Economic Development

Why should high-growth firms accept borders?

North America

North America

“If you play in a high-growth [technology] sector, such as digital media, the world is your oyster, because you’re not constrained by the global economy,” argues Peter Conrod, vice-president of Client & Business Strategy for Royal Bank of Canada. This is one oyster, moreover, that can be shucked open different ways, as the foreign investing experiences of a dynamic pair of Canadian hi-tech enterprises illustrate. As the producers of an inherently “disruptive”, game-changing product, they, surprisingly, do not feel constrained by convention.

Varicent Software, fourth on PROFIT magazine’s list of Canada’s 200 fastest-growing companies, makes an innovative online
compensation-and-sales-performance management tool. “Even in tough economic times, our solution does well because it addresses a business need,” says CEO Dan Shimmerman.

Nor does Varicent confine its ingenuity to software. Although based in Toronto, the company started out selling its product in the US and
followed with expansion into Europe and Asia. Not until four years after it was founded did it start selling its software in its home Canadian
market.

“We don’t spend too much time on analysis to determine which markets to go to,” Mr Shimmerman confides. Instead, the company makes “calculated bets”. This is not as casual a process as Mr Shimmerman makes it sound. “We set clear expectations and watch [sales] milestones,” he says. If the firm fails to meet them, it will modify its plans or pull out of a country. Currently, Varicent has a presence in eight countries.

One example of Mr Shimmerman’s intuitive decision-making style is the way he chose to establish a regional headquarters in Asia. To him, it simply made sense for the firm to open an outpost in this booming region. So, the only question became whether to locate it in Hong Kong or Singapore. He chose Hong Kong.

Edmonton-based Yardstick Software Inc., 17th on the PROFIT list of rapid growers, offers web-based testing services for certification and licensing. Chris LaBossiere, the co-founder and co-CEO, does not even bother to look at such traditional metrics as market size and growth rate when making foreign-investment decisions.

“We sell the product where the regulatory environment creates a market for it,” he explains, and that may well be in a developed country with technologically advanced customers, whose language, culture and laws make them suitable candidates for Yardstick’s services. So, rather than venturing into emerging markets, Yardstick has targeted Australia; New Zealand; Singapore; the UK; and the US.

Although their approaches to foreign investing may seem rather unorthodox, these high-growth companies follow the opportunities they
see. “No doubt, that’s one reason these are high-growth companies to begin with,” suggests Royal Bank’s Mr Conrod.

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