Since stepping down from the top job at Rogers Communications in 2013, after a 25-year career at the company, Nadir Mohamed has made some moves one expects from a CEO emeritus: a few high-profile directorships and a gig as CEO-in-residence at Ryerson University. Less conventionally, the 60-year-old executive has thrown himself headlong into Toronto's frothy tech start-up world, a place inhabited by millennial entrepreneurs and disruption-minded investors.
In 2015, Mohamed partnered with former Ryerson president Sheldon Levy to launch ScaleUp Ventures (1), aiming to tackle one of the tech set's most persistent obstacles: that large Canadian firms too often turn up their noses at domestic start-ups, opting to buy from established international firms. ScaleUp is armed with $25 million in public funding, $75 million in private cash and a leadership "council" of CEOs who can open doors.
What was the idea that sparked ScaleUp?
While I was at Rogers, I was very involved in trying to understand what was happening with digital technology. This included getting involved in a New York initiative that Mayor Bloomberg had started, putting established companies in the media and telecom sectors together with start-ups and developers, and really making the case for why New York City could be the growth engine for high tech. Could we do something similar in Toronto? (2)
That's when I thought that as a catalyst, we should create a fund that targets these sectors [media, banking, telecom and manufacturing], and brings universities, entrepreneurs, the corporate sector and government together.
Why is it so tough for Canadian start-ups to make inroads with large corporations?
In the past five years, companies have realized that understanding and leveraging disruption isn't a luxury any more; it's an imperative. So when you talk to bank CEOs or telco CEOs, you don't have to convince them. They get it. The question is how to do it.
How do you give Canadian start-ups the toehold they need?
I remember a company called Flybits, a mobile solutions business. I used to talk to founder Hossein Rahnama when I was at Rogers about his efforts. At one session, he said, "We've got some customers: Paris Metro, Fulham Football Club." I said, "These are pretty good customers, but it strikes me that none of them are Canadian. What about our banks, what about the Blue Jays?" He said, "Nadir, it's really difficult to actually get engagement [in Canada]."
Start-ups need connections. If you're in fintech and want to work with Royal Bank and just wander in and knock on the door, it will take you a long time to get somewhere. We can connect you to the right person. As a TD Bank director, I knew [former CEO] Ed Clark, and persuaded him to get people together. I always maintain that what entrepreneurs want is a chance to be heard. Without connections, it would have been hard to get that meeting. Hossein needed a kind of endorsement. I was able to give it.
If a start-up can't claim a large Canadian customer when they're pitching Fortune 500 companies, is that a strike against them?
I don't believe so. But to the extent that you have a customer that has scale, it's much easier to get the second customer because you already have the endorsement. If you think of the challenge from a start-up's perspective, to try to pitch a company that is a little more removed [geographically] is a lot harder than on home turf. If we can get that engagement early and provide that first customer, life gets a lot better.
Is it critical for these large customers to also be investors?
It's important. But it's not about Nadir coming to them and asking for a favour. In our model, we go to our friends in Royal Bank and say, "We're interested in this company, what do you think?" Their input is valuable to our decision about whether to invest. If they're uninterested in the company, it's less likely to succeed and scale up, and we're less interested in investing.
Should governments become more proactive in procuring products and services from Canadian start-ups?
Absolutely, and in multiple ways. You can go through the immigration process here to bring in talent, or you can look at procurement and RFPs. Can we structure them to be more conducive to giving our start-ups a chance to get in there and deliver solutions?
To me, it applies to every level of government. The model is replicable. There could be ScaleUps across the country that leverage different corporate resources. Could there be the equivalent of a ScaleUp in Alberta that, instead of banks and telcos, targets energy-based companies? You could see how that could be defined for different parts of the country. There could be an initiative that looks at clusters (3) across the country.
This interview has been condensed and edited.
1. To date, ScaleUp has invested in Naborly, a tenant-screening software firm; FundThrough, an invoice advance-payment platform; and Fusebill, a subscription management system.
2. Ontario is home to North America's second-largest IT cluster, after California.
3. The Toronto region has 13,000 tech firms, including a large cluster of cybersecurity outfits.