Why scaling up BC tech companies is critical to BC’s economy

By Kerri Wilcox
Dec 11, 2020
Photo credit: blake81/iStock/Getty Images

Listen to our podcast episode with Jill Tipping, FCPA, FCA, President & CEO of BC Tech and George Kondopulos, CPA, CA, KPMG’s Greater Vancouver Area’s Industry Lead partner on findings from the BC Tech Report Card. Hosted by Kerri Wilcox, CPABC's VP of external affairs and communications. Part of our Coffee Chats with CPABC podcast series.

It’s no surprise that BC’s tech sector is growing and attracting the attention of big global players. Recently, Salesforce acquired Slack Technologies, a Vancouver-founded tech company, for a mega deal of $27.7 billion USD. While Slack is now headquartered in San Francisco, the company was touted as one of BC’s tech unicorns. As BC tech companies gain the attention of global investors and more global companies make their presence known here, what does it mean for BC’s tech sector and for our economy?

To better understand BC’s tech ecosystem, we spoke with BC Tech’s president and CEO, Jill Tipping, FCPA, FCA and KPMG’s Greater Vancouver Area’s industry lead partner, George Kondopulos, CPA, CA on findings from the latest BC Technology Report Card.

What is the current landscape of BC’s tech sector?

Jill: The key finding that we’re all really excited about, is that BC’s tech ecosystem continues to thrive. In particular, for the fourth year in a row BC’s tech sector received an A grade when compared to other industries. BC's economy is now a tech economy.

And while it may not be the first industry that people think of in BC, the tech sector is contributing $17 billion to the province's GDP, and it is really starting to be a big provider of jobs across the province. So the tech sector is a top five sector no matter which way you cut it.

We have also witnessed a solid compound annual growth rate in BC’s tech sector. When we look at where BC has done well, we have surpassed Alberta’s performance in this respect. Alberta has put some significant investments into their ecosystem, but we are striding ahead of them in terms of simple growth and in absolute size.

But, if we look at how BC’s tech sector is doing compared to others, say US states or other provinces of comparable size, our tech sector is still lagging a bit. As a result, we only get a B when we are compared with other provinces or jurisdictions, which means there is room for improvement that hopefully we can address in the future.

George: The BC tech community is host to nearly 11,000 companies that represent a broad range of industries, including interactive and digital media, clean tech, life sciences, information and communication technology, as well as IT and engineering services.

Geographically, around two-thirds of firms are located in the Mainland/Southwest region, 15% in Vancouver Island/Coast, 8% within the Thompson-Okanagan region, and the remainder in other BC regions. Virtually all the larger firms, those that employ more than 100 employees, are located in the Lower Mainland and Vancouver Island.

11,000 is a sizable number, but 80% of them are employing less than 10 people. How are tech companies in BC doing with respect to scaling up?

Jill: We really do need to focus on scaling up in this province, and it is a challenge for the tech sector. Our companies have tended to stay small or sell at an earlier stage than they would in other jurisdictions. Chances are if they are headquartered elsewhere, they might grow into a medium sized or large company before they think about selling, but here in BC, tech companies tend to sell a little bit early.

And while we do see some promising points from the report, for example, there has been an 18% increase in the number of companies employing more than 100 employees in the period covered by this report card. But in absolute numbers there are only 220 of those companies.

And within that only 22 have 500 or more employees and 220 have over 100 employees. Imagine what we could do if we could double or triple the companies that are at this size. While there has been progress and the sector is definitely doing better than in other sectors and certainly has tremendous upside potential, we have to tackle the scale up gap and get to the root of it because we have to build the BC champions of the future.

George: That is the primary reason why we have given our tech sector a persistent B grade to serve as both a reality check and a call to action. While BC has a growing number of mid-sized companies, it continues to trail more mature tech sectors in Ontario and Quebec.

To put it simply, the threshold to be among the largest 10% of tech companies in BC is an employee count of 50. The comparable threshold for Canada is 100, with Germany at 150, Israel at 200, and California at 500. Clearly, BC still lags behind and scaling up is critical in helping us catch up.

Why is scaling up so critical to the growth of BC tech sector?

George: Our tech sector has been attracting some big names over the past several years. We have seen global giants like Microsoft, Samsung, Salesforce, Amazon, Apple, and the list goes on, establish a presence here.

These global companies serve as magnets for additional companies; they help drive growth for the tech sector and help build an ecosystem that is a major contributor to our provincial economy. However, they also pose a challenge to our local tech companies, because they are smaller and cannot compete with these global companies’ salaries and benefits.

Jill: It is critically important that we help our local startups scale up and here are the reasons: they are more likely to create well-paying resilient jobs; to attract investment capital; to create spin offs of new startups that are solve new problems; to invest in R&D; to remain in the community; and to invest in the community notably in forms of charitable give-back. And at the end of the day, they are also more likely to drive economic prosperity.

When startups get to that medium sized or larger stage, they are exporting to the world and bringing BC innovation with them. As a result, they are building the future economy of the province. Our startups  are thriving and are incredibly important to us, but we need to support them to turn into scale ups. In this report, we made a fairly bold call that we need more sustained multi-year public investment in programs that can help startups grow from small to medium size and from medium sized to large.

The great news is that this problem has been solved elsewhere in the world and elsewhere in Canada, such as Ontario which is doing a fantastic job. What we can do is take the made-in-Canada solutions and deploy them in BC to give our startups access to leadership training, help them access new markets and subject matter experts, and connect them with mentors and advisors who have done it before and help startup leaders grow their businesses.

Stronger domestic investments and growth supports are the two critical items we need to close the gap between us and our competitors in the US and the world.

Learn more about BC Tech and KPMG’s BC Technology Report Card and what the future holds for BC’s burgeoning tech sector by listening to our podcast episode with Jill and George.

Kerri Wilcox is the vice president, external affairs and communications for the Chartered Professional Accountants of BC (CPABC).