Falling loonie could help startups seeking venture capitalists

TORONTO - Industry watchers say the tumbling loonie is a blessing in disguise when it comes to Canadian startups and the innovation economy as U.S.

See Full Article

venture capitalists look to make their investments go further.

As the resource boom that helped fuel Canadian growth over the past decade continues to go bust, Canada's commodity-sensitive currency has lost nearly 40 per cent of its value and now trades at near 13-year lows.

While that spells trouble for snowbirds looking to travel abroad and for shoppers facing higher prices on imported goods, it presents an opportunity for foreign investors, says Steve McCartney, vice-president at Communitech, a Waterloo, Ont., startup incubator.

"In terms of the dollar, Canadian companies would look like they would be an excellent value for them at this point," he said.

The cheap loonie is also an advantage for startups when they're making their pitch, he said, because many of them take in revenue in American dollars but pay operating costs in Canadian currency.

And for young companies looking to compete with established players, the low loonie allows them to compete more aggressively on price, he added.

John Somorjai, who heads the venture capital arm of Salesforce, an American cloud computing and customer management company, said his company has seen great results from its Canadian investments, including video marketer Vidyard.

And while the exchange rate is one factor, what's most important is the level of talent being produced by Canadian universities and the quality of the ideas being pursued by entrepreneurs, he said.

"We've made great investments and we'd love to do more in Canada," he said.

Somorjai said Canadian startups tend to look to the United States for growth capital when they're already doing business and looking to scale up their revenues and customer base.

American venture capitalists have helped fund some of Canada's biggest recent tech success stories, including Hootsuite, which has raised more than US$240 million; as well as Kik, which has raised US$120 million, and Shopify (TSX:SH), which raised more than US$110 million before going public last year.

Paul Salvini, who heads the Accelerator Centre in Waterloo, Ont., said $1 million is the level of funding at which most startups look to the American venture capital ecosystem.

One of the big issues for companies at that stage is getting noticed in a crowded marketplace, Salvini said.

Many venture capitalists do not range far from their home base in Silicon Valley and the area surrounding San Francisco, he said.

"The lower dollar might give them a reason to want to come and take a look," Salvini said.

Beyond attracting American investors, the loonie's fall against the greenback is a chance to focus Canadians on startups and the innovation economy and away from more cyclical industries, he added.

"We have to look at what our response is to the low dollar as the world moves towards a knowledge economy and an innovation economy," Salvini said.



Advertisements

Latest Economic News

  • BP Canada given the go-ahead to start drilling off the Nova Scotia coast

    Economic CTV News
    HALIFAX - Nova Scotia's offshore petroleum regulator has granted BP Canada Energy Group approval to begin drilling a well off the province's coast. The Aspy D-11 exploration well is the first in BP Canada's Scotian Basin Exploration Project, which could see up to seven exploration wells drilled off the southeast coast of Nova Scotia over a three year period. Source
  • Bought bitcoin in 2017? Here's how cryptocurrency is taxed in Canada

    Economic CBC News
    So, you read all the headlines in 2017 about the millions of dollars to be made in cryptocurrencies like bitcoin and ethereum, and you took the investment plunge. Maybe you made big money, maybe just a few thousand dollars. Source
  • Tesla's troubles are piling up — but the Elon Musk cult is still full of true believers

    Economic CBC News
    Tesla is beset by production problems and swimming in debt, its bonds are considered junk status, its stock has more people betting against it than any other major company. There are real concerns it won't be able to raise enough cash to keep going. Source
  • Oil surges toward $70 and stirs dreams of $100

    Economic CBC News
    Three years after the devastating oil price crash, optimism is back in the industry as prices are surging toward $70 US per barrel, and thoughts of $100 return. The rosy outlook is a far cry from early 2016, when prices dropped below $30 US per barrel. Source
  • Oilpatch skeptical about Plan B for Trans Mountain

    Economic CBC News
    The federal government may have a Plan B, if Kinder Morgan pulls the plug on the Trans Mountain pipeline. But the energy sector is still waiting on Plan A to be unveiled. Ottawa believes another proponent could step forward if Kinder Morgan bails on Trans MountainOn a conference call with analysts, Kinder Morgan's chief executive Steve Kean said that there were no signs that the political roadblocks were going to be removed. Source
  • Oilpatch skeptical about backup plan for Trans Mountain

    Economic CBC News
    The federal government may have a Plan B, if Kinder Morgan pulls the plug on the Trans Mountain pipeline. But the energy sector is still waiting on Plan A to be unveiled. Ottawa believes another proponent could step forward if Kinder Morgan bails on Trans MountainOn a conference call with analysts, Kinder Morgan's chief executive Steve Kean said that there were no signs that the political roadblocks were going to be removed. Source
  • Marijuana sector firms get marketing pushback as legalization looms

    Economic CTV News
    TORONTO -- Some Canadian marijuana sector companies are getting pushback against their marketing efforts from social media platforms and government officials as legalization of recreational pot looms and regulations are not yet final. Lift & Co, which hosts industry events and offers cannabis education, has had its YouTube account suspended and Facebook ad account deactivated, with both companies citing a policy violation. Source
  • Southwest offers apology, travel voucher and cash to passengers on damaged jet

    Economic CTV News
    PHILADELPHIA -- Southwest is sending a letter of apology, a $5,000 check and a $1,000 travel voucher to passengers who were on a flight that made an emergency landing in Philadelphia following an engine explosion. Source
  • FAA orders more engine inspections after Southwest accident

    Economic CTV News
    The U.S. Federal Aviation Administration on Friday ordered ultrasound inspections of hundreds of jet engines like the one that blew apart at 32,000 feet in a deadly accident aboard a Southwest Airlines plane. The agency said the directive affects 352 engines on new-generation Boeing 737s, a twin-engine jet that is a workhorse of the aviation industry, used by airlines around the world. Source
  • Metis, Manitoba agree to 2-week 'reset' before heading to court in hydro spat

    Economic CTV News
    WINNIPEG - The Manitoba Metis Federation and the province have agreed to a two-week "reset" to avoid meeting in court over planned hydro projects. Metis federation president David Chartrand and Crown Services Minister Cliff Cullen had a private meeting to discuss a deal between the federation and Manitoba Hydro. Source