The tech sector faces new challenges

Other notable companies that have announced layoffs in recent months include Clearco, Coinsquare, Article, and Thinkific Labs.

Young companies trying to attract the attention of investors are discovering that the climate is very different from what it was a few years ago. The Canadian Venture Capital and Private Equity Association reports that the number of deals in the second quarter decreased compared to the previous three months.

Experts say businesses need to be aware of the current situation. They also need to find ways to grow to be in a better competitive position after the economic downturn ends.

The sluggishness of the sector comes after a long period of growth and expansion accompanied by strong demand.

“It was hard to see signs that things were about to change so quickly,” said Mike Abramsky of MaRS Discovery District.

The sector will struggle for some time due to rising interest rates, high inflation, recession risks, market volatility and slowdowns in activities that have benefited from the pandemic, such as online shopping, he said.

“There were too many signs of a major storm,” adds Mike Abramsky. Everything related to interest rates, the economy and stock exchanges, including e-commerce, the real estate sector, cryptocurrencies and even fintech companies, has collapsed. And when a recession looms on the horizon, no one can predict the future. Facts that are not yet known will force companies to remain cautious. »

Laura Lenz, partner at OMERS Ventures, says companies need to find ways to save money whether they need it or not. This will help them increase their viability without having to raise new funds.

In addition, they must have a clear idea of ​​what will lead them to profitability, adds Laura Lenz. This requires cutting discretionary spending, marketing, certain activities, and even the workforce.

“You also have to monitor sales performance and review everything from leases to professional service contracts. Another solution is to consider automating unprofitable repetitive tasks so that employees can focus on the important work they were hired to do. »

The specialist claims that investors, especially venture capital companies, are looking for “phenomena”.

“They want to invest in companies that have a 50% growth rate, despite the current macroeconomic environment,” she says.

For her part, Nuna Fine, director of the master’s program at Queen’s University Business School, says it’s important for these companies to have more than one source of income in order to be able to adapt to different situations, although visiting for their core business will always be essential. .

“Putting eggs in one basket is not safe,” she says.

Laura Lenz predicts growth will come in two areas: workforce automation and climate change mitigation practices.

“I expect some decentralization and a reduction in our dependence on FAANG. [Facebook, Amazon, Apple, Netflix et Google]. »