A growing number of Canada’s emerging technology giants are scaling back hiring in the face of worsening economic news as the sector shifts rapidly from a grow-at-all-costs mentality to relative austerity.
The chief executive officers of Hootsuite Inc., Trulioo Information Services, Canada Drives Ltd., Copperleaf Technologies Inc., Vendasta Technologies Inc., and Clutch Canada Inc. – Canadian companies with tens or hundreds of millions of dollars in revenue and hundreds of employees or more – have told The Globe and Mail in the past week they have cut back hiring plans this year. Other Canadian tech companies reduced staff this month, including Wealthsimple Technologies Inc., Ritual Technologies Inc. and BBTV Holdings Inc.
“Every company is rethinking their growth plans; we’re doing the same,” said Dan Park, CEO of Clutch, an online marketplace operator for used car sales based in Toronto, which has halved plans to hire 50 to 60 people in 2022.
Growing economic turmoil stemming from inflation, rising interest rates, supply chain issues and war in Ukraine have weighed heavily on valuations of publicly traded tech stocks since fall and spread to private markets this year. That has led to job cuts, hiring freezes and curtailed hiring plans as fast-growing technology companies aim to preserve cash for what could be a prolonged period of economic uncertainty with much less access to cheap and abundant capital than last year.
Clutch rival Canada Drives saw business leap 580 per cent in the first quarter compared with the same period a year ago. But the company, which handles $250-million of sales annually, also fell short of its fundraising target after several large investors retreated from the space, CEO Cody Green said in an interview. Canada Drives on Monday said it had raised $40-million from subprime lender goEasy Ltd., and Mr. Green said he hoped to raise at least $10-million more from others. “Last fall, we expected we’d be able to raise over $100-million” in 2022 for a second straight year, “but as the market changed, so did our expectations and needs with our growth plans,” he said.
Now, Canada Drives is “paring our growth to the current funding environment,” Mr. Green said. That means the company, with 725 employees, now expects to expand to 850 this year, not the 1,000 originally anticipated.
Hootsuite CEO Tom Keiser said his Vancouver company, which has grown to 1,400-plus people from less than 1,200 in January, will end 2022 with “hundreds of people less than what we had planned to end the year with.” Hootsuite, which provides digital tools for companies and governments to manage and monitor online posts, generates more than US$200-million in revenue and is growing by about 20 per cent a year. But “we’re trying to balance the high growth mindset we came into the year with and how we were investing and driving versus this more conservative world we’re in,” he said.
Asked if Hootsuite could consider layoffs, Mr. Keiser replied: “We’re doing our best to manage expenses and slow down hiring so that we can avoid that. I’ve done that in the past. It’s a soul-depleting, culture-killing experience.”
Several companies say they are scaling back hiring or more cautiously managing spending even though their businesses have not been hit. “We’re continuing to grow, but we will be more prudent as we grow because” of the economy, said Judi Hess, CEO of Copperleaf, a Vancouver company that sells decision analytics software to utilities, transportation companies and others. She said Copperleaf, with 450 employees, will hire “in the tens” fewer people than it would have otherwise this year.
Vendasta CEO Brendan King said the Saskatoon vendor of digital tools to companies that serve small businesses is also taking “a bit of a breather on hiring,” even though rising interest rates and inflation haven’t yet hurt his business. “Before it was ‘grow grow grow.’ Now it’s ‘grow EBITDA margins,’” he said, meaning the 700-person company is looking to improve earnings before interest, taxes, depreciation and amortization. “If they’re not quota-carrying sales reps or developers” who build critical products, “we’re probably not going to hire them.”
Anthony Mouchantaf, director of venture capital with Royal Bank of Canada’s RBCx innovation banking platform, said: “People are still digesting the scale and scope of the macro environment and how significantly it will impact” tech companies. He believes many recent layoffs have been “more prophylactic than reactionary” as companies “prepare themselves for what they view as a significant potentiality but not necessarily an inevitability.”
Not every fast-growing Canadian tech company is taking precautionary measures. Some, such as chatbot provider Ada Support Inc. and tutoring-by-text company Paper Education, have made no changes to hiring plans. Trulioo has adjusted its hiring in step with sales. Last year, the Vancouver provider of digital identity verification services doubled revenues to $100-million and doubled staff to 400 as demand soared from cryptocurrency and online trading platforms. Those areas have been hit hard in the current economic environment and overall revenue will likely grow by less than 40 per cent in 2022, as will hiring, CEO Steve Munford said: “We’re not laying off or freezing hiring, but we are absolutely not hiring at the pace we were” in 2021.
Meanwhile, the slowdown has helped many companies that had struggled to find talent, but it has also presented a dilemma for Kelly Schmitt, CEO of Calgary’s Benevity Inc., which sells software used by workers at hundreds of global enterprises to donate money and volunteer hours to charities.
Benevity paused hiring for two to three months early in the pandemic and has finally caught up to its staffing needs, adding 160 in May and June. “Looking at the state of the world, I feel like we should slow down,” Ms. Schmitt said. “But I also don’t want to whipsaw and do something like we did two years ago and then we keep growing and we can’t keep up. It makes scenario planning challenging.”
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