The Silicon Valley landscape is dotted with tech giants with a strong mass-consumer connection. From Facebook and Google to Apple and Netflix, multibillion-dollar companies flock to the warm climate, green lifestyle and alluring draw of the San Francisco Bay Area.
The term Silicon Valley North has been tossed around as a moniker for Ottawa, not always with great fanfare. Whether you think the term is an apt description of the nation’s capital, there’s one way Ottawa severely lags behind its California counterpart – business to consumer sales (B2C).
The Ottawa technology landscape features a few large companies, a rich talent pool and a multitude of startups on the rise.
What there isn’t, however, is much of a B2C market in the mould of Facebook or Google.
“The reasons are historical and geographical,” says Nigel Harris, a leader in the Ottawa tech scene for more than three decades and the current CEO of Powerstick.com.
The history of Ottawa is steeped in business-to-business (B2B), he explains.
Going back to when Montreal-based Northern Electric relocated its R&D branch to the capital in the late 1950s, the influx of engineering talent laid the foundations for a tech-focused environment, he says. However, that talent was focused on the more esoteric parts of the market, not on producing consumer goods.
And then there’s the geography game.
“If you create a B2C company, 90 per cent of your opportunity is going to be in the U.S.,” Mr. Harris says.
“If you’re trying to build the most cost-effective product, you’re probably going to build it in China,” but then you lose the benefits of NAFTA, he adds.
Powerstick.com, of which Nigel was a co-founder, is on the verge of releasing a very consumer-friendly device – the Mosaic.
Essentially a portable hard-drive that is Wi-Fi compatible, Harris describes the Mosaic as the perfect device for a family road trip, allowing everyone to stream their own content. Even with the device gaining some traction in big media outlets and being submitted to the Consumer Electronics Show’s best-in-show competition in Las Vegas, Harris is still hesitant to participate in direct-to-market sales, especially with big box stores.
Instead, he sells Powerstick directly to business customers such as the U.S. military, Tesla and Bank of America and attaches their branding to the devices.
“What people are doing now is they’re going to the store, finding something they really like, they’ll find out as much as they can about the product and then they’ll go back and see where they can get it cheaper online,” he says.
Harris says that dealing with box stores is such an onerous process the benefits aren’t worth the costs.
Beyond that, B2C marketing presents numerous other challenges, such as having to appeal to various consumer demographics and large swaths of diverse potential consumers versus catering to a single need shared by a number of repeat business customers.
One of the ways around the difficulty in marketing in the B2C realm, Harris saw, was to launch a Kickstarter campaign for the Mosaic.
Reaching its goal of $50,000 in pledges with three weeks to spare, Harris explained that not only was Kickstarter a great place to pick up some extra cash, but the buzz started around the Mosaic as a result of the Kickstarter was the real payoff. For Powerstick.com, it was a great marketing tool.
Allan Zander, CEO of DataKinetics, a data optimization and performance company, largely agrees with Mr. Harris’s assessment of the Ottawa tech scene.
“Since there was an early ground swell of B2B companies here, comfort was likely developed that way,” Zander says.
“I don’t think the next Google or the next Apple is likely to come out of Canada. The model too frequently is not to swing hard for the fences, but to bootstrap and get something off the ground. The money that is required to get a B2C enterprise off the ground is just not heard of [in Ottawa].
“While both [B2C and B2B] companies need engineering talent, a B2C company needs a whole team of strong marketing depth very familiar with B2C challenges,” he adds. “There certainly is good marketing talent available in Ottawa, but it is harder to find than good engineering talent.”
Zander believes the marketing gap is one of the main obstacles to B2C development in Ottawa. He isn’t sure there is a shift in the nature of the city’s tech market towards B2C, but that doesn’t mean he is down on the market overall.
“There is a hum again of innovation and entrepreneurial buzz going which is, frankly, exciting,” he says. “I wouldn’t take anything away from that just because it is B2B-focused instead of B2C.”
Larger-scale VCs have also been eyeing Canada, Zander says.
“As some of these companies start to increase their value by being more consumer-focused that are driving big multiples,” it may build the ecosystem, he explains. “Hootsuite is not a bad example in my mind for this. Are they leading edge in what they do and demonstrating that they can make it as a Canadian company? Absolutely.”
Umar Ruhi, an assistant professor at the University of Ottawa’s Telfer School of Management, says local technology firms still generally feel more comfortable with the engineering side of their businesses.
“I think the companies in Ottawa are pretty strong when it comes to the core tech in their solutions,” he says, “but they may not be as good when it comes to the augmented product – look and feel, the packaging, the appeal to the emotional aspect of a customer purchase, which is important for a B2C.”
The ever-changing employer-employee dynamic is also swaying how businesses operate in both the B2B and B2C fields.
“Businesses are giving their employees more of a say in the type of tech they prefer,” Ruhi says. “Even if you are doing B2B stuff, you still need to go and talk to individuals inside the company. It’s no longer the CIO who is the gatekeeper and you have to go and talk to the CIO and the organization in order for them to adopt your solution.”