- As an entrepreneur, if your business is growing, you have to be prepared to learn new skills, collaborate, delegate and manage people.
- Entrepreneurs need to have a mindset where they are comfortable with risk, are confident in their judgement, and are optimistic but pragmatic.
- Future entrepreneurs should take courses in accounting because financial statements show what a company actually consists of.
The federal government would do well to increase the number of entrepreneurship programs in Canadian schools. Young Canadians should be aware that entrepreneurship is a potential path for them and providing the extra support through education programs would eventually bolster our entrepreneurship ecosystem.
What are the strengths and weaknesses of Canada’s entrepreneurship system?
When I sit back and look at what we have in Canada, I believe the Toronto scene is actually very robust and it is continuing to get better. We have an ecosystem that is much deeper and broader than what we had when I started Xello with my friends. That is a big change.
One of the most remarkable things that has happened is that we have a technology company that is now the most valuable company in Canada: Shopify has surpassed RBC. I do not think many people would have expected that in our lifetime—it is quite amazing.
“Entrepreneurial-minded people come to our country to better themselves and for increased opportunity. That is really incredible.”
In Toronto, we are blessed with an amazing talent pipeline. Our community college and university systems turn out a ton of graduates. There is a real hidden advantage there in that people want to immigrate to North America to improve their quality of life and for increased opportunity, and a great many of them are unable to immigrate to the United States because of their tight immigration requirements, so they end up coming to Canada. That then brings Canada a tremendous resource of talent that is really behind the growth of our cities and major metropolitan areas like Montreal, Toronto and Vancouver. Entrepreneurial-minded people come to our country to better themselves and for increased opportunity. That is really incredible.
From my own experience watching technology companies in Canada, I was often frustrated by what I saw as selling too soon. Very talented, amazing ideas never really reached their full potential. Today, we have companies specifically focused on filling that gap. The Canadian Business Growth Fund, which has invested in Xello, is a perfect example of a problem that has actually been addressed. If you look at the results, there have been a tremendous number of success stories, and it feels to me that there is momentum there to keep growing, so I am very positive.
What are the challenges that Canadian entrepreneurs face today?
We cannot underestimate the impact of COVID-19 on entrepreneurs. It is a time of uncertainty, and a time frankly where resources are going to be limited because we are feeling the economic effects that will make it tougher for entrepreneurs. Of course, there will also be opportunities in a situation like this, but overall if you look at the market, it is going to be tough because people will be more conservative and less interested in trying something new because they feel more concerned. In the short-term, I do think that COVID-19 will have an impact and those thinking about entrepreneurism will need to take that into account.
The other thing that has really changed in my mind, and it is not limited to entrepreneurs but extends to business in general, is the need to deal with constant change. When I started my business and wanted to be an entrepreneur, part of my idea was that I was willing to work incredibly hard and what I saw as the benefit of starting my own business was that after a certain point you can sit back and relax. About five years ago, I realized that was never going to happen. There is always going to be another challenge, and I might wake up tomorrow with a new competitor that blows us out of the water, so I have to be prepared for that eventuality.
Eventually, I came to terms with that and now I view it as a good thing because now I embrace change. I look forward to change because it is an opportunity for growth. If things were not changing, I would feel I am stagnating. But as an entrepreneur, you have to be prepared to deal with constant change because you are not as sheltered as a big corporation from the things that are moving around you—you are living on the edge.
“There is always going to be another challenge, and I might wake up tomorrow with a new competitor that blows us out of the water, so I have to be prepared for that eventuality.”
If you are lucky enough to see your business grow, you have to be prepared to change yourself; to adapt and learn new skills. The things that brought you success early on are not going to be the things that will lead to continued growth. If you were good at being a solopreneur and making things happen on your own, now you will have to learn how to work with a group of people successfully, to collaborate, delegate and manage people. That is very different from doing.
What must be done and by whom to address the challenges entrepreneurs face?
When I think about our economy—government, business, academia and all of these stakeholders—I actually think from the perspective of setting the stage for entrepreneurs, and in that area, the government is actually doing a very good job. Some of that comes from the perspective that when I started by companies—either a window washing business or Xello—I never thought about what the government could do for me, what was or was not in place to start my business. That was not even in my mind. What was in my mind is, “No one is going to help you, no matter what. You need to find something where when everything goes wrong, you still have a chance.” That is the perspective that I came from.
That being said, Xello has benefited enormously from government programs like the Scientific Research and Experimental Development (SR&ED) tax credit. There is also one in Ontario called the Ontario Interactive Digital Media Tax Credit which has been hugely beneficial. We just finished a program with the National Research Council of Canada Industrial Research Assistance Program (NRC IRAP), and there is no doubt that Xello would not be where it is today without these programs. That is why I believe the government is actually doing a really good job. I have a fair amount of trust and faith that the government is going to be very supportive.
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How has the government’s response been in terms of supporting entrepreneurs through COVID-19?
When COVID-19 hit, a lot of that money we were expecting to come in was building up as accounts receivable—no one was paying us. And other companies were probably experiencing this as well, but we were very quickly in a cash crunch. What we were able to tap into was the Canada Emergency Wage Subsidy (CEWS) program, which we qualified for on the basis that we were not able to collect accounts receivable. Another program that supported us was one where we were able to defer our employer health tax portion. We took advantage of both of those programs and that allowed us to get over the hump, and then customers started to pay us again. The programs were designed to absorb the shock so that things do not collapse, and for Xello it worked really well.
What is in an entrepreneur’s DNA and how much of it can be learned?
There is this great cartoon of these two twins who have shown up at a patent submission office on the exact same day with the exact same invention, and below it says, “separated at birth.” Was it DNA or is there something else at work? Even when we are thinking about how we prepare kids for the future—how much is nature and how much is nurture?
“You have to have some confidence in your judgement and be optimistic but pragmatic.”
What we do know about entrepreneurs is that there are certain characteristics which you have to have. You have to be comfortable with risk, that much we know. You have to be comfortable making decisions with limited information. And you have to have some confidence in your judgement and be optimistic but pragmatic. These are things that I think are shared traits among entrepreneurs. It is a way of seeing the world; you see possibilities, sometimes to your detriment, and you are overoptimistic. But it is a mindset.
What advice would you give to your past self or someone starting a business today?
The choice of the business that you start, whatever industry that is in, is probably the most important decision you make.
Often, in technology, they ask: what would you rather have? An amazing team of designers, developers, engineers, or research experts focused on an industry where there is not as much growth, or a terrible group that does not have a lot of skill but is in the right industry? You want to go with the second option. What you choose for your business is really important, and so where I spent a lot of my time was trying to understand what makes a successful business and trying to create in my own mind what I am looking for in starting a new business.
I always advise people to read as much as possible. I started early on, in Grade 9, reading the Globe and Mail’s Report on Business, just out of interest and to learn. From there I went on to reading stories; biographies about the Reichmanns, the Rockefellers, the Warburgs, and the Morgans. Barbarians at the Gate is a great book about leveraged buyouts. I just found that interesting, and from that I was able to understand the characteristics of a successful business.
For me, the biggest thing that came out of it was that I wanted by business to be based around a product, so that I am not necessarily selling my time. It needed to be something that can be replicated at scale—that was one of the big things I was looking for. Everyone will have different things that appeal to them and their own model in mind, so you have to spend a lot of time thinking about the gotchas.
“For me, the biggest thing that came out of it was that I wanted by business to be based around a product, so that I am not necessarily selling my time.”
The other two are a little bit more straightforward. My suggestion would be to take some accounting courses so that you really understand financial statements. Financial statements are books by which you can read a company and understand what is really going on, because without accounting skills you will have people who are very strong in many different areas, but their businesses fail because of cash flow management or because they are not sure how the tax filings work, they fall behind on tax filings and get penalties, and then it all adds up and it is too late. Taking some accounting courses is really important.
Finally, in my case, it was really important to start a business where we could bootstrap that business and where we did not need capital upfront. It is hard to do that, but I do not know in technology today if you could start a technology business that way. I could see that being a bit of a challenge.
If you had 30 seconds to pitch anyone in a position of power, who would you pitch and what would you say to them to strengthen the entrepreneurship ecosystem in Canada?
I do feel that Canada has a great ecosystem and a lot of success stores, but we really need to challenge Canadians to overcome some of their risk aversion. Canadians are more risk averse than Americans on average, so we need to help and encourage Canadians to understand that entrepreneurship is not a scary thing. We need to break it down and make it something that they are more familiar with, and, where possible, teach them some skills like accounting so that it becomes less daunting. In a way, government can help provide that permission that entrepreneurship is something that you can consider. That can be done, and in some ways, it is being done already. DECA is an organization that does great work in some schools with entrepreneurship programs. Junior Achievement is another great one—but we could probably do with more. That would be tremendous, and that could be done through talking to the Prime Minister or the Minister of Education.