olympic sports] when Cathy Priestner started co-working on Own the Podium. Canada has always had a really robust engine but we haven’t got over the next hump to really dominate [innovation] globally, and we should.

We talked to 1,100 founders to really find out what was getting in the way, and that’s what informed our Team True North strategy.

Why did you choose the highest probability of reaching $1 billion in annual revenue by 2030, rather than $1 billion in valuation, as the yardstick for Canada’s top-performing tech companies?

If I gave you a dollar and said you’re worth $1 billion, in theory you’re worth $1 billion. But it’s meaningless. So if we’re really going to lead the world in innovation, we wanted to pick a level where companies are having an impact globally and really dominating their respective space.

I said we wanted to get 14 companies to $1 billion in annual revenue by 2030. We were looking at the data that we had available to us at the time and that seemed to be a realistic goal — with a little bit of a “Gulp!” when I said it out loud.

It’s pretty similar to when Cathy Priestner started Own the Podium in 2004, when people said, “What do you mean, you want to win gold medals? It’s a very un-Canadian thing to be the best in the world.”

And lo and behold, six years later — a relatively short period of time — we went from worst performance in the world to best in Vancouver [at the 2010 Olympic Winter Games]. We won 14 gold medals at in Vancouver, the most ever by this country.

Communitech launched [our True North Strategy] in September 2021. And two months ago, we announced the first cohort of 35 companies of Team True North. Those are the companies that are in the one-per-cent, highest-performing private companies in the world, based on our objective standard.

Two of those companies crossed the $1 billion in revenues last year. Faire [a Waterloo-based online wholesale marketplace] is one of them. So we’ve already got two of those gold medals in the bag before the “Olympics” even started.

What “verifiable data,” as Communitech described it, did you use in choosing the Team Truth North companies?

We actually had 20 years of global data and worked with a firm, Two Sigma out of New York, to set the global standard. We took that same global standard and applied it to the Canadian dataset of 10,000 companies. And that’s how we identified [a total of] 186 companies that are in the highest-performing, one-per-cent globally that happened to be Canadian.

[The metric] is not only revenue at a certain level of scale, but the scale corresponds to a certain level of growth. The gross margin [of revenue] is also high, and also the capital efficiency of that growth. We’re basically [identifying] companies that have phenomenal product market fit where the market is almost pulling them, the product is so good.

How did you arrive at 35 companies as the first cohort of Team True North?

In cohort 1, those 35 companies did a combination of $5 billion in revenue between them, $141 million on average with 150-per-cent growth.

When you’re growing that fast at scale — and only one per cent of companies [globally] have that reality — what we learned is that so few people are going through that experience. But the knowledge to help each other is actually best by curating and connecting them together.

So by having groups of 35, that actually binds them together as a group. And then they can learn from each other and build up a relationship. Cohort 1 has been announced, cohort 2 is going to be announced on October 13.

What are Communitech’s strategies to support the Team True North companies?

The first strategy is just saying that these are the best companies in the world. It allows them to share that with their teams, so their teams feel motivated and excited about what they’re building. It actually inspires all of them and everyone else to go bigger.

It’s kind of like what Cathy Priestner did with announcing Team Canada and having high-performance training centres. Just like Own the Podium, it’s important that Canadians know about it. It inspires the whole next generation of [company] founders to also build big.

The No. 1 issue for these companies is talent. So we’re using Team True North as a way to attract talent into these companies, to celebrate them and to support and grow their talent: “Go work and build in Canada.”

Another strategy we’re using is what we call integrated markets. It’s basically a very overt “Buy Canadian” push. We’re really pleased to have the confidence of the federal government and $30 million in the last budget to operationalize that. We’ve already converted over $200 million of procurement to these companies, and we want to scale that up to about $1 billion a year, to solve Canadian problems with Canadian innovation.

Our fourth strategy is on the capital side. On the good news front, there was $17.2 billion invested in Canadian [tech innovation] ecosystems in the last 12 months. That’s up 400 percent.

But it’s concerning from our point of view that 74 per cent of that was U.S.-domiciled capital. In effect, we sold 74 per cent of the shares of our best companies to the Americans. So if all the work that’s been done to build up the [Canadian] ecosystem just disappears, because once the companies exit that money flows back to the U.S., that’s a problem.

We need to get our pensions [funds] investing another $4 billion to $6 billion a year at home. For example, eSentire’s funding earlier this year — $330 million financing of an Ontario-based cybersecurity company — a quarter million dollars of that came from [Quebec pension fund] Caisse de dépôt.

We basically find the best companies and we bring them to our large pensions and say, “Look, on a risk-adjusted basis, these are better companies [providing] better returns than anything else you could be doing.”

The last piece we talk about is good AI, or tech for good. We think Canada stands alone as essentially having two things. One is a global brand that is trust, in a world where technology is not trusted. And the second thing is a core competency in artificial intelligence and machine learning, at commercial scale and acceleration.

If you look at those Team True North companies, for 60 per cent of them their core technology is AI and ML. So if we can connect these things, Canada can be the place where trust is built right into technology. We think that accelerates the flywheel of Canada being globally competent, not only from a research point of view in AI and ML, but in commercializing that technology.

We want to have a Canadian standard, which we call “good AI,” that all of these companies implement. We have a partnership with Ernst & Young to verify that companies have met the standard. And then when they go out internationally, they can say “You trust Canada. You can also trust the good AI standard that Canada built.”

The first cohort of Team True North is fairly heavy with Ontario-based firms (22 of the 35 companies). Why is that?

That’s just where we’re seeing the commercialization success. We use an objective standard and let the chips lie. [The Toronto-Waterloo region innovation corridor is the second-largest and fastest-growing in the world].

But we had some really pleasant surprises, like BioVectra, a company from Charlottetown, P.E.I., and a great critical mass of companies in Vancouver. We’re seeing really great companies that are in the one-per-cent highest-performing companies globally, literally from coast to coast.

We’ve seen many scaling Canadian companies reach a certain stage, only to be bought by foreign multinationals. What is Communitech doing to help ensure the Team True North companies don’t meet the same fate?

Three things. Basically saying that aspiring to build big, global, sustainable, stand-alone companies, like Shopify, that’s the goal. When we’re onboarding Team True North founders, that’s where they want to go.

Second thing I’m very concerned about is that 74 per cent of the capital coming into these companies is coming from the U.S. That’s really on our pensions [funds] to fix. It’s not like they’re not investing the money — they are. They’re just not investing it at home.

The third thing is to have some systemic benefits of being Canadian. As Canadian companies, we’re actually globally advantaged on talent. But we’re disadvantaged on revenue, on the integrated markets. We’re disadvantaged on capital. And we’re disadvantaged on marketing our global brand.

We need to rebalance both revenue and the capital flows so these companies stay Canadian. They’re fighting upstream, and I want to see if we can make it a little bit less of an upstream fight.

One [way of doing that] is by talking about Team True North very explicitly and saying: “Look, there’s a critical mass of high-performing companies in Canada today, based on an objective global standard.” And making it easy for [pension funds] to invest.

For the last seven years, Canadian venture returns are better than the United States, for the first time ever. We’ve got to move the flow into these Canadian companies, because they’re less risky and have better returns.

Caisse de dépôt has the best returns by far of all the Canadian pensions, by investing in Canada. They’re doing an awesome job for their pensioners. The returns are great and it’s great for the country.

How many of these companies do you think will still be in Canada/be Canadian-owned once they reach $1 billion in annual revenue?

If we can fix the funding flow, 100 per cent of them. There are actually a lot of reasons for them to stay Canadian and Canadian-controlled. And Shopify is the great example of why that’s a beneficial thing for a company at scale.

What sort of reaction have you got to the Team True North initiative from the participants in Canada’s innovation ecosystem?

From the [company] founders, it’s almost the exact same reaction that Cathy Priestner had when she launched Own the Podium. The “athletes” are saying: “We want to compete in the Olympics to be the best in the world. That’s the reason to do it.”

By and large, I think coming out of the pandemic and everything we went through collectively, there’s a sense of: If we’re going to have the quality of life that we want long term, we’re going to need a high-performing innovation sector that can stand on its own.

We need density of awesome innovation companies. Look what we went through when BlackBerry went down. That 2008 winter, when we lost Nortel and BlackBerry went down, we just don’t want to go through that again.

This interview has been condensed and edited for clarity.

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