While flashy software companies tend to draw the most attention – and funding – Michael Lalonde says that it’s the “boring” companies that are the backbone of a successful tech ecosystem.
Lalonde is director of sales at PureColo, an Ottawa-based company data centre and co-location space. The company takes scrapped data centres from large private operators and puts them back into service, targeting small and medium-sized customers who can’t afford that kind of infrastructure themselves.
In this instalment of Top of Mind in Tech, Lalonde talks about the challenges of securing funding, the necessity of “boring” companies in a startup ecosystem, and the slowly changing norms around commercial real estate.
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This transcript has been edited for length and clarity.
Funding providers neglect certain types of businesses
“It’s something I’m thinking about because everything we’ve built to this day has been our own doing and we haven’t received a lot of support, other than the CERB loan during the pandemic and our BDC loans. Even when dealing with BDC, we’re ending up getting offered money after we’ve already been through the pain of not having enough money. They always want to fund you after you no longer need the funding and it seems to be the model with a lot of banks as well. I’m thinking about it a lot because, as we grow, we’re now getting into this bracket that BDC doesn’t really service anymore and so we have to start looking outside of that realm when we have a new build. It’s frustrating because we’re back to those same conversations with the large banks that say, ‘Well, how many assets do you have?’ And we have some, but a lot of our assets are actually recouped assets. While they have a lot of value on the books, they’re not valuable because we got them for free or next to nothing and then we put in the time and effort to refurbish them.
“It’s interesting to me that traditional banks and government-funded loan agents refuse to acknowledge these types of businesses. From a green perspective, a lot of our equipment is typically used or refurbished and would otherwise go to a landfill. From an ESG perspective, we don’t get any support because it’s not something that’s in the government-mandated ESG guidelines. It’s very frustrating that these programs don’t look at the whole picture. They just say, ‘Here’s our tight, rigid guidelines. If you don’t fit within them, don’t talk to us.’ I think that’s a huge missed opportunity.”
Startup ecosystem searching for ‘unicorns’
“I love some of the things (organizations in the startup ecosystem) do. They’ve been instrumental in bringing together people within the small business technology community to have real discussions and network. Eighty per cent of our business is coming from referrals from meeting people in-person. But I do have an issue when they say, ‘Oh, we’re going to find the next unicorn company.’ I have a huge problem with touting that we’re going to find the next Shopify by awarding, essentially, gift bag awards, because they don’t really do anything. All these things help and there’s nothing wrong with them in any way, shape or form. But you need real capital investment for anything real to happen. Real companies need a lot more. If you look at Shopify, they had angel investors, they had real money at the beginning.
“We have companies that do really good things that fly under the radar because they’re not as attractive as software or other companies like that. But they’re called unicorns for a reason, because they’re hard to find and they don’t really exist. We keep pretending that we’re for sure going to find one. But why don’t we focus on all these gallant horses in our backyard pulling all the weight? Why don’t we give them money and build them up, instead of chasing after the shiny fancy thing that could be something? That’s not to say it’s impossible, or it would never happen, but we aren’t giving equal dues to those making real returns.
“I totally understand and I say that with the perspective that I too live within that ecosystem. That’s why I like to try to say there is a lot they’re doing right when it comes to fostering those conversations and making sure like-minded people are interacting and cross-pollinating. But all that is to say, even when that happens, the actual funding is not where it needs to be.”
Commercial real estate war
“There’s been, from a business perspective, a big war happening right now when it comes to space and, specifically, commercial real estate … It’s a war between the commercial real estate business of the past where everyone needs space, everyone needs office space, and the new wave of people working from home saying, no, we don’t need that, we actually don’t need this amount of space. The old guard is still saying it’ll bounce back, but the younger generations are like, we don’t want to be in the office. Why are you forcing us to be in the office? Why can’t we convert half of these buildings into housing? We have all these homeless people that have nowhere else to go. I know they’re already starting to do that, but it’s been four years since the transition started happening and (the old guard) are just starting to acknowledge it.
“It boggles my mind that we’re not more nimble, that we don’t have people who are willing to take chances, to say no, let’s change, let’s do something better. People are just very stuck in their ways and they expect things to always go back to the way they were. I think we need to be more nimble as a city and as a country and be better and fill those holes that actually need to be filled, as opposed to just trying to do business as usual.”
