Starting a business is an inherently risky venture, regardless of where you are in the world. Many businesses fail within the first five years of their life, and for those who do succeed, they have to put a lot on the line in order to survive. Some universal sacrifices that all start-up owners face are the risk and impact to their own finances, as well as the impact that running a business can have on their personal life and personal relationships. However, depending on what country you’re from, starting a business can come with its own additional region-specific challenges and obstacles.
Canada has a high rate of start-ups when compared to other countries internationally; however, many Canadian start-ups face a number of unique challenges that results in many start-ups failing at a higher rate than other countries. While it is still unclear what the true reasons are for these failings, there are many reports from founders that can give a good idea as to what can be causing this.
Laws, Regulations, and Competition
Unlike many other countries, Canada has significantly more regulations that start-ups must follow, much to the detriment of the start-ups themselves. Often, the different levels of government don’t work together, so when it comes to things like property laws, versus tax laws, versus business regulations, each level of government runs things a little differently. Plus, there is a pretty large lack of support for new businesses when it comes to navigating each set of regulations successfully.
There is also a general lack of knowledge from governments about innovation and building a business, especially in regards to a business’ needs as it grows. This can lead to confusion and even laws that may penalize certain businesses unfairly, such as shipping businesses who may be located rurally because of cost, but are then penalized due to environmental regulations. Many start-up founders also note that while Canada loves to perform research into how various industries may be struggling, there is a severe lack of action on the part of government organizations to resolve the problems that have been found.
Lack of Support and Access to Funding
Another huge obstacle is access to funding. Canada has a smaller market, and while there are several ways that companies can raise money, including through government grants, venture capital, angel investors, and loans, the amount of money available is much less when compared to countries like the United States, and therefore gaining access to funding in Canada is significantly more competitive. As a result, many companies seek venture funding in the US, where markets are larger and more accessible, rather than Canada, leading many companies to choose to grow, scale, and stay in the US.
Canada also suffers from a system where Canadian goods and products are marketed to other countries internationally, but a similar domestic program doesn’t exist. When most companies need to find success domestically before they can expand internationally, this lack of push for Canadian products and services domestically can really hinder the growth of Canadian start-ups.
Procurement
Procurement is the process of purchasing goods or services from a third party for business purposes at the best price possible. Procurement is hugely important for start-ups as it is usually their goods and services that are being procured by large corporations and government entities. However, in Canada, due to risk aversion, longer sales cycles, and regulatory obstacles like extensive proof-of-concept trials, many start-ups are left waiting for years for a procurement to go through, with many deals still failing after a long trial and approvals process.
As it stands currently, a formal structure of procurement within Canadian governments does not exist, and so start-ups are generally on their own on how to break into the industry, and even then, sales with government agencies are rarely successful. Additionally, this also connects back to the lack of domestic push for the use of Canadian goods and services within Canada, because the number of companies and organizations who are willing to procure from Canadian start-ups is also incredibly small, unnecessarily increasing competition even more.
Lauren Schwartz | Staff Writer
