How Do Canada’s Zombie Startups Survive?

As the seasons change, discussions surrounding the persistence of “zombie startups”—those companies that continue to operate despite lackluster performance—have gained significant traction in the Canadian tech scene. During a recent Town Hall meeting in Vancouver, Clio CEO Jack Newton identified one contributing factor: the Scientific Research and Experimental Development (SR&ED) tax credits. Newton argued that while government support is intended to foster innovation, it can sometimes be “anti-productive,” inadvertently allowing underperforming companies to linger longer than they should.

Two weeks earlier, Tom Birch, the global managing director of venture capital and technology at CDPQ, echoed this sentiment, remarking, “The ecosystem of living dead doesn’t last too long in the Valley, whereas in Canada, they tend to persist.” Birch attributed this phenomenon to cultural differences between Canada and the United States, noting that there is a scarcity of large-scale enterprises in Canada willing to acquire struggling startups, leading to a prolonged existence for these “zombies.”

Quantifying cultural differences can be challenging. It’s evident that entrepreneurs in the U.S. are often quicker to shut down failing ventures in order to pivot and start anew, aided by one of the largest capital pools in the world that facilitates their resurgence. In Canada, however, the conversation seems to be shifting towards the reliance on government assistance. Alison Taylor, CEO of Jane App, expressed a somewhat indifferent attitude towards the various forms of government support available to her BC-based company. Her only frustration emerged when comparing her situation to that of companies in Ontario, which she perceives as receiving more substantial assistance.

However, I find myself grappling with the notion of discussing when a startup should cease operations. After all, the ability to survive is a critical aspect of achieving success in the startup landscape. Perhaps my discomfort stems from the emotional weight of such discussions.

This month, I am thrilled to announce an engaging opportunity to connect with Marie Chevrier Schwartz, the former CEO of Sampler, who has bravely navigated the challenging waters of the startup landscape. Earlier this year, Sampler faced the difficult decision to shut down after filing for bankruptcy, an experience that was undoubtedly a significant turning point for both Marie and her team. At the upcoming SAAS NORTH conference, we will dive deep into her journey, exploring not only the circumstances that led to Sampler’s closure but also the valuable lessons and insights she gained along the way.

Marie’s story is one that resonates with many entrepreneurs who face the harsh realities of building and sustaining a business in an increasingly competitive environment. We will discuss the emotional and strategic aspects of her experience, including how she managed to lead her company through both the highs of early success and the inevitable challenges that arose. Attendees can expect to gain a wealth of knowledge from her reflections on resilience, adaptability, and the critical importance of knowing when to pivot or pull back.

For those interested in attending this enlightening session, tickets are still available at a generous 25 percent discount by using the code BETAKITSN24. This is an incredible opportunity to hear firsthand from someone who has faced such pivotal moments in their career. The insights shared in this discussion could prove invaluable for entrepreneurs at any stage of their journey. Plus, this is a far more rewarding experience than my usual giveaways of fun-sized Milky Ways, which, while delicious, can’t quite compare to the depth of knowledge and experience that Marie will bring to the table!