Forced out of their offices by the pandemic, some Canadian scale-ups have discovered that embracing remote work also solves a longstanding talent problem in the country’s tech sector: hiring executives who’ve grown promising firms into very large businesses.
Companies that reach the $100-million recurring-revenue mark remain “a rarity” in Canada, said Mike Murchison, CEO of Toronto-based Ada, a customer-service chatbot firm. So “the roster of folks [with] that experience that you can pull from … is just not a very deep list today.” Instead, firms like his are finding sales, marketing and engineering leaders in Silicon Valley or further afield, and bringing them on remotely.
Promising Canadian tech firms have long faced challenges recruiting experienced executives to help them scale. A growing number of companies are now looking outside the country, and hiring leaders remotely, encouraged by the shift to distributed teams during the pandemic.
Once companies start to scale beyond a few tens of millions of dollars in revenue, they need to “start layering managers,” said Chris O’Neill, a Burlingame, Calif.-based general partner at Toronto-headquartered VC firm Portag3 Ventures. “Leading as a leader of a leader is very different than just being a leader [or] individual contributor.”
As growth takes off, companies tend to face problems in multiple areas at the same time, with business areas like pricing, customer support and communication becoming increasingly complex. By hiring executives who have already met those challenges elsewhere, “you just avoid them,” said O’Neill. “A lot of it’s figured out.”
But finding leaders with such experience domestically is a longstanding challenge for Canadian tech firms. More than half of the 125 founders, VCs, and policymakers in a March 2016 Lazaridis Institute survey identified “insufficient executive and managerial talent” as one of the primary impediments to scaling up.
Companies have filled some of those seats by relocating executives from abroad, a path eased by Ottawa’s fast-track immigration program for highly skilled workers. But not all will come. “It’s really hard to get people to move to Canada from California, because of this thing called winter,” said Angela Tran, a San Francisco-based general partner at Vancouver-based VC firm Version One Ventures.
Relocating an executive can cost firms between $250,000 and $500,000, said Jamie Savage, founder of The Leadership Agency, a recruitment firm. Yet companies are increasingly open to leaving top candidates wherever they are and letting them work remotely. Savage’s firm has placed 12 executives living in the U.S. at Canadian firms during the pandemic. That’s up from just three in 2019, and one placement of a U.K. executive.
Savage added that about a quarter of the agency’s domestic clients are “open to ‘anywhere hires,’” as long as they share a time zone. Sales and product leaders are in particular demand. Firms still have to account for the exchange rate, a compensation bump to incentivize a switch, and expenses related to setting up a U.S. entity to make the hire. Still, it’s cheaper than moving.
Nest Wealth, which develops software for wealth managers, recently made its first hire outside Canada: a CTO based in Silicon Valley. Pre-pandemic, the company’s 75 employees almost always worked out of its Toronto headquarters. “That’s how we thought we would build culture—[by having] people pick up on the innovative ideas and iterate just by being around the water cooler,” said CEO Randy Cass.
But the company has adapted to the pandemic-induced shift to remote work. “We’re never going back to five days a week in the office,” said Cass. That evolution also helped with securing the new CTO. Nest was looking for an executive with experience growing a company from tens to hundreds of millions in revenue, who’d scaled an engineering team and rebuilt a technology platform. Recruiters told Cass the number of potential candidates would be much higher if he was willing to look outside Canada.
Meanwhile, Tucson, Ariz. resident Hank Canitz joined Toronto-based Nulogy—which makes supply chain software for consumer packaged-goods companies—as vice-president of industry solutions in January. “Today, I don’t think it is such a disadvantage to be remote,” he said, noting that managers’ fears early in the pandemic that staff would do less work from home has not borne out. The longtime industry executive said he decided to join Nulogy based on its business model of connecting suppliers and manufacturers, not on location.
Last year, Ada began looking for a leader to scale its engineering team, from 50 people to a planned 300-plus. An experienced senior executive can “see around the corner and help you avoid mistakes,” said CEO Murchison. In November 2020, he hired Thomas Gerber as vice-president of engineering from Salesforce, where Gerber helped build its AI platform. Murchison said the new recruit has already helped Ada’s executive team make better decisions, such as prompting the firm to consider how new products will add to maintenance costs or slow development, rather than just the revenue potential.
Gerber isn’t Ada’s only recent remote executive recruit: it’s also hired director-level employees in Boston, Prescott, Ariz., San Diego and San Francisco over the last four months. The firm, which employs more than 200 employees, has always had some international staff and considered itself remote-friendly. But it’s now “a digital-first culture,” said Murchison. “We’re maniacal about geography not conferring any employee a career advantage.”
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While the headcounts of Ada, Nest and Nulogy are still in the dozens or hundreds, many larger firms are also taking advantage of the remote-executive opportunity. Last month, Ottawa-based Shopify hired former Stitch Fix CTO Cathy Polinsky, who said she’d only considered a job there after its shift to a “digital by default” workforce.
Similarly sized Ceridian recently hired a new chief financial officer and chief product and technology officer in the U.S. While the HR tech firm is headquartered in Minneapolis, most of its executive team is in Toronto. “To scale beyond” a few hundred million dollars in revenue, “you have to start bringing in people to the organization who have experience at scale,” CEO David Ossip told The Logic in December 2020. “The only place we can really get that is” the U.S.
The growing acceptance of remote work makes it easier to land those hires. “People are going to solve more for lifestyle” than office location, said Portag3’s O’Neill, previously CEO of productivity app Evernote. Distributed teams were on the rise before COVID-19 struck, but the shift has been accelerated by the pandemic. “It won’t go back,” he said.