Jack Newton wants to see British Columbia’s tech entrepreneurs in the same room more often.
Addressing an overflowing UBC Robson Square theatre at BetaKit Town Hall: Vancouver on Tuesday night, Clio’s CEO and founder shared that he’s grown accustomed to meeting BC entrepreneurs in the Valley and overseas, but rarely in his own backyard.
Newton, whose company raised the largest software funding round in Canadian tech history earlier this year, believes it’s the “strength of weak connections” that ends up powering community.
“I want to show that we can build great companies in Canada.”
Jack Newton, Clio
“Something I always find to be the case in Vancouver is: ‘holy shit. I didn’t know there was that cool company building something right in our own backyard,’” he said. “I think it’s just a missed opportunity for us to be spending more time together, connecting in person.”
BetaKit’s latest Town Hall in Vancouver convened 240 tech leaders from across BC to reflect on the future of the local and national tech sector. The event continued discussions from the May Town Hall about Canadian ambition, public policy, and navigating the challenges tech entrepreneurs face.
RELATED: Shopify CEO says Canada must overcome “go-for-bronze” culture at BetaKit Town Hall
The need for a more connected tech community in BC was a recurring theme of the evening. During a Vantage Points panel featuring voices from across BC’s tech sector in conversation with BetaKit CEO Siri Agrell, Atelier founder Scott Langille spoke to the growing hunger among young people in BC’s tech sector for a community that fosters reinvestment, mentorship, and a sense of belief in young founders.
“If we can assemble all of these people that are working on things behind closed doors, bring them into formats beyond just networking events and some internships, where they can actually be in the same room as someone, learn from them, that’s what it’s about for me,” Langille said.
Unsnagging the flywheel
Newton’s fireside conversation with BetaKit editor-in-chief Douglas Soltys framed the benefits of community in terms of flywheels that contribute to ecosystem momentum.
“These virtuous flywheels, I think, exist everywhere,” he said. “They exist both at the microcosm level right here in Vancouver. They exist at the Canada-wide level, and I think we need to be thinking about what kinds of things we can do to drive that innovation flywheel.”
In addition to community Newton listed talent and access to capital as components to fuelling ecosystem momentum, but noted public policy can either add or reduce friction to the flywheel. Where the government often gets wound around the axle, he believes, is in trying to pick winners.
Newton said while the government is usually less keen to back companies at the early stages, when support is most needed, they can also be anti-productive in keeping companies alive that would otherwise fail in a free market environment.
“For the government, a good North Star would be to look at the ecosystem the way doctors look at a patient,” Newton said. “First, do no harm.”
Newton pointed to the capital gains tax rate changes announced in Budget 2024 as an example of the federal government not meeting that standard, as well as the Scientific Research and Experimental Development (SR&ED) tax credit program, which he feels is often used to prop up ‘zombie’ companies. Vantage Points panelist Anne Taylor, vice president of business development at AbCellera, also singled out SR&ED, saying the program is out of sync with the growth needs of companies in her sector, and fails to incentivize intellectual property retention in Canada.
“The average life sciences company takes 15 years to generate proper commercial revenues. It’s a very long pathway, and it takes a billion dollars to get there,” she said, adding that programs like SR&ED often don’t take those factors into account.
Practical patriotism
Shopify CEO Tobi Lütke’s challenge to overcome what he believes is Canada’s “go-for-bronze” culture at the first BetaKit Town Hall resonated nationally. At BetaKit Town Hall: Vancouver, the conversation turned to practical approaches to creating more Shopify-sized success stories.
“Our DNA is Canadian, but if it’s going to help increase the odds that we can build a terrific company hiring out of the US or hiring elsewhere in Canada, we’ll do that in a heartbeat.”
The circumstances that helped shape the fortunes of that company are different than those scaling Canadian tech companies face today. Venture funding is on pace for its worst year in a decade, public Canadian tech companies are going private in droves, and with the ZIRP era gone, the IPO window remains closed.
Newton noted to the audience that Clio’s $200 million USD ARR, larger than Shopify’s at the time of its IPO, is only half of what is currently required to be viable in the public markets.
In navigating these waters, Clio might be Canada’s best current example that there are many different ways to successfully scale a tech company.
“I’m intensely patriotic, and a big part of how I wanted to build Clio is I wanted to build a Canadian company. I want to show that we can build great companies in Canada,” he said.
While proud of his company’s Canadian roots, he noted Clio would not prioritize a Canadian-first approach if it meant jeopardizing its success. Throughout the fireside chat, Clio’s CEO offered a number of examples of his ‘practically patriotic’ approach.
“In 2008, we were hopeful that we could start selling Clio to BC lawyers,” he said, drawing cackles from the audience. After being “laughed out of the room” in Canada, Clio only began to gain market traction after taking a “YOLO bet” in Chicago.
“And at that point, we were like, ‘Okay, we’re all in on the US,’” he said. “This is our market, and we’re gonna ignore the Canadian market for now.”
Newton acknowledged he has felt the pressure to follow a conventional path to growth, and credits Clio’s success to resisting that pressure. Instead of confining its team to the BC market, Clio opened an office in Toronto in 2013 to expand its reach in eastern Canada and the US. Announcing on stage that Clio will open a new Toronto office in a month, Newton told the audience he believes companies need to be in two major Canadian cities to scale. Today, Clio’s leadership team is distributed across Vancouver, Toronto, San Francisco, and Los Angeles, among other cities.
“Our DNA is Canadian, but if it’s going to help increase the odds that we can build a terrific company hiring out of the US or hiring elsewhere in Canada, we’ll do that in a heartbeat,” he added.
Pragmatism has also informed Clio’s approach to fundraising. Newton recalled early rejection from Canadian VCs, which pushed Clio to seek capital south of the border. “I’ve had a lot of calls with Canadian VCs over the last five years [who say] Clio is their … ‘one that got away’ story, and I take some small amount of satisfaction in hearing that,” he added.
Newton has felt the weight of demands from existing investors aging out of their funds to exit via IPO or a sale. On the Vantage Points panel, Jane Software CEO Alison Taylor also lamented the Canadian tendency to fall into well-worn tracks by selling early. “I think we just haven’t been aggressive enough,” Taylor added.
Rather than succumbing to those pressures, Clio has instead provided its investors with liquidity by raising new rounds with significant amounts of secondary capital to bring new blood to its cap table. “You don’t need to sell,” Newton said, adding that founders can look at the private markets as a way of “letting your existing investors punch out.”
Clio’s decision to remain a private company appears to have proven wise, with many public tech companies actively chosing to return to the private market this year. In the last few months, BC has seen high-profile firms like BBTV, Copperleaf Technologies, and CloudMD all depart the public markets, and Lightspeed and Dye & Durham exploring a go-private sale.
Speaking to how Clio’s approach to financing has performed in comparison, a hint of pride slipped through Newton’s calm and thoughtful demeanour.
“If you look at what we did on our Series F, which was $900 million USD, that’s multiple times the size of the average IPO, and we did it entirely in the private market, without any of the turbulence that you see happening in the public markets,” he added.
Photos courtesy Eric Ennis from Renovo Agency for BetaKit.