Taylor: What will help you, the human being, be your best? How can we be that for you right now?
Dev: No one's asked that.
Wendy: Let us do more than feel your pain.
Billions, S5:E6 “The Nordic Model”
The scene from Billions, a meeting between a tech founder, a savant investor, and a performance coach, depicts a too-rare experience—finding business collaborators invested in your personal and your professional success as you scale your business.
It starts with leadership coaching—helping an entrepreneur realize a vision—and flows into obtaining the right talent, establishing a productive culture, and defining strategy and operations that align with scaling.
By the time a company has market validation—technology, customers, revenue—there are intense demands on a tech founder or CEO, who may be a person who is technologically deft, but who has less business experience.
“Even after the exit, I felt a bit inhibited that ‘Oh, well, maybe I should have known what I didn't know.' But, when I talk to other entrepreneurs now, I realize they don't know it either,” says Saud Juman, founder and former CEO of PolicyMedical, a healthcare scale-up. Saud valued mentorship as a tech entrepreneur; he offers holistic coaching to help others succeed as he did—with scale and with speed.
“Many of us never get coached. We basically have to figure it out on our own. Those who figure it out well are successful. And, those who don't, struggle. In the business world, coaching has come a long way, but we're still left to read books, read articles, and become experts on our own,” observes Marc Fournier, People Advisory Lead at BDO Canada.
Marc continues, “Coaching is valuable to leaders at any stage of a company's maturity, but there are stages along the way when the need or desire for coaching and leadership development may be more evident—if there's organizational change, if there's succession planning, if there's M&A.”
Deann Young, the VP in People Advisory who leads the coaching service at BDO, agrees. “Coaching can have an impact at every stage of a tech company—startup, scale-up, sale or IPO. We coach the whole person—a coaching client is more than an individual in a workplace.”
Kelly Campbell, National Strategy Lead at BDO Canada, suggests the professional is personal—especially for entrepreneurs. “It often starts with ‘What do I want? What's my goal? Is it about benefitting others or building a company I want to sell?'”
Deann adds: “Vision and values are foundational. Ideally, your culture aligns with your values and enables your vision. Leadership is a key enabler of culture. And coaching can make a difference in how leaders model desirable behaviours and reinforce culture.”
Culture and talent are critical in tech scale-ups.
Culture and talent
“Tech companies are in a dynamic environment where people are more critical than processes,” explains Peter Matutat, National Technology and Life Sciences (TLS) Leader at BDO Canada.
Tony Lourakis, CEO of Fleet Complete, one of the fastest-growing telematics companies in the world, agrees.
“When you're pushing the organization to its growth potential, when you're being bold and ambitious and aspirational, and you're launching products, expanding into new business lines and new geographies—when you're doing big things—there are bound to be operational challenges. You get through them by bringing in great talent, ensuring that you have the absolute best people you possibly can have in the organization. You need a combination of the institutional knowledge of people who have been with you a long time and know our industry and our company, and you also need to bring in new talent who have ‘been there, done that,' who have experience and know best practices from other industries and other companies that have scaled or grown.”
HR can have a serious impact on the success of a scale-up—particularly in tech, where talent can be difficult to attract and retain. Mature HR processes were pivotal to the business transformation Saud led at PolicyMedical:
“We went through a pretty intensive process of actually relaunching the company. It was almost like starting it all over again from the beginning. First, it was an internal thing. I had to reconnect with why I started the company in the first place, which was to impact people's health through a healthcare technology company. Then, it was a matter of ‘How do I do this?'
In retrospect, it went through a four- or five-phase sequential process. The first process was the product. The client-success phase was the second—we started turning the clients into real fans. We put a lot of systems and processes in place to predictably deliver on that. The people that we were hiring started to change quite a bit. What we did in the early days, and I would not do this again, is we tried to hire promising, up-and-coming, potential talent and grow them into stars. With a fire under me to restart this thing in a much faster way, I thought, we need to hire rock stars. We need to hire serious, experienced people who could come in and execute on this goal.
Our recruiting changed. It changed the quality of the people we hired. And then, with those more serious people coming in, the culture changed. The company started to grow up quite a bit. We started to adopt some of the more traditional governance practices that a lot of entrepreneurs turn their noses up at. We started to have proper board meetings. We started to have a proper reporting structure. We started to implement Google's OKRs—objectives and key results methodology—where everybody now had quarterly key results, including myself. We started listening to our employees very, very methodically.
We were able to course-correct the culture in the office quite a bit. We brought Peter [Matutat] on board to start doing audited financials. And, I had to cross the bridge from entrepreneur to CEO—I was the last to change. Previous to being fully a CEO, I would have a flavour of the quarter. I would walk in every quarter and say, ‘I went to this conference, I read this book, I listened to this podcast, and let's do this and let's do that.' I quickly realized, you know what people want, they want to be treated with respect, they want to be paid fairly, they want challenging work, and if you want to incent them, probably, time off with their families and loved ones is a good way. All this other stuff I was trying to do was really a lot of noise. The main HR functions come down to recruitment and retention.”
“I hired my first HR manager when we had fifty employees,” says Marc, who was an entrepreneur before he joined BDO.
“If a tech company is on the path of growth, and they don't have internal HR—and some don't, because they focus on their products or their services […] There's a void of help for these entrepreneurs. That's what BDO's People Advisory service is there for. It's outsourced HR—everything from employment contracts to onboarding, employee relations when there's an employee problem to employee handbooks.
Instead of hiring an HR manager at $50-, $60-, $70K, they can get our support. We're a very experienced team. They get all that experience when there's a question to ask. We provide that. We also provide help from the compensation side—‘Am I paying my people they way I want to be paying?'—and then eventually we'll relate it to how we measure and reward employees on an employee-performance program.
Once people know we have a People Advisory service, we often get asked to do recruitment. The process is no different than at your typical recruitment firm—except the fact that we're not leaving because we have long-term relationships. So, we get to work with the client-relationship partner and make sure we understand the culture and the critical skill sets needed the support the success of their company. The depth of our client relationships is an incentive to basically find someone that will last for a long time—we're not CV pushers. We take the job quite seriously.
Talent attraction—successful scale-ups have got to have a culture that attracts people who want to be there. But they also need to be able to retain that talent. When they're looking for the different types of talent, they have to understand what they need and be able to articulate that and go to market—then they're able to find the right people who fit with what they're trying to accomplish.”
Outsourcing non-core functions
“You need to understand what your secret sauce is, when you're scaling up,” says Kelly Johnstone, the Halifax-based TLS leader who runs CFO and Controller Services at BDO Canada. “What are you really good at—hire for that. If you're a company that's strong on technology—you're coming out with the best solutions in the market from technology point of view—never outsource tech talent. Make sure you are hiring your developers, for example, and building that know-how in your business. For everything that is non-core, a lot of times it's better to outsource, especially in a scale-up—bring experts in to help you, so you don't have to commit to very expensive people on your payroll while you're focused on accessing the right talent to grow your business.”
The part-time, or fractional, CFOs work closely with tech founders, supporting their ambitions and, often, acting as their ‘number two.'
“Managing the operations alongside the strategic and financial, while you don't necessarily have people backing you up in those areas, is a real challenge for the founders,” says Jamie Barron, who leads BDO Canada's Toronto West TLS Group. “Founders need to ask, ‘How do I best get the expertise in-house, whether it's with an advisory board, fractional CFO, utilizing the expertise of an angel investor? How do I leverage not just the people in my company, but my partners?' At the scale-up stage, tech entrepreneurs are managing product development, market development, people—just managing people is a much bigger job, because now they're in that 10-50 employee band where often there's an HR person dealing with all that.”
“In the early years, as a bootstrapped company, just survival was a huge challenge,” Tony Lourakis adds. “I mean, we were on the edge so many times in the first few years. Then, as you get your base revenue to a certain point and you manage the cash flow—this is how we did it, but there are different ways businesses grow and evolve—our challenge became scaling and managing the growth from a systems perspective, product-scalability perspective, a talent perspective. More recently, we've grown internationally, we've acquired about five companies in different geographies around the world, so our challenge in the past few years has been systems, back-end office systems, financial systems, ERP (enterprise resource planning) systems, CRM (customer-relationship management) systems, consolidating the products into one common global platform, and making the company one global organization.”
“A lot of our work deals with infrastructure in the broadest terms—people, process, technology—so what we see tech leaders challenged with is, typically, revenue growth outstrips infrastructure,” adds Matt Ambrose, Partner in Technology Advisory Services at BDO Canada. “That's not a bad position to be in. Generally, it's a good thing because it means the organization is focused on top-line growth, but what that means is that there's usually a bit of catch up that needs to be done around, ‘Okay, we need to actually get efficient here because we can't continue to grow at this rate and just keep adding bodies or doing something a manual way.'”
“The other challenge they face—and we see this with a few clients—is that tech companies can go global quite quickly. In software, you're typically publishing in English, and it doesn't take much to suddenly say, ‘Hey, we're launching this product in the U.K.,' for example. And, suddenly you've got all kinds of things to deal with in the U.K. that you never had to deal with in Canada. You've got everything from VAT taxes to incorporating the business to how you pay taxes there. Suddenly you start employing sales people there—‘Oh, they're compensated differently, they have different employment regulations.' All these things suddenly explode on these companies. They may only be $20- or $30-million-dollar companies, but suddenly they have offices around the world, or they have agents around the world. So, we see that kind of rapid growth not necessarily in terms of revenue, but rapid growth in footprint. We see the challenges of being a small company that's a global company.”
Matt continues: “As these companies grow they deal with a customer class that may be bigger, more sophisticated, and demands more of them, particularly around risk. The situation is: ‘We always used to sell to mutual-fund companies, and now we're selling to a big bank, and, wow, they want way more from us in terms of diligence, and reports, and back-up data that we never even had to produce before.' They have the challenge with moving into a new territory, just like anybody does when they grow their client base.”
Kelly [Campbell] agrees: “I'm growing and I'm still going to have to look at my risks, I'm going to have to look at my shareholders and investors. I'm going to have to look at the next milestone in terms of my company's life cycle.”
Successful entrepreneurs—like Tony Lourakis—and enterprises—like Fleet Complete—rely on advisors to help them effectively manage growth as their business matures.
“Oh, man, BDO has helped us since the early years,” says Tony. “I've been working with Daphna Smuckler 16 or 17 years and many from BDO globally. BDO's helped us because of its global presence. As we've expanded around the world, many BDO offices have been there to support us in those different regions. BDO's helped us do due diligence on acquisition targets. BDO has helped us prepare and go through having due diligence done on us when we're taking on a new equity partner or raising debt-based capital. BDO has been a great supporter and advisor all along the way.”
“We're a sounding board,” says Brion Hendry, GTA Tech and Life Sciences Industry Leader at BDO Canada. “We're able to understand and anticipate their needs to help them avoid pitfalls.”
Giancarlo Beevis, president and CEO of Intelligent Fabric Technologies, illustrates the importance of securing an advisory board that operates within your niche and can offer true value. Intelligent Fabric Technologies is a GTA-based biotech firm that developed the first antimicrobial textile chemical proven via U.S. codes to deactivate Sars-Cov-2, resulting in 241% year-over-year growth in the second quarter of 2020. A deeper dive of this story explains Giancarlo's journey to innovation.
Giancarlo explains: “Our board is a curation of fantastic individuals. Dr. Mark Cochran, who is the executive director at Johns Hopkins, is our new chairman of the board. He's been a wealth of knowledge. Cameron Groome is a board member who works for another biotech company and who has offered guidance from a Canadian regulatory perspective—he's been unparalleled as well. Jason Garay has been our chief science officer since inception. He was the first person hired by Intelligent Fabric Technologies. He's a Board-certified epidemiologist. He's been the infectious-disease surveillance manager for the province of Ontario in the past. And, he has been a stand-out from a mentorship and a guidance perspective, as to how we move these technologies into the future, and how we test them, and how we ensure that we're not just a marketing company—we're selling science. We want this to work. We want this to save lives. We want this to better people's existence. Our mission statement from day one has always been to create clothing that cares. He's really made sure that everything we do abides by that mission statement.”
“Best practice is to have an advisory board of successful tech executives. Most of my successful clients have experienced, independent advisors,” says Peter Matutat, National TLS Leader at BDO Canada.
As our partners and clients so aptly account, the core of a tech company wanting to scale—the people in and around it—drive the growth and value of the business, and build the culture that makes it unique. It's these people who help support the ultimate vision—directly or indirectly helping bring it to life.