Canadian SaaS accelerator L-SPARK released its State of SaaS report at SAAS NORTH 2023, and while it indicated a rebound in investment in the sector, L-SPARK’s managing director Patrick White believes there are still challenges facing Canada’s software startups.
“I think the last little while we’ve been really feeling that seed is struggling, and how long a company takes to get investment in that seed,” White said in a sit-down interview with BetaKit as SAAS North 2023.
“I think the last little while we’ve been really feeling that seed is struggling.”
Patrick White
White’s observations are in line with the numbers. The Canadian Venture Capital and Private Equity Association found that seed investments slowed in Q3 2023, and below the levels raised in 2022.
Investors in the ecosystem have also pointed to a lack of institutional capital at the seed stages, though that situation may improve with BDC Capital’s $50-million seed fund, announced in October.
But White is not certain that one new fund will solve all of the country’s early-stage funding woes.
“I think it’s really good news that BDC has a seed fund, but I was talking with another investor here at SAAS NORTH, and even if they do 10 deals—which would be great if they could even get that high—there’s still a lot of companies that need to get a seed deal done,” White added.
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L-SPARK, which has been accelerating Canadian SaaS startups since 2014, is now advising early-stage startups navigating these tough fundraising conditions. One big piece of advice? Lean on services.
“When L-SPARK first started, ‘services’ was a very dirty word, no one wanted to hear it,” White said, adding that now, when profitability is a concern for many companies, offering services can be a way to get there.
“It’s a lonely place to say you can’t do it on [a client’s] service paper, you’re going to do it on a product paper,” he added. “I think that discipline is going to be a huge piece.”
Listen to Patrick White’s full conversation below, and catch more conversations from SAAS NORTH 2023 on The BetaKit Podcast.