Is it possible to create a successful SaaS in Canada?
A business based on a SaaS model, or Software as a Service, seems to be the best possible type of business nowadays.
In theory, the software written once brings periodic gains without too much human intervention. For many Internet entrepreneurs creating a SaaS is the final stage of development aside from other personal branding and tech industry projects.
In practice, the success of a SaaS largely depends on the great commitment of the people involved and probably is never fully a passive type of business. The best companies in the industry are also distinguished by high quality content marketing and customer service. Consumers also appreciate the opportunity to pay for software when needed, instead of one-off high fees for a boxed software.
This improves the industry statistics. According to Meena Sandhu in an article on Linkedin citing the Forrester Global, SaaS market is currently a 141 billion dollar industry. Monthly customer earnings and their high value in time foster the construction of stable business
SaaS in Canada
We have many successful examples of this type of business also in Canada. Everyone knows Hootsuite and Shopify, which are global tycoons with Canadian pedigree.
Spike in the SaaS industry events also proves the development of SaaS business in Canada. The first SaaS North conference hosted by L-Spark took place in Ottawa in 2016 and was attended by nearly 800 people. In a few months, the next edition will be held. The SaaS Showcase will be held more often and will present many businesses from the L-Spark ecosystem.
Each week, Canadian SaaS receive millions of dollars in funding as successive rounds of investment. A newsletter that aggregates this information features dozens of links to industry articles every week. The Canadian industry is growing at a galloping pace, resulting in global SaaS leaders from Vancouver, Ottawa and Markham, respectively.
Canadian SaaS Unicorns
Hootsuite – From lean startup to global leader.
79 out of a 100 Fortune 100 companies use Hootsuite – a Canadian SaaS, which was created in Vancouver, BC. Its goal is to help manage multiple profiles on social media and optimize the content.
The origins of the company started out in pretty much the same way as many other giant web companies – the founder had a need that was not sufficiently satisfied by the solutions available on the market.
However, such simplification can be detrimental to many future entrepreneurs. Ryan Holmes‘s CEO Hootsuite started with a gastronomy job. Later he ran an interactive agency where he created his own projects, alongside client orders.
Hootsuite was one of the projects. Despite the very good acceptance by the market, the project would have no chance of surviving without the support of investors. Further rounds of investment were necessary for Hootsuite to begin generating revenue.
The idea alone would be of little value unless it was supported by a smooth management of work and the proper development of the company. Ryan repeatedly emphasizes the impact of his small business experience, which he is able to understand many aspects of his business. Even when the team has over a thousand employees.
An important part of Hootsuite’s global success is the company’s focus on innovation. In one interview Ryan insists that everyone is responsible for innovation. Of course, some teams are dedicated solely to researching and making improvements, but no one is relieved of the search for innovative solutions in their field.
Just like in the previous Hootsuite story, Shopify founder Tobias Lucke was frustrated by the lack of a good solution for his problem. He had some interesting products to sell (snowboards), but even with his programming skills he did not see a simple way to make a nice online store with many external systems integrations.
Finally, he decided to solve this problem by developing the solution himself. At first only for his own needs, however, under the influence of the participating community, Ruby on Rails saw the potential to deliver eCommerce solutions. In 2006 Tobias and Scott Lake created Shopify in Ottawa. Despite good reception and income the co-founders worked there without a salary for two years. The company was born of money borrowed from family and friends and angel investors.
When they were starting, the very concept of SaaS was little known. The similar software was sold in a boxed version from merchants and the prices were not posted on the site. Shopify, on the other hand, offered a subscription in specific plans that were immediately available through their website. Even just this one thing was a great innovation in those days.
In 2008, co-founders became even more aware of the gigantic prospects ahead of the eCommerce industry. Two years later they raised an investment of $7 million, and a year later another $15 million.
Today Shopify is for many people eCommerce platform of choice. Most external systems integration is done with Shopify platform in the first place. As a result the company reports that it has more than 377,500 merchants using its platform, with total gross merchandise volume exceeding $15 billion.
In April this year, business circles in Canada circulated information about a valuation of a Canadian SaaS of over a trillion CAD. It was the first such information ever since Shopify, and it was about Real Matters, which was priced at $653 million a year before.
Founded in 2004, Real Matters runs an online platform that offers proprietary data on real estate services, such as appraisals, mortgage closings and title searches. Over time it has built a North American customer base that includes most of the top mortgage lenders, banks and insurance firms.
As in the story of Shopify and Hootsuite, the CEO, Jason Smith, played key role in the company’s great success. A man with tremendous business experience, who had the trust of investors. One of the most important investment partners of Real Matters is Wellington Financial LP, which has been investing in this company since 2010. Previously, they had invested in the earlier company of Jason Smith’s – Basis 100, so the good relations were crucial in this case. Mark Usher (Partner at Wellington) says, “To see what Jason and the team at Real Matters have built are nothing short of impressive and world class,” “We are happy to have played a role in their journey.”
At this point, Real Matters is the market leader in Canada and the US. However, the company plans to increase its market share three times in the next five years. The income each year is expected to grow between 20% and 25%.
Taking into account the company’s past successes and excellent organization and customer retention rate of 95%, the forecasts are very realistic.
Examples of Real Matters, Shopify, and Hootsuite show us that you can create a global SaaS in Canada that does well in the US market. Increasing support and easier access to know how makes it worth checking your idea. Especially when you have a need that is not yet satisfied in the right way.
If you need help creating a SaaS type of software, prototyping your idea, or applying for government grants to support your project, then join us for a brief online meeting. Perhaps we will be able to help.