L-Spark managing director Leo Lax recently wrote a blog post that forecast a banner year for the Kanata-based accelerator, as well as for Ottawa and Canada as a whole.
Among his predictions: numerous seed and series-A financing rounds for L-Spark portfolio companies, and a doubling of federal government support for accelerators.
We talked to Lax to hear more about his bold predictions, and got the scoop on the current cohort’s trip to San Francisco next week.
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What follows is an edited transcript of Leo Lax’s interview with Techopia’s Craig Lord.
One of the interesting things you wrote about is that companies are choosing Ottawa over Montreal and Toronto. What do we have that they don’t?
Here in Ottawa, there is a fairly large abundance, I would say, of experience: Senior executives from companies that have been small and grew large, many of them in a software business, even more of them from a software-as-a-service business. That level of expertise allows them to be in a community that helps them grow. I would say that is the main reason.
I would say there’s the beginning of a reputation that we in Ottawa have a rich SaaS community. We have Shopify, we have Klipfolio, we have Pagecloud, we have SurveyMonkey… the newcomers. We also have the IBM, Microsoft, OpenText … the latecomers. That’s a good combination. I’m hoping that we can create a cluster here in Ottawa that pulls together the engine elements for growing companies, anywhere from early-stage, to midsize, large companies, all the way to the public companies in the SaaS business.
Why is this year going to be significant for L-Spark portfolio companies in raising investment?
We are still a newbie at this stage, we are still one of the startups, only two and a half years old. We just completed our third foundation cohort selection, so we are still learning.
However, we now have 29 companies who have taken on our mantra. Within those, just looking from a portfolio strategy point-of-view, we are getting more and more companies who are getting visibility in the market, who are getting to be known, and are starting to receive attention from the investor community.
But this isn’t necessarily the year that we’ll see an L-Spark company IPO?
We are not at that stage. We don’t work with companies that are pre-IPO, we work with companies that are pre-revenue, maybe. There’s a long journey between here and there. It’s like Shopify being an instant success that was 10 years in the making.
We are at year one, two or three on the formation of these companies so they have a long way to go before an IPO. However, we are getting them equipped with the elements they need to even dream of getting (to) that level. I hope we are giving them the confidence to believe that they can.
From a Canadian next-stage growth point-of-view, you might be looking at the Lazaridis Institute. They are looking at those big companies and giving them the tools and the exposure to get from the growth into the expansion stage. Then, once you’ve got the expansive stage, you are probably in multiple countries, have customers in a significant number, continuing to grow on a regular, repeatable basis – at that point, you start to be an attractive target for approaching the public market and how public investors might be interested in the company at the next stage.
We are about two stages before that, but we hope we are putting together the ingredients that will help our companies reach the next stage.
What kind of support do you envision coming from the federal government’s innovation agenda?
If I knew exactly the answer, that would be amazing. However, I don’t. I’m just hearing what the community’s saying. I have spoken to some of the policy wonks who are working on this area, and hearing what they are collecting and pulling together. Based on that, and the fact that this government has publicly made one of its key tenets supporting and growing the innovation economy, I believe there will be support coming.
Now, we have engaged somewhat with those people, we have provided them some input, as have many, many members of the SaaS community. My expectation would be a doubling of support for the incubation and acceleration industry to actually allow people who have been there and done that to engage with the people who want to be there and do that in the future.
A portion of the money would be provided into the industry that is supporting the innovation economy directly, the venture capital industry. They are a key component of that growth element.
I’m hoping, and this is not a direct investment into any particular company, but I encourage the Canadian government to engage and purchase and be customers of these early-stage companies, even though their products may not be as fully-rounded out. It can be a mechanism by which fairly large and nationwide organizations might start using those products, a mechanism by which startups can fine-tune their products.
The current L-Spark cohort is going to San Francisco next week for a SaaS showcase. What are the goals of the trip?
The purpose is to provide a platform for our companies to engage with the investor community in California. We all know that (particular) investor community is probably the most active, and most risk-capable, and therefore any startup that believes they do not need that level of engagement is possibly leaving some opportunity on the table.
We have been amazingly fortunate that over 60 VCs have agreed to attend our event. Basically, we are telling this community who we are, why these companies are a potential (opportunity) for investment, and in many cases this will be the door to open visibility. I’m hoping that as a result of that, a number of these investors will not come back and visit us in Ottawa, that they will continue to engage because they will now see that there is an untapped market that is interested and growing and has the skills and capabilities. With their help, their investment, we can be even more competitive in the market.
There’s a secondary objective. This happens to be the week, and in fact this was no coincidence that we did it that way, that SaaStr is run in San Francisco. It is probably the premiere SaaS conference right now. We want to make sure that our companies grow, and engage, and learn from the rest of the international community that’s gathering in San Francisco. SaaS is such a new, emerging business model that every day (yields) a new revelation.
And you might get a bit of inspiration for SaaS North this coming year.
It is our hope that we will be able to indicate to the people at our showcase as well as the people at the SaaStr community that there is another conference with content and capability that is bringing together an emerging Canadian community. Of course, we will highlight that we will be holding SaaS North at the end of November.
