Knowledge Centre

Although the pandemic has impacted countless economic sectors, many of Canada’s technology companies have fared well through the uncertainty, thanks to spiking demand for digital innovation and flexible strategies drafted by their ‘startup-minded’ leaders. 

However, while the overall tech sector performed better than expected, and tech became a safe haven for capital, David Rozin, Vice President and Head of Technology & Innovation Banking at Scotiabank and Roynat, urges clients to stay focused on managing their companies with discipline - to sustain their success, and help Canada earn its place as a global technology leader.

The pandemic ripple effect:

“In some ways, it’s validation for many tech entrepreneurs whose visions are coming to fruition,” observes Rozin.  “The pandemic created a ripple effect, as the world embraces the digital innovation and efficiency tools these companies are bringing to market. But on the other hand, the pandemic’s lasting impact could be a tougher business climate, where prudent strategies and cost controls will determine which companies face challenges versus those that continue to grow.”

Rozin recounts how, prior to the pandemic, Canada’s technology ecosystem matured greatly, with the country becoming a recognized creator of, and destination for, technology talent. This attracted considerable venture capital to those fledgling tech firms with the best ideas and business plans. Suddenly, the pandemic triggered broad behavioural shifts and accelerated digital adoption, which drew both customers and investors to tech firms in areas like health, education, restaurants, remote working, or any technology that supports how we now work and live.

Acknowledging that not all tech niches benefited equally from the pandemic, Rozin notes that many other tech companies leveraged their flexible operating models to reduce their costs, downsize for the short-term, or rethink their value propositions: 

"

We saw companies wisely reduce their expenses – or pause their growth plans – and resilient management teams devised new ways to create value for customers or seize emerging opportunities.

David Rozin, Vice President and Head of Technology & Innovation Banking at Scotiabank and Roynat

“In many cases the investment community stepped up with additional capital to help tech firms ‘right size.’ Investors said, ‘Show us that you can adjust your cost structure and we’ll support your vision,’” explains Rozin, whose team has been busy advising tech clients on current challenges and opportunities. They recently supported a company that had an immediate opportunity to expand its tech-enabled services in Montreal and Vancouver. “We helped them set up and serve these new markets with a term debt facility that provided liquidity to add facilities and equipment, but with the flexibility to access future capital for longer-term growth.”

A team who has walked in your shoes:

It’s all in a day’s work for the team of finance and tech specialists at Scotiabank’s Technology & Innovation Banking division, which provides financial solutions to a broad array of tech clients from start-ups to small cap, publicly-traded firms, especially those in the scale stage. With Scotiabank’s long track record in the technology industry, the Bank’s sector-specific coverage team was formalized in 2019. They’ve earned a strong reputation serving Scotiabank and Roynat Capital clients, and partnering with the Canadian innovation community, including MaRS and C100, to help promising start-ups take off.

“We’ve got an eye for fast-growth companies with a strong product market fit and revenue generation who are starting to scale,” explains Rozin, pointing out the group’s diverse interests in enterprise software, health tech, Internet of Things, precision agriculture, video gaming and fintech, to name a few niches.

In fact, the Technology & Innovation Banking team stands out in the Canadian financial services landscape since it’s purpose built, with a blend of long-time technology bankers, former venture capital and private equity investment professionals who focused on the tech sector, and finance professionals who have managed tech firms. And, they can bring together other Bank groups to support any client need, from growth capital, to mergers and acquisitions, to management transition.

“Many entrepreneurs are thinking about the next stage of their company journey and we’ve got the depth of offerings to support them,” notes Rozin, pointing to one tech client who Scotiabank helped complete some opportune, mid-pandemic acquisitions in Europe. “Our combined expertise helped us coordinate some major M&A transactions for this client so they could meet their five-year growth plan in just 12 months.” 

"

The team we’ve assembled can provide a completely different level of advice in this very nuanced sector,” says Rozin. “Our clients say, ‘You really understand our vision, and we’ve found a long-term partner.’  That’s important because growth for a tech firm is not always a straight line, so you need a partner who will support you through the peaks and valleys.

What’s your next smart move?

While tech entrepreneurs deserve praise for navigating the pandemic, and attracting eager investors, this is no time to relax. “Now that you’ve navigated the darkest days of the pandemic, and the economy is starting to re-activate, this is the time to think strategically about how your company will re-emerge and focus, going forward,” advises Rozin.

For instance, a company should refine its talent strategy, especially since the tech sector has long faced a talent war for scarce senior developers and management. They might now be able to recruit the best available talent for upcoming growth, or acquire office space at a discount. To do so, strategic decisions must be made to configure the optimal workforce, including hiring needs, workspace requirements, and policies and programs to attract the best people in a competitive market.

Similarly, amidst current strong investor interest in the tech sector, companies must carefully consider whether it is really the best time to raise capital. Cautions Rozin, “Management must ask itself, ‘Does this really makes sense for our company’s long-term journey?’  Your company might be doing great today, and you could attract a high valuation in an Initial Public Offering, but you should think at least eight quarters out and consider if your business could meet those revenue expectations down the road without creating turbulence for the company.”

Rozin points out that,

"

Many tech companies demonstrated really strong capital stewardship and structures over the past year, and it’s important not to lose that discipline. It served them well in the worst of times, and it will help them in the best of times, especially when investors start comparing tech companies and rewarding those with the best metrics.

Rozin concludes that his team plays an exciting – and important – role in supporting our homegrown tech sector: “Canadian companies have done well in these times, but it’s now a race for Canada to establish itself in the next version of the global economy. There’s no reason Canadian companies can’t be the brain centre of the world’s digital economy, but they need to stay the course, with focus and discipline, and Scotiabank is fully committed to that vision.”