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

  • World financial markets higher after French centrist Macron comes out on top

    Economic CBC News
    European stock markets and the euro ratcheted higher Monday, particularly in France, after the first round of the country's presidential election saw centrist Emmanuel Macron emerge on top — stoking hopes that he will defeat far-right Marine Le Pen in the run-off in two weeks' time. Source
  • Canada House gives London, England a taste of Tim Hortons

    Economic CTV News
    Canada’s high commissioner to the U.K. is encouraging expats to “bring a Brit” to London’s Trafalgar Square on Canada Day for a uniquely Canadian experience -- Tim Hortons coffee and doughnuts. Janice Charette treated guests at Canada House to a generous spread of double-doubles, Timbits, and other treats for the announcement on Monday, explaining just how pervasive the so-called “Timmie’s addiction” is in Canada. Source
  • Home Capital benches two key players facing Ontario watchdog's allegations

    Economic CTV News
    TORONTO -- Home Capital Group (TSX:HCG) is benching two of the key figures at the centre of allegations filed against the mortgage lender last week by Ontario's securities watchdog. The Toronto-based company says its current chief financial officer, Robert Morton, will be assigned new responsibilities after first-quarter results are filed next month. Source
  • Taxpayers getting a 'nudge' from Canada Revenue Agency

    Economic CBC News
    When Kim Brooks opened her notice of assessment from the Canada Revenue Agency, she was surprised to see a seemingly random factoid printed in bold letters at the top of the page. "Only one out of 10 individuals who owe tax do not pay on time," said the document. Source
  • Pattie Lovett-Reid: Engage in these 6 habits of the wealthy

    Economic CTV News
    Many years ago, I had the opportunity to speak to 26 Canadian women from all walks of life and asked them to share their stories on achieving authentic success. It's interesting to note that authentic success wasn't all about the money. Source
  • Jimmy Choo is on the market

    Economic CBC News
    A Jimmy Choo shoe is seen in a shop in downtown Rome in March 2016 file photo. (Max Rossi/Reuters) British luxury retailer Jimmy Choo is seeking offers for the company as part of a review of its strategic options to maximize shareholder value, it said on Monday. Source
  • Asian stocks mixed as investors examine French election outcome

    Economic CTV News
    TOKYO -- Asian stocks were mixed Monday as investors weighed the results of the first round of the French presidential election. KEEPING SCORE: Japan's benchmark Nikkei 225 rose 1.3 per cent in morning trading to 18,870.24. Source
  • French election result gives markets a start-of-week lift

    Economic CTV News
    LONDON -- European stock markets and the euro ratcheted higher Monday, particularly in France, after the first round of the country's presidential election saw centrist Emmanuel Macron emerge on top -- stoking hopes that he will defeat far-right Marine Le Pen in the run-off in two weeks' time. Source
  • Oregon teens sells $1 million in custom socks

    Economic CTV News
    SHERWOOD, Ore. -- Seventeen-year-old Oregon resident Brennan Agranoff spends his days going to school, doing chores and running his custom-design sock business. It's no simple hobby: Agranoff is the founder and CEO of HoopSwagg, and he has already sold $1 million in custom socks. Source
  • Oregon teen sells $1 million in custom socks

    Economic CTV News
    SHERWOOD, Ore. -- Seventeen-year-old Oregon resident Brennan Agranoff spends his days going to school, doing chores and running his custom-design sock business. It's no simple hobby: Agranoff is the founder and CEO of HoopSwagg, and he has already sold $1 million in custom socks. Source