In order to provide a tool to enable entrepreneurs and investors to gauge how attractive firms are from a financial standpoint, we are pleased to introduce a way to measure Financial Velocity. Financial Velocity is defined here as the amount of funding a firm has raised divided by the number of years it has been in existence. It is expressed in millions of dollars per year. This measure reports the rate at which companies raise and consume capital.
We have assembled a list of the top Canadian businesses based on Financial Velocity and are pleased to introduce the Narwhal List. This list shows Canadian venture capital backed companies with the highest Financial Velocity.
Policy experts and innovation practitioners have criticized Canada’s innovation system for its inability to grow and scale companies. This has been a baffling issue because Canada’s technology sector has been successful at starting companies and generating innovations with high potential. In this study we wanted to determine whether the way in which Canadian companies raise funds also adding to the scaling problem?
This study reveals three critical issues:
1. Canadian companies wait longer before they start raising funds.
2. They raise funds less often.
3. They raise less money over time.
And as a result of this pattern, even our best companies are not particularly attractive to investors as their growth rates fall well below that of the most successful US companies.
Our success as an “Innovation Nation” depends not only on our ability to come up with novel ideas or inventions but also on our ability to market and sell those ideas. Unfortunately there is a striking difference in the spending behaviour of Canadian and American on marketing and sales (M&S). While mid-sized US software companies spend, on average, 34% of their revenue on M&S, comparable Canadian firms only allocate 20% of their budgets to those expenditures.