From Unicorn to Titan
When Tobias Lütke and Scott Lake decided to build an online store in 2004 to sell snowboarding gear, little did they know that they would change the face of e-commerce for the next generation. Fast forward 15 years, Shopify is one of the world’s biggest e-commerce platforms and the number one ranked company on the TSX30TM, a list of the top-performing companies on Toronto Stock Exchange (TSX).
As we reflect on this year’s rankings, we’ve seen a company that went public on TSX only five years ago become the largest public company in Canada. Like many entrepreneurial endeavours, Shopify started as a solution to a problem the founders had personally experienced. Its performance over the years has been driven in large part by its ability to execute on growth strategies, pivot when needed, and excel during unprecedented times. When the pandemic started, Shopify ramped up its support for local businesses, helping them get online and reach customers digitally.
Shopify has shown that it can deliver topline revenue growth and raise capital to fund vertical integration. In 2019, the company acquired Handshake, an e-commerce platform for wholesalers, Helpful.com, a video messaging service for business, and 6 River Systems, focused on fulfillment automation in retail operations. In a comparably short period of time, Shopify has joined the ranks of some of the world’s largest technology companies like Google, Amazon and IBM. What Shopify showed was that you don’t have to be in Silicon Valley to build a technology company, let alone a tech titan.
Role of Immigration in Canada’s Innovation Sector
Shopify’s success is a testament to the resilience and tenacity of entrepreneurs in Canada. It’s also a story of the role that immigrant entrepreneurs have played in elevating Canada’s presence globally. In fact, there are two Canadian companies on the TSX30 this year that were started by entrepreneurs not born in Canada. Shopify is one (Tobi Lütke was born in Germany) and the second is Cargojet, helmed by Ajay Virmani who immigrated from India.
Canada has a very inclusive tech ecosystem where diversity is appreciated. Many up-and-coming technology unicorns are led by first generation Canadians. This is very different from the brain drain that we witnessed in the early 2000s. In the last 5 to 10 years, we’ve started to see the re-emergence of a thriving innovation hub in Kitchener-Waterloo as well as in major cities like Vancouver, Montreal, Toronto and Ottawa. This in turn is creating economic prosperity.
According to data from the Government of Canada, the Information, Communication and Technology (ICT) sector in 2019 “outperformed the overall Canadian economy in output, employment and innovation growth.” It generated $210 bn in revenue, $7.5 bn in business R&D spending and employed over 650,000 people earning a salary that’s 53.7% more than the Canadian average.
Building The Next Tech Titan
As Canada attracts more tech talent, we’ve also seen a huge investor appetite in high-growth innovation companies over the years. These run the gamut from SaaS tech companies to clean technology startups that are revolutionizing the sustainable investing landscape.
There are three main reasons why Canada is the ideal launching pad for these technology companies:
Interest from private capital investors, from angels to venture capital, that want to get involved in the sector and help to fund these early stage companies.
Ease in attaining working visas and presence of ancillary businesses that can help startups attract technology talent from all over the world.
Provision of proper tax incentives to help entrepreneurs build their business, such as the SR&ED tax credit program.
We also have a unique two-tiered capital markets ecosystem in Canada which provides entrepreneurs with access to public venture capital to build their companies and scale. But beyond funding and access to talent, becoming the next titan requires one more vital ingredient: agility.
What Shopify has demonstrated is the importance of quickly pivoting and adjusting business plans to meet the needs of customers. Since the start of the pandemic, Shopify has launched new offerings and adapted current programs to help existing and new clients build and grow businesses. For example, Shopify partnered with the Government of Canada on the Go Digital Canada initiative, which provides resources and tools for brick and mortar small businesses to take their business online.
Canada has always had a natural resource focused economy, but recent years have seen a shift to knowledge-based industries. There’s a realization now of how technology can further accelerate the growth of our economy…and help us excel on the global stage.
TSX30 is a ranking of the 30 top-performing stocks on TSX based on 3-year dividend-adjusted share price performance. See the full rankings and methodology at tsx.com/tsx30.
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