Most of Canada's Fastest-growing Tech Companies are Business-to-Business. Here's Why

Posted by Jacob Serebrin
 
Most of Canada’s fastest growing tech companies have something in common: they’re selling to businesses rather than consumers.

Out of the over 125 software, IT and web-focused firms on Profit Magazine’s list of the 500 fastest-growing companies in Canada, released in early June, only nine are consumer-facing.

Only two of those managed to crack the top 30—Electronic Box, a Longueuil Que. based Internet service provider, at number 28, and Ashley Madison, the online dating service for people who are already in relationships, at number 29.

While the Profit 500 is self-reported, and not comprehensive, the data does line-up with other, similar, reports. And Deloitte’s Technology Fast 50, an annual list of the 50 fastest-growing tech companies in Canada, released in November, was made up almost exclusively of companies in a business-to-business market.

“It’s part of the Canadian landscape,” says John Muffolini, Technology, Media and Telecommunications industry practice leader for Deloitte. “We have fewer companies selling directly to consumers.

Part of this, according to Muffolini, is because of the higher cost of marketing in the consumer marketplace.

“When you’re marketing to consumers, you may have the best technology but it’s hard to remove the Samsungs and the Apples,” he told Techvibes. “Businesses tend to go for the best technology, the best value, if there’s a value-ad.”

With less marketing dollars available, Canadian tech companies are playing to their strengths and going after low-hanging fruit, Muffolini says. This isn’t a new trend; both Profit and Deloitte’s past surveys suggest that the business-to-business side has been growing faster for some time.

“If you look at the past 10 years, there’s only a hand of Canadian companies that have been big in the consumer market,” says Muffolini.

In fact, on Profit’s 2012 list, no consumer-facing tech companies even made the top 40.
Muffolini says he’s optimistic about the future of customer-facing tech companies in Canada, and says he sees growing pockets in the app and gaming sectors. And when it comes to gaming, the lack of fast growth doesn’t mean it’s not big business.

“There are a lot of large companies with Canadian operations, using Canadian talent,” says Muffolini. “But they’re not Canadian companies.”

Despite the fact that most of the fast-growing companies in the Canadian tech industry are in the business-to-business market, they’re still rather diverse, with companies providing cloud services, network security, e-commerce platforms, analytics and custom solutions all posting strong growth.

And it’s not just established firms that are continuing to scale-up, who are making these lists, “there are quite a few that are emerging that have ramped-up pretty quickly,” says Muffolini.