Monday, March 19, 2018

Measuring Canada's Ability to Scale Small Businesses into Large Corporations

         By Chuck Black

As covered many times in this blog, our largest space and aerospace companies tend to go bankrupt and get picked over by others (Toronto, ON based Avro Canada and Brampton, ON based Spar Aerospace, for example), or reincorporate as US based firms in order to take advantage of the American market (Richmond, BC based MacDonald Dettwiler and Associates) or they get purchased by large, American based corporations (Cambridge, ON based COM DEV International).

The front cover of the March 2018 Impact Report on "Measuring Canada's Scaleup Potential" along with an estimate of companies per one million population in Canada, the US, the UK, Germany and France. Canada's ability to to create companies is average when compared to the other countries on the list. Graphic c/o Impact Group.

They don't generally stay operational or remain Canadian. This is usually perceived as not being a good thing, but the situation persists and not just in aerospace (remember Nortel? Or Research in Motion?).

For example, as noted in the March 19th, 2018 More Commercial Space News post, "UrtheCast will now report Q4 2017 results & host the 2017 year-end investor conference call on April 2nd, 2018," Vancouver, BC Urthecast is currently in the midst of a fiscal crisis caused by the inability to close previously announced financing for its UrtheDaily™ Constellation. The extent of this current crisis might not become clear for another two weeks since the firm has postponed it's most recent public investor conference call until then.

Ottawa, ON based Telesat Canada could also be preparing for a crisis of it's own. As outlined in the March 16th, 2018 post, "Loral warns of possible Telesat legal battle, Xtar restructuring," the New York, NY based Loral Space & Communications (which holds the majority of Telesat shares) is planning to move ahead with a "strategic transaction" involving Telesat, which could spark a legal battle with Telesat's only other shareholder, the Montreal, PQ based Public Sector Pension Investment Board (which owns more of the valuable voting shares).

So what's the problem? According to Charles Plant, the senior fellow with the Toronto, ON based Impact Centre at the University of Toronto, Canada might just be good at starting companies, but not growing them.

A quick reminder that Canada has been obsessing over research and development initiatives for a very long time. As outlined in the April 7th, 1967 Globe and Mail post, "Ottawa hopes to spur research and development through five programs," Canadian industry was "being wooed into research and development as never before," over fifty years ago and not a lot has changed since then. Original graphic c/o Globe and Mail.

As outlined in the March 19th, 2018 Impact Centre post, "Measuring Canada’s Scaleup Potential," Plant and his colleagues at the Impact Centre have put together a useful, eighteen page study, under the same title, which attempts to measure Canada’s startup and scaleup rate and compare that to other countries around the world.

According to the Impact Centre, "there seems to be a shift away from focusing on startups to focusing on those companies in Canada that are scaling. This appears to have been predicated on the premise that Canada has become good at starting companies but is challenged at scaling them to world-class size. "

The report looked at how Canada stacked up against other major regions in the world, such as the US, the UK, France and Germany. It concluded that:
We have a higher startup rate than Germany and France but trail the UK on the same metric. 
We lead all European jurisdictions in terms of scaling rates. 
We report a rate of startup and scaleup that is dramatically lower than the US and, in particular, Massachusetts, California and New York. 
We have lower rates of both startup and scaleup than Pennsylvania, Illinois, and Georgia.

The report also identified a series of potential high growth companies capable of growing to "world class" size:
Based on additional analysis of revenue and employee growth and financing in public or private markets, we identified businesses with the potential to grow to world-class size, but only if they maintain current growth trajectories. 
In total, we identified 50 Canadian companies with over $10Mln CDN of invested capital that were growing at more than 20% a year. This represents 12% of all of the 423 Canadian companies above $10 M in capital.
The full report is available online at and its well worth taking a look at.

The executive summary, for those of us who are too lazy to read the full report, is available online at
Chuck Black.

Chuck Black is the editor of the Commercial Space blog.

No comments:

Post a Comment

Support our Patreon Page