OTTAWA — Toronto-based study-abroad coaching platform Halp launched in 2019 just before the pandemic-driven tech boom. But the tide changed in 2022 and the company faced a different economic reality when it raised a US$4 million seed round last October. “When we were doing the fundraising, the sky was already falling,” said CEO and co-founder Matthew McLellan.

Faced with his first downturn as a company leader, McLellan said he sought advice from advisory board members who led tech companies through the dot-com bust and the 2008 financial crisis. “They’ve been building, exiting, scaling companies and on the board of companies in edtech for 40, 50 years,” he said.

Canadian first-time founders like McLellan are seeking help via mentors who have been through tough times. For some startup CEOs, this is the first time their companies are facing the impacts stemming from a looming recession after starting their firms as venture capital investments peaked with the wild valuations of 2021.

With first-hand experience seeing that bridge rounds are becoming increasingly difficult to raise, Canadian startup investors and advisors are drawing from their experience to help founders survive until further funding is available, said McLellan. “They’re looking at their portfolio companies that have eight months of runway and they’re like, ‘This is how to not be in this position, because it might be hard to do your Series A before 2025.’” Halp has about three years of cash runway and the company expects to be cash flow positive by the end of the year, he added.

Investors have also told McLellan to focus on strengthening the company’s business fundamentals and tighten his belt wherever possible. 

“I think what [investors] are saying is: Reorient around the plan, don’t over hire, everyone has to stretch and push, be super frugal,” he said. 

McLellan now phones vendors like Slack and Salesforce once a month to ask for discounts and said he thinks twice before spending over $100 on anything. “There’s a shift in how you’re spending and actually stretching a dollar and being really frugal and scrappy,” he said.

Dev Jain, CEO and founder of Montreal-based railway data analytics firm RailVision, described a similar strategy. The startup, which helps companies like Via Rail save on fuel, raised US$4 million in seed funding in November and said his backers have helped keep him on the right path. 

Jain approached his investors when he saw the economy start to slow down and asked if he should be doing anything differently. “The message from all of our investors was, ‘No, don’t do that, you’re already on the right path. Don’t drive yourself nuts by thinking that there’s something else that you need to be doing,’” he said. 

The slowing market made companies like RailVision, which help clients identify ways to save costs, attractive. “The message from our investors was [that] the market is actually adapted to make this great timing … so now hit a home run,” he said

While post-seed round companies look to their boards for advice, startups in incubators like the University of Ottawa’s MakerLaunch are connected to a vast alumni network. 

“We have the Nortel group of professionals [from the] early 2000s, we have BlackBerry and now we have Shopify. So, we have these three really big cohorts of technical knowledge,” said program manager Lionel Regis. Many of those professionals are still in Ottawa and are looking to help young founders, he added. MakerLaunch relies heavily on its alumni network of businesspeople and public policy professionals for advice on how to apply for grants.

Startups in MakerLaunch may need to plan for rising costs because founders might need to choose between hiring a new employee or paying for hardware, so being connected to the alumni network and knowing where to look for resources helps, said Regis. “When we’re talking about cash flow and being able to make decisions, it makes those decisions a little bit easier,” he said.

McLellan said that raising funding in a tougher VC market helped Halp become “weather tested,” but still heeds the advice of his board to be thrifty. “Your investors and advisors are seeing what’s happening out there,” he said. “They’re like, ‘This needs to be your default mode.’”