How Bridgit and Three Other Canadian Startups Went from Clever Pitches to Scaling Companies to Real Contenders

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THE MAGAZINE FOR LEADERS

HOW BRIDGIT AND THREE OTHER CANADIAN STARTUPS WENT FROM CLEVER PITCHES TO SCALING COMPANIES TO REAL CONTENDERS

MARCH 2020 AN ICON IS RISING

The tallest tower in Canada, designed by Foster + Partners, one of the most innovative architectural practices in the world, is a feat of structural engineering. An exoskeleton/super structure hybrid at Yonge and Bloor, its design allows for a maximum of sunlight to penetrate the interiors. * Eight mega columns have footings more than 45 meters (148 feet) below street level. * The tower will make use of 61,000 cubic meters of concrete in total. That’s enough to cover the distance from Toronto to Montreal if measured in wheelbarrows. * Approximately 4, 500 metric tons of structural steel will be used during its construction, the equivalent of 25 jumbo jets. * The amount of rebar that will be used – reinforcing steel used as a tension device in concrete structures – is roughly 7,500 metric tons. That amount could wrap halfway around around the world.

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What does Attabotics CEO Stephen Gravelle have in common with Ant-Man? Page 26

ALL GROWN UP Sure, anyone can launch a business. Finding the financing and customers to make it grow ON is another story. We talk to the entrepreneurs BINS behind four startups—or should we say RO scale-ups?—about how they did it. UN /By Liz Agrba, Stacy Lee Kong, SHA Anthony A. Davis and Jeffrey Jones GE) PA (THIS 4 EDITOR’S NOTE 12 ASK AN EXPERT 40 WEALTH 28 The secret to being the Catherine Wood bets

MANDEL; 5 ADVISORY BOARD best boss you can be big on game-changing JOURNEY TO THE TICKLE is taking your vacation technology (think IN YOUR THROAT

KAILEE 7 EIGHT THINGS days. Plus, how to keep Tesla and bitcoin), and Can Roberto Bellini BY The good news: It’s your top performer from that innovative spirit recreate some of his easier than ever to strike defecting extends to how she father’s biotech magic by

GAZINE it rich. The bad news: runs ARK Investment solving one of medicine’s

MA The world is still mostly 14 THE EXCHANGE Management B run by men (and they’re Rola Dagher isn’t like most nagging problems? RO

R sticking around longer) other CEOs. She came 44 TURNING POINT /By Sean Silcoff FO

Y to Canada as a teenage Not even satellite maker 9 NEED TO KNOW refugee. Her big break Telesat is immune to

USIVEL How to shut down the was a telemarketing the disruptive power CL rumour mill—or use it job at Bell. She’s an of Netflix. That’s why 34 EX T to your advantage outspoken advocate for CEO Daniel Goldberg PUMPED

SHO mental health. And her is going boldly into Look out, Couche-Tard: 11 TL;DR cramped office suits her the realm of low-earth

APH Calgary-based gas supply Is it USMCA or just fine satellites GR giant Parkland Fuel wants TO CUSMA? Plus to eat your convenience-

PHO everything else you need to know about the soon- store lunch. VER /By Joanna Pachner

CO to-be-ratified agreement

MARCH 2020 / REPORT ON BUSINESS 3 Editor’s Note

March 2020, Volume 36, No. 6 Editorial Editor JAMES COWAN Assistant Editor DAWN CALLEJA Senior Editor JOHN DALY Copy Editor LISA FIELDING Research CATHERINE DOWLING, ANNA-KAISA WALKER Art Art Director DOMENIC MACRI Associate Art Director BRENNAN HIGGINBOTHAM Director of Photography CLARE VANDER MEERSCH Contributors MICHAEL BARCLAY, STEVE BREARTON, JOE CASTALDO, TREVOR COLE, TIM KILADZE, JASON KIRBY, IAN MCGUGAN, JOANNA PACHNER, JUDITH PEREIRA, RITA TRICHUR, LUIS MORA Advertising Chief Revenue Officer ANDREW SAUNDERS Managing Director, Creative Studios and Ad Innovation TRACY DAY A better sandwich Senior Manager, Special Products ANDREA D’ANDRADE Product Manager RYAN HYSTEAD When Restaurant Brands International unveiled its fourth-quarter earnings Production this month, most of the Canadian headlines focused on the disappointing per- Managing Director, Print Production SALLY PIRRI formance of its Tim Hortons brand. There were plenty of reasons to be dis- Production Co-ordinator heartened, including a glut of limited-time offers and an overly generous loy- ISABELLE CABRAL alty program that cut into revenue. Comparable sales fell by 4.3% in the fourth Publisher PHILLIP CRAWLEY quarter, thanks to the chain’s compounding missteps. It was a bad three months Editor-in-Chief, The Globe and Mail DAVID WALMSLEY at the end of a bad year at the end of a bad decade for the doughnut behemoth. Managing Director, Business From an ill-fated partnership with Cold Stone Creamery in 2009 to an ill-fated and Financial Products adoption of Beyond Meat products in 2019, it’s been a long time since the chain GARTH THOMAS Editor, Report on Business had a clearheaded strategy. GARY SALEWICZ That said, there was good news in RBI’s results that was largely overlooked because of our national Tim Hortons obsession. The company—which also Report on Business magazine is published 10 times a year by The Globe owns Burger King and Popeyes—reported an 8.3% boost in sales for 2019. While and Mail Inc., 351 King Street E., Toronto the burger brand added more than 1,000 new locations in the past year, it was M5A 0N1. Telephone 416-585-5000. Popeyes that truly stood out. The fried chicken operation saw a 34.4% increase Letters to the Editor: [email protected]. in comparable sales in the fourth quarter and 12.1% for the year overall. The next issue will be on March 27. What explains this success? A really, really good sandwich. Initially launched Copyright 2020, The Globe and Mail. in August, the Popeyes chicken sandwich was neither particularly innovative Indexed in the Canadian Periodical Index. Advertising Offices nor fancy. It was a fried filet of white meat on a brioche bun with pickles and Head Office, The Globe and Mail, sauce (mayo or Cajun). Both versions earned plaudits. No less than The New 351 King Street E., Toronto M5A 0N1 Yorker’s Helen Rosner raved: “[The] sandwiches stick the landing on the most Telephone 416-585-5111 or toll-free Send feedback to 1-866-999-9237 robmagletters@ important element of a fast-food sandwich: the fusion of its distinct compo- Branch Offices globeandmail.com nents into an ineffable, irresistible gestalt.” Thanks to one menu item, Popeyes’s Montreal 514-982-3050 revenue grew by US$393 million in one quarter. Restaurant Business Online, a Vancouver 604-685-0308 Calgary 403-245-4987 trade publication, noted by way of context that the boost was equivalent to the Email: [email protected] total annual sales of Chuck E. Cheese. United States and countries outside of This success provides a reason to be optimistic about Tim Hortons’s fresh North America: AJR Media Group, battle plan: make better stuff. The chain has already installed new coffee brew- 212-426-5932, ajrmediagroup@ globeandmail.com ers in more than 2,000 locations. “We’ve continued to use decades-old brewing Publications mail registration No. 7418. technology while the industry has evolved,” Restaurant Brands CEO José Cil The publisher accepts no responsibility told analysts. In short, Tim’s distinctive glass pots are headed for retirement. for unsolicited manuscripts, SHIRI KE

Improving the quality of core products is a monumental task, but RBI will transparencies or other material. H Printed in Canada by Transcontinental OS

face a second one that’s even bigger—convincing consumers. When relaunch- Printing Inc. Prepress by DMDigital+1. UR ing its own coffee, McDonald’s Canada gave away over 100 million cups to woo Report on Business magazine is electronically KO available through subscription to Factiva.com patrons. That’s the scale of the effort Tims will need to undertake, given a new from Factiva, at factiva.com/factiva APH GR double-double is unlikely to be a social media darling like that chicken sand- or 416-306-2003. TO wich. Still, old brands can earn new respect from consumers. /James Cowan tgam.ca/r PHO

4 MARCH 2020 / REPORT ON BUSINESS Advisory Board

LENA KOKE CEO, AXESS LAW Provides affordable legal services via retail outlets It’s June 2, 2013. I opened my business one hour ago, and I have my first client. Winning. Three weeks later, I’m suffering from a severe lack of sleep and have epically failed at appropriately backing up my client files. Our computer network has gone down and now I’m manually retyping three weeks’ worth of client meetings. Losing. Two weeks later, and things are going well again. Winning. I got this. Three weeks after that and ... can you guess? Losing. Losing badly. Entrepreneurship isn’t about one or two big failures that teach you everything you need to know; it’s The Joys of Failure about daily failures that test your ability to regulate emotions, In our last issue, we asked eight successful entrepreneurs to develop the right mindset and simply show up. When you show tell us about their greatest business failures. Then we invited up—and I mean, show up like your life depends on it—you will executives from the Report on Business list of Canada’s Top find success in every failure. One day you’ll wake up and realize Growing Companies to share their own tales of defeat—and the mindset you developed was the most important thing you what they learned from losing. have ever had and will ever have.

VADIM KATCHEROVSKI CEO, EASY PROJECTS A customer punched me in the Develops project- and work-management face for interrupting his dinner. software for businesses That was rock bottom for me. One of my biggest mistakes was not investing in the right people early on. For a number of years, the strategy was to hire people we could afford instead of paying a premium for the top talent. As a result, our company was not PETER KALEN growing as fast as it could and eventually hit CEO, FLEXITI FINANCIAL a plateau. Once I took the plunge and started Issues private-label credit cards for retail and consumer clients hiring A players, we experienced double-digit growth within a year. That’s one investment Flexiti Financial was born out Wellspring had found a new where you can get the highest returns. of Wellspring Financial. After investor, rebranded as Flexiti and just over a year of operations, was back in business, scaling Wellspring’s senior lender pulled up its team and originating new JUSTIN L. THOUIN its funding due to circumstances loans. This experience helped us CEO, LOWESTRATES.CA beyond our control. As a result, understand the importance of Runs a website that allows users to compare in fall 2015, Wellspring was perseverance, especially when financial products forced to downsize the team launching a business, and the to refocus on recapitalizing the importance of establishing a I tried my hand at consulting before launching company. Within six months, clear vision in the market. LowestRates.ca and was parachuted into companies by banks to help turn things Send us your around. My career as a consultant was short: thoughts at It only involved two assignments, and I was robmagletters@ HOW LIKELY ARE YOU TO TAKE RISKS DESPITE globeandmail.com, THE FEAR OF FAILURE? essentially fired from both. I made some tweet us tough suggestions that neither company’s @robmagca 50 47% management wanted to hear. It was clear they had their own ideas and wanted me to parrot 40 37% those back to them rather than make the A radical changes I recommended. 30 NAD What I learned—in addition to realizing I CA 20 may be the world’s worst consultant—was TUP that if I truly believed in my ideas, I should 13% AR 10

ST put my money where my mouth is. I took my

CE 2% recommendations and implemented them into 0 1% UR LowestRates.ca. VERY LIKELY LIKELYNEUTRAL UNLIKELYVERY LIKELY SO

MARCH 2020 / REPORT ON BUSINESS 5 Advisory Board

JOSH NILSON CO-FOUNDER AND CEO, EAST SIDE GAMES Develops narrative-idle video games for mobile When we started in 2011, we decided to team and were able to recover, but scale up as quickly as possible to get more I wouldn’t grow at that scale again starting products to market. We grew our team out. I would focus on growing slowly while to 40 people from 12—that was a huge getting our early products to market, strain—while still working to establish our ensuring we have properly defined what culture. We have a scrappy, world-class our core values are as a company.

RAHIM MADHAVJI PRESIDENT, KNIGHTSBRIDGEFX BRIAN YOUNG, Offers currency exchange at discounted rates CEO, HOME PAINTERS TORONTO Failure teaches you that you suck. It’s always your fault. Offers residential and commercial painting Whatever you are doing is not working, and you need and handyman services to change. You have not met the standard needed to succeed. Change or die. When it comes to marketing and Failure I went through 15 years of struggling sales sales, the best thing you can do is realize you are failing, teaches as a door-to-door residential painter. The so you stop throwing good money after bad. Change you that product was fine. But my way of marketing your process and fail until you get it right. my business was completely wrong. My you suck. competitors were all going online, and I It’s always refused. I was just set in my ways as a typical hard-headed, old-school marketer. ANNE MARIE KIRBY, DAVID CICCARELLI your fault. In September 2011, I was cold-calling CEO, COREHEALTH CEO, VOICES.COM a house in North Toronto and a customer TECHNOLOGIES Whatever Operates an punched me in the face for interrupting his Operates a platform used online marketplace you are dinner. Although the punch didn’t do any major by corporate wellness to connect businesses damage, that was rock bottom for me. with voice talent doing providers I finally capitulated and woke up to face my Over the years, I’ve In the early days, we is not fears in 2012. I hired a business coach, who recognized that, for the took out a $30,000 working, established a website for me and changed the most part, failure is doled loan for a direct mailing way we marketed ourselves. The rest is history. out in doses that allow campaign. We sent and you We have gone from $350,000 in sales us to contend with it. oversized postcards to a need to in 2011 to over $3.3 million in 2019. That’s Looking back, now that list of ad agencies in New almost 10 times the business. I think this I’m operating a growth- York and Los Angeles. change. exemplifies how hard work, perseverance and mode company and have There was a promo code tenacity—coupled with up-to-date digital another startup in a very on the postcard that marketing methods—can grow your business challenging field, if I people could input on exponentially. knew ahead of time the our website for a chance plethora of “failures,” big to win an iPod. At the and small, that I would end of the campaign, face at different points, we had a whopping two ALEXANDRE GRAVEL I’d likely not have jumped entries. Our cost per CO-PRESIDENT OF STRATEGY, TOAST into either venture. I can’t lead was $15,000! This imagine humans would (epic) failure taught us a Runs a digital content agency and produces television take any of the chances few things. First, never Toast is now a 20-year-old organization. In 2011, we hit a wall. A solid wall. we have to advance the ask someone to switch We had to lay off 100% of our employees. The reason? To survive with the world, and a few of us channels (like from a model we had, we had to either be the flavour of the moment with a highly would still be living in physical postcard to a hip, creative team or be cheap. Both of these options came with types of risk caves. Ultimately, I’ve website). Second, if you management that didn’t fit our vision. As entrepreneurs, we need to always learned that each failure sell online, advertise have an eye on the market. But we also need to make sure the way we are gives us the opportunity online. Not only did I learn differentiating ourselves from the competition is also in sync with what the to solve it, take a new these valuable lessons, market is looking for. It is not just a question of product-market fit, but a direction or just rethink but it also made me willing question of making sure the narrative the organization puts out there matches our purpose. Those who to experiment. I knew the vocabulary of the market. are open will not only even the worst failure Since 2011 we’ve rebuilt around a new narrative that fits the market and its survive but grow. would bring insights. needs, and still remains aligned with the values and vision we are aiming for.

6 MARCH 2020 / REPORT ON BUSINESS Eight Things

SLOW AND 03/20 STEADY WINS THE RACE? 3

Almost all companies (93%) CEOs It’s getting simpler to get rich are preparing for Business owners believe it’s easier to become a millionaire the future, but APPROACH TO DIGITAL are than when they started, according to an Entrepreneur’s approaches vary, TRANSFORMATION Organization survey. Respondents cited the opportunities to according to a MIT staying automate and sell online among other reasons. Sloan Center survey. longer 56% 44% INCREMENTAL RADICAL The average 61% tenure for a EASIER 22% CEO of an S&P HARDER 500 company 2 is now 10.2 17% 4. years, compared with 7.2 years THE SAME during the financial crisis, Big product defects can according to the Conference lead to happy customers Board. “The less severe a product malfunction is, the 11 YEARS more inclined consumers are to defer the initial CALIN decision about whether to take corrective ROVINESCU AIR action... This dynamic tends to trap consumers CANADA in a state of inaction, resulting in their enduring smaller malfunctions longer than larger ones. 17 YEARS BILLBOARDS ELLIS A consequence of these inaction traps is that JACOB minor product malfunctions may result in less CINEPLEX WORK enjoyable overall consumption experiences than 24 YEARS more severe defects.” 62% of Canadians have noticed HEATHER —Neil Brigden and Gerald Häubl, REISMAN a billboard in the past week. Journal of Marketing Research INDIGO 5 (source: Vividata)

6 (Free) books still rule Americans made nearly twice as many trips to libraries than GENDER to the movies in 2019, according to a Gallup Poll.

ROLES AREN’T 10.5 GO TO A LIBRARY

AVERAGE TRIPS 5.3 GO TO A MOVIE CHANGING PER YEAR 4.7 ATTEND A LIVE SPORTING EVENT Ipsos asked Canadians if specific 3.8 ATTEND A LIVE MUSIC OR THEATRICAL EVENT characteristics, household tasks and occupations will be more or less associated with a particular gender in five years. NO DON’T MORE LESS CHANGE KNOW Plenty of executives 35% INDIVIDUAL CONTRIBUTORS 8 work remotely 32% TEAM MANAGERS 13% DIRECTORS 14% 25% 51% 10% Many remote workers are “individual 3% VPs contributors,” or those without management 3% SVPs/EVPs responsibilities, but plenty of execs avoid the 5% FOUNDERS/C-LEVEL office as well, says an Owl Labs survey. 9% CONSULTANTS

MARCH 2020 / REPORT ON BUSINESS 7

Need to know

Last November, at the height of Black Friday and Cyber Monday sales, a post appeared on Facebook falsely claim- Rumour mill ing Costco was offering a $75 online coupon. The retail giant Unchecked gossip can seriously damage quickly quashed the hoax using traditional media and Face-

RA book to declare, “This is a SCAM.” a brand. Here’s how to make sure the

DAU The incident is a clear example of an effective corporate response to whisper network is working for you. an online falsehood, says Tim Hannigan, an assistant professor at the TINA University of Alberta School of Business. “They were able to very suc- CRIS cessfully get on this to control the message,” he says. ION Learning to manage rumours “should be part of the core competency AT

TR of a modern C-suite,” says Hannigan, who, along with other research- US ers, is studying the impact of gossip—good and ill—on a company’s ILL

MARCH 2020 / REPORT ON BUSINESS 9 Need to know

reputation, new product development, respond,” he says. WORK and customer and supplier relationships. For the 2013 launch of the BlackBerry The temptation to say “Psst, did you 10 operating system, he says the company ADVICE know?” runs deep. But not all rumours are “really embraced” the use of selective FROM detrimental. A tech company, especially, information sharing during a year-long DATING might want to trigger a buzz about a new strategy. product or service, turning to industry “By releasing information in a slow APPS bloggers and journalists as conduits for and controlled way, we were able to miti- Technology has controlled leaks. Even a company as noto- gate rumours and speculation, while get- transformed the riously secretive as Apple, Hannigan says, ting and keeping customers excited and dating world, and how sometimes publicly interacts with blog- engaged about the new product leading users interact with gers and industry watchers to whet their up to launch,” Gadway says. matchmaking apps could appetite for an imminent release. Speculation is a “blessing and a curse,” offer useful insights In one study, Hannigan and his co- observes Scott Greenlay, a former national for businesses looking authors interviewed 30 members of an director of the technology practice for to boost employee unnamed consumer electronics firm to MNP, a national accounting, tax and busi- engagement, according analyze how it incorporated rumours into ness consulting firm. “In the private sector, to Jui Ramaprasad of product development. you never want to admit to manipulating McGill University’s “It was surprising to find rumours used the rumour, and you don’t want to admit Desautels School of widely in the decision-making process,” when you have had to react to it,” he says. Management. People are the researchers reported. Despite some False or misleading information cannot much more engaged on tension among employees about how to be ignored, Greenlay emphasizes, because mobile phones than on interact with blogging sites, the research- it moves at such a high speed through desktop computers, says ers found the company used external gos- social media. Companies need to develop the associate professor, sip to help assess its new product innova- a risk management plan long before a dam- co-author of a recent tions. aging piece of gossip surfaces unexpect- study on the topic. There Jeff Gadway, a former head of product edly, he says. “When it happens, it does not are multiple reasons for marketing at BlackBerry, says company take months or weeks–– it takes hours for this, including simple officials initially had an adversarial rela- the rumour mill to possibly destroy your timing. “There are some tionship with bloggers and tech journal- company.” times of the day when we ists who fed off hearsay. “Later on, we Now working as a consultant in the let down our guard more came to realize our best strategy was to tech industry, Greenlay advises execu- than others.” (Meaning, try to embrace those particular sites, and tives to anticipate the possible outflow you’re probably thinking build constructive and aligned relation- of leaks from within their organizations. more romantic thoughts ships with those journalists,” says Gadway, For example, senior leaders should write at 10 p.m. than you are at who co-founded Galvanize Worldwide, a emails as if they will be read by others out- 10 a.m., parked behind marketing and communications consul- side the company. your work computer.) tancy based in Waterloo, Ont., in 2015. The bottom line, say the experts, is that Further, dating apps likely The collaborative approach paid off. you need to create a strategy to manage employ some variety of “When [bloggers and journalists] heard a the whispers about your firm. “If you don’t “swipe left or right” that rumour, instead of just publishing it right have a plan and tools in place, get them encourages impulsivity; away, they would contact us and give us an now,” urges Greenlay. “With the rumour the easier it is to click yes, opportunity to comment, to add texture mill today, one individual has the ability to the more often people or, if something was blatantly wrong, to have the voice of a lion.” /Jennifer Lewington do—and faster. “The time between seeing a profile and taking action is much less on a mobile,” says Ramaprasad. The lesson here for savvy WHEEL AND DEAL companies? Stop worrying about having workers sit at their desks from nine to five, and embrace It doesn’t always pay to negotiate, according to researchers from the University of mobile technology. It Pennsylvania. In a series of studies, Einav Hart and Maurice Schweitzer asked students could improve morale to complete a simple task, such as writing a short essay in seven minutes or less. Half of and enable employees to the participants were forced to discuss the terms of payment, while the rest were given a take confident action— fixed amount. Those who haggled devoted less time to the task and wrote an average of whenever inspiration 96.4 words compared with 132.6 from the other group. The researchers concluded “nego- strikes them. tiations can harm post-agreement motivation” and “may cause more harm than good.” /Rosemary Counter

10 MARCH 2020 / REPORT ON BUSINESS the most affected. “It’s possible the price you pay for a vehicle will be higher, because the agreement demands greater continental protectionism,” Fagan says. This means automakers will need to buy more parts from North American companies rather than markets such as Asia or Europe. Canadians tend to shell out more for their dairy products due to “cartel-like” arrangements, Fagan says, but the new deal will potentially lower the cost of cheese and milk by opening up 3% of the dairy market to the U.S. The USMCA will also help pharmaceutical makers gain better access to new biologic drugs, which offer novel treatments made from blood, viruses and other living TL;DR organisms (Botox is an example), therefore potentially lowering the cost to consumers. Trader woes The fine print One other “small yet important” This country is in the home stretch of finalizing a deal on cross-border change involves state-to-state continental trade. But what do you need to know about the United dispute resolution: If one coun- States Mexico Canada Agreement (or the Canada United States Mex- try gets mad, the new agreement ico Agreement, depending on which side of the border you’re on)? requires a panel be set up to adju- Here’s how this new deal will impact your business—and the nation’s dicate it. Unlike under NAFTA, political relations. one country can’t frustrate the process by stalling or filing How this began and industries in North America motions, according to Lawrence The USMCA (or CUSMA, [and] to ensure smooth cross- Herman, a veteran international according to Canadian politi- border trade.” trade investment lawyer. “In an cians) is essentially a renegoti- What happened era in which we’re dealing with ated NAFTA, which came into The countries began talks on an administration that’s follow- force Jan. 1, 1994. That deal added May 18, 2017, and ultimately ing an aggressive America-first Mexico to the pre-existing agree- signed a deal Oct. 1, 2018. Canada policy, it’s important to have a ment signed in 1988 between the contends the document has bet- system that guarantees, in the United States and Canada. On ter protections for labour rights face of a dispute, a panel will be the 2016 campaign trail, then and intellectual property. “A ll of appointed to hear it out,” he says. presidential candidate Donald us together have finally accom- What happens next Trump vowed to renegotiate— plished what we set out to do at All three countries must ratify or tear up—that treaty. But this the very outset: a win-win-win the deal before it can start to be wasn’t just a whim of a volatile agreement which will provide implemented. In the latter part politician; the old deal needed an stability for workers in all three of 2019, the USMCA required update. And badly: The internet of our countries,” said Chrystia terse renegotiations, and Prime was not a world-shaping pres- Freeland, Canada’s chief negoti- Minister Justin Trudeau had ence during the negotiations for ator and deputy prime minister, an election to win. Mexico rati- the ’94 arrangement. And the after Mexico’s signing ceremony. fied the deal in December, and previous accord was more about Is this a good deal for Canada? Trump signed it into law on Jan. products than people, accord- The simple fact that Canada 29. Canada will likely ratify now ing to Drew Fagan, a professor at came out largely unscathed is that Parliament has resumed. the University of Toronto Munk indeed a win, Fagan says, given When will we start to see changes? School of Global Affairs and the tone of the negotiations. Expect to see some impact later Public Policy. “The new NAF- The implications in 2020, once an implementation TA’s entire goal is to set clear The auto and dairy sectors and framework is established. (and better) terms for workers pharmaceutical producers are /Sarah Boesveld

MARCH 2020 / REPORT ON BUSINESS 11 Need to know

Even the sweetest perks won’t make much difference, says Goldbeck, especially since the employee now knows you could have offered a better deal the whole time. Instead, good bosses should pre-empt this bad blood and actively move in the other direction. “If she’s your star performer, you should have an idea of what’s wrong and what might fix it— maybe more vacation, a raise, management opportunities, educational experience,” he says. Money, he adds, is rarely the main motivator (and if you have no idea what’s bugging the ASK AN EXPERT employee, consider the problem could be you). But you won’t Give me a break really know until you ask. “Take that employee out to lunch, and tell them you value them and I’ve heard of companies offering want them to be happy,” says Goldbeck. Skip any aggressive unlimited vacation to their employees. questions about their job search Would it work for my company? and focus on making this job awesome. “A sk for specific things you can do and then do them,” Before implementing the trendy taking your own vacations, he says. And know it’s very, very, unlimited vacation policy which sets a precedent. These very hard to leave a boss who favoured by cool companies are the first steps toward creating cares that much. like Netflix and Glassdoor, a work environment that sucks stop for a second and make an less. Once you’ve addressed your I’ve been invited to an event assessment. “A re people using workplace culture, an unlimited that’s “business formal.” up their allotted vacation time as vacation policy will fit right in, What does that even mean? it is?” asks Beverly Beuermann- with only the slightest margin As far as strange-seeming dress King, an organizational stress for error. “The only downside is codes go, this one’s actually and resiliency expert. She’s also when someone abuses it, which refreshingly straightforward. the spokesperson for Expedia’s probably 98% of the people “‘Business formal’ basically Vacation Deprivation survey, who work for you won’t,” says means a matched business suit,” which every year reveals a bleak Beuermann-King. But those 2% says Kimberly Law, an image truth: While we might crave a who are bad apples will be easier consultant. “For men, that’s a break, Canadians as a whole fail to spot than ever before. tailored jacket and pants. For to use 40 million vacation days women, the pants can be a each year. This is your problem I’m worried one of my top skirt or even a dress—as long as a boss, whether you offer performers wants to leave. as they’re the same colour and unlimited vacations or not, and She hasn’t received a job offer fabric.” Then all the same formal

Send your it’s a far more real issue than (yet), but I think she’s looking rules apply: neckties for men, questions to an employee’s desire for an around. What should I do? stockings for women, accessories askanexpert@ eight-month trip to Thailand. Just for fun, let’s turn this that are simple but not boring. In globeandmail.com “Even when offered unlimited question upside down and ask general, the darker the suit, the time, people feel they have too Henry Goldbeck, a headhunter more formal your outfit, but that much to do or they’ll be seen in Vancouver, what a bad boss doesn’t mean black should be Y as not dedicated or people are would do to make it easier to lure your go-to. (“It’s intimidating,”

secretly monitoring their time away a star worker. The answer? Law says.) And, last but not least, KENDR anyway,” says Beuermann-King. Nothing at all. “The worst thing every time you hear the word M C Tackle these problems through a boss could do is wait until she “formal,” it’s always better to be JOE reasonable workloads, good has an offer and resigns, and overdressed than under. “You can ION AT

communication and flexible then say, ‘Well, what can we do? always loosen your tie,” says Law, TR hours. And make sure you’re Do you want more money?’” “but you can’t go the other way.” US ILL

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14 MARCH 2020 / REPORT ON BUSINESS Need to know

Why does the head of this big company get this office? Because of this. [She gestures toward a window looking south to the lake.] I want the view. I don’t go for big offices and glamour. I go for what makes an impact and what makes me feel good, and this view is worth a lot. Water is peace for me. Were you near the ocean in Lebanon? Growing up, we lived five minutes from the ocean. I’d look out of where I was born and raised, and you could see the THE EXCHANGE ocean, which is beautiful. But I can’t swim. We were too busy hiding from bombs and bullets Rockets than learning how to swim. (1) What was your reality in Lebanon before coming to Canada? to routers Survival. Most of my life in Rola Dagher escaped Lebanon, came to Lebanon was around, how do we make it to the next day? I was Canada via Cyprus, worked in retail and born and raised in a very, very then got her big break: a telemarketing small town. The translation of job at Bell. Now she’s president and the town from Arabic to English CEO of Cisco Canada. /By Trevor Cole is “back of the cave.” That town had maybe 200 people, and they were all related. All the Dagher Since she replaced Bernadette Wightman family. And my dad decided to as Cisco Canada’s president and CEO in get out of that town to find a 2017, Rola Dagher has been a prominent wife. He was the first one who voice on matters that have little to do with married outside that town, and data centres, switchers, routers and the various they had a family of six girls. other bits of digital infrastructure Cisco sells. As a You’re the eldest? Lebanese immigrant with a drama-filled backstory, I’m number two out of six. The she speaks out frequently on immigration, work- oldest is still in Lebanon, and place diversity and mental health. But as someone there are four in Toronto and one who rose from terror-filled hardship to become the in Jersey. Being born and raised head of the Canadian arm of a global enterprise, in a very small town taught one that claims to contribute 1.7% to this country’s me nothing but humbleness. GDP, Dagher also has much to say about leadership, We were at a school with all 1. During KKAB

SA ambition and what it takes to succeed in corporate nuns and priests. The school Lebanon’s civil war, which Canada. It certainly isn’t having the right MBA or bus would come and take us stretched from ANNIE family connections, or even—as I discovered when to another town. My dad was 1975 to 1990,

APH we met in her tiny, glass-fronted office, a room so made fun of in the town we lived more than GR 100,000 people

TO cramped its door hits the back of the guest chair—a in ’cause the Middle Eastern died, and more

PHO taste for the perks of status. culture is very strong on having than a million boys in the family. Women didn’t fled the country.

MARCH 2020 / REPORT ON BUSINESS 15 Need to know

amount to nothing back then. But was with my sisters and my mom double digits. They called me the he proved that raising six girls and dad. It was amazing, feeling fastest-growing female leader is the best thing that could ever the love that I hadn’t felt in a Dell ever had. I was promoted happen to you as a parent. couple of years. to vice-president to lead their It sounds like a happy story, Where did you go to school here? infrastructure business, and that but I don’t think it was. What were I did not go to school here at all. was all in less than three years. I the harsh realities? What was your path into the tech got a call from a Cisco recruiter, We lived escaping town to town, industry? and they’re like, “We’ve been most of my life in Lebanon. I started working, probably day watching your career.” And 17 What were you trying to escape three in Canada, in a retail job, interviews later, I landed the from? because my parents’ neighbour job. The recruiter called me on a Our town got attacked multiple owned a retail bag store. I Saturday. I was grocery shopping times. worked my way up in retail for at Sobeys, and I sat on the floor 2. Each member By who? of the family years. And I learned to speak and cried like a little kid. By the town next to us. We got immigrating to the language from my sisters, Were you given performance attacked by a different religion Canada needed because they were going to goals? because they wanted the land to be sponsored, school. I would ask them to Every single leader has costing of our town. thousands repeat everything in Arabic and performance goals. (5) But my Which religion was attacking? of dollars. To in French so I could understand, focus, when I started, was around They’re called Druze. The Druze reduce the size and I taught myself the language. people and culture, because I of the family, and attacked our town, which was thus the cost, I did about five or six years in believe that people and culture all Christians. Back then, it was Dagher’s father retail, and I would dress all these transform every organization. happening to multiple towns. arranged for her lovely women and men. I’m In an interview last August, We escaped our town and lived to become part of like, “I want to be one of them.” you said one of your biggest another family by in multiple shelters, a deserted marriage. So, I decided to start in the accomplishments was hospital, and then Dad took us corporate world, and I found a transforming Cisco Canada’s finally to Beirut, where he owned 3. Dagher’s telemarketing job at Bell, selling culture. a property. My dad and I fixed marriage ended long distance. I was with Bell Yes. 15 years ago. an apartment to make sure it Her daughter, for 15 years. I worked my way up I need to understand this, because was safe for my sisters, and we Stephanie, is now from a telemarketer to selling a year before that, you wrote moved in. And then I got married 30; she also has a Centrex lines, (4) and that’s how in The Globe and Mail, “When I son, Michael, who off at the age of 15. is 28. I taught myself the technology. joined Cisco Canada, I was thrilled Was that an involuntary marriage? You moved to Dell before Cisco. to see the company had already At 15, I didn’t want to get 4. Centrex lines I started as an account manager, established a corporate culture married—I was too young, but are souped- selling to customers in Canada built in respect, enablement and up business my parents said that’s the right telephone lines, and competing against Cisco. trust.” So, what did you change? thing to do. (2) with services And my results were amazing— The previous statement, the Did you come to Canada with your such as call double-digit growth that one in The Globe, that’s a global husband? forwarding and Dell had not seen in that line statement. In Canada, we had conference After my parents came here, calling. Her top of business for years—and work to do. All I did for them is I escaped Lebanon with my client was RBC. they’re like, “Whoa, who’s that empower them, inspire them, husband at the time, yes. And firecracker?” So they’re like, and move out of their way to my daughter, who was almost “Okay, we’re going to give you go out there and make a huge 10 months old. (3) a bigger role.” I led the whole impact on customers. I worked How were your first months here? team in Canada, seven or eight with the team on ensuring the The first minute was the best people, competing against leaders we have are servant minute I’ve ever felt for a very Cisco’s products. I also grew leaders. I’m so big on servant long time. It was a minute of that part of the business by leadership. And, at Cisco hope and seeing my parents after globally, our CEO will tell you we not knowing I would be able don’t care how good you are as a to see them and after them not leader. If you’re not a delight to knowing I was alive, because work with, we don’t want you. they had no idea I was alive until How do you define “servant I escaped to Cyprus. leader”? Wow. Cisco doesn’t break out revenue for Canada, Serving your people. You’re but worldwide, it had 2019 sales of So that first minute was the there to support them; you’re minute God said to me, “You’re there to empower them; you’re ready for your next journey in $52 BILLION there to inspire them; you’re life.” And the first month was just 60% of that was generated in the Americas. there to help them make an being extremely blessed that I Canada saw a 6% increase in sales last year. impact and have a purpose.

16 MARCH 2020 / REPORT ON BUSINESS Dagher poses at home with photos of her kids, Stephanie and Michael, and their dog, Ollie I’m not there to micromanage. morning. It was about a boy getting Leadership is not about how an organ donor, thanks to Cisco. many people like me; it’s about I love that commercial. how many people I develop. What I took from that is, Cisco With that comes accountability, wants to put a friendly face on a responsibility and a sense of very cold, technical business. I’m urgency. wondering whether that’s part What inadequacies existed in the of why you spend so much time culture at Cisco when you arrived? talking about these issues—to put I don’t want to get into it, but a human face on Cisco. there was a lot of work to do. Technology is at the intersection And how did you perceive that? where it’s impacting human My first day on the job, I was progress. Look at what’s asked in a big town hall, “What’s happening in the world: The your strategy?” Day one. I said, only constant change we’re “I don’t have a strategy. My seeing is in technology. And if strategy is to listen, learn and you don’t use it to improve lives, lead through all of you. Ask you’re using it the wrong way, me this same question in three right? I always say technology months.” And that’s what I did. is the enabler, but people are I did a tour for all of Canada, and the transformers. I formed my strategy based on A lot of your technology has to what I heard. with bladder cancer. I hid it from do with the internet. It’s not all You’re an outspoken advocate everyone, especially my parents, positive. Cisco Canada likes to say, of diversity in the workplace. and I got all of my treatment. “We securely connect everything In an interview a while ago, you One of my sisters helped me to make anything possible.” said, “Technology is intrinsically through it, because she was the “Anything” includes political neutral.” How do you square that only one who knew at the time. manipulations on Facebook, cyber idea with the concern that male And what’s the story behind your bullying and invasions of privacy. bias is built into technology, mental health advocacy? Hence the reason we say because most of the people My son’s best friend committed “secure,” because everything we programming it are male? suicide in university, and I saw do has a security component. It used to be. If you go back how my son was impacted by Because you cannot build 10, 15 years ago, I would say it. Also, some of my sisters a house and leave the door yes. Today—and again, I’m struggled with mental health 6. According to unlocked. We can’t control what speaking of Cisco and the Cisco issues. When I saw my loved the company, people can do with it, and that’s 42% of Cisco’s culture—50% of leaders are ones struggling, I thought, global executive probably the part you’re talking female. (6) Well, I’m in a seat of power, and team are women, about. It’s the private and public Are you talking about the C level, leadership is all about action. I and Dagher’s organizations’ jobs, as well, to predecessor as or are you including VPs? took a chance on opening the head of Cisco secure it. It’s like you’re going to No, I’m talking about the C conversation with my CEO, (8) Canada (which buy a beautiful car, and you turn level. We still have a lot of work and he jumped on it. It was a big has 2,800 down the insurance. to do when it comes to the risk, but it was so rewarding on employees) was What’s next for you? Your also a woman. middle level. If you were to go, so many levels. predecessor was here for three for example, to a research and How much of your time is devoted 7. Between years. You’ve been here for two development facility, you’ll see to issues like mental health, 2018 and 2040, and a half. Do you see an end more men than women. But diversity and immigration? immigration point? will account for there’s a big shift at the higher Quite a bit, actually. I wear all of Canada’s I’m in love with my job. I’m level. I love the diversity we’ve multiple hats, hence the net labour force in love with the people, the seen at Cisco. Another passion reason I work around the growth—3.7 culture and the technology. million workers— of mine is immigration, because clock and people will tell you according to the You’re going to have to peel diversity, for me, is all about I’m a workaholic. I run an Conference Board me off this building because diversity of thoughts. I don’t organization, a full-time job, but of Canada, and I don’t think I’m going anywhere want to hire people who talk then I go out there and advocate. one-third of the other than to have a bigger economic growth like me and look like me and I’m getting bombarded— rate. impact within Cisco. do things like me. I want to hire probably five, six speaking people who challenge me. (7) requests a week. And my 8. The CEO was Trevor Cole is the award-winning author You’re also a cancer survivor. LinkedIn—I can’t keep up. Chuck Robbins, who replaced of five books, including The Whisky What was your cancer experience? I have a hard time saying no. John Chambers King, a non-fiction account of Canada’s I was diagnosed 10 years ago I saw a Cisco ad on TV this as CEO in 2015. most infamous mobster bootlegger.

MARCH 2020 / REPORT ON BUSINESS 17 CONSTRUCTION TECH NO CLIPBOARDS

Minding the gap

As early as 6 a.m., Mallorie Brodie and Lauren Tech startups ALL Lake would put on steel-toe boots and hard largely ignored hats, pick up coffee and doughnuts, and go in the construction search of construction sites around South- industry until GROWN western Ontario. In 2013, they were both in Bridgit came their final year at Western University—Bro- along. How its UP die at the Ivey Business School and Lake in two founders a civil engineering program. The pair knew built a company they wanted to start a business, but that was by moving an Anybody with the extent of their vision. So they went look- old-school a flashy pitch ing for inspiration, scanning the skyline for industry cranes to guide them to building sites. away from can launch “Our plan was to focus on construction, spreadsheets given Lauren’s engineering background and a business. By Liza Agrba both our families having been in the busi- Building one ness,” says Brodie. “From there, we under- is far harder. stood that despite knowing a thing or two about the industry, we needed a fresh idea. The obvious next step was going out onto Meet four sites and learning directly about the industry’s challenges by talking to people working in it.” startups The construction sector had been largely ignored by tech start- impressing ups until a couple of years ago. Investors and developers shied away from what looked like a slow-moving industry, according to customers— Lake. But after doing more than 500 interviews with general con- and venture tractors, subcontractors, engineers and developers, Brodie and Lake realized construction’s supposed curmudgeonly resistance capitalists— to tech solutions was a fiction. Instead, they found a gap in the mar- with their ket. “From our point of view, it’s not that the industry has been slow to adopt technology—it’s that technology firms have been slow to ability to build for construction,” says Lake. Six years after its start, Bridgit now has two major construc- turn lofty tion software products. The first, Bridgit Field, launched in 2014, visions into is essentially a user-friendly version of the traditional “punch list” workers and inspectors use to track unfinished tasks, stay orga- executed plans nized and co-ordinate projects. It’s not the only such product on the market, but it was among the first to be developed. Bridgit Bench, launched this year, is the first project management tool targeted specifically at construction. It focuses on resource planning, particularly human resources. That’s a major selling point for project managers, since the sector suffers from a labour shortage that makes it difficult to hire on short notice. “Construction is pretty volatile, and we’re always competing for talent. You can think you’re starting a project one month and then get word from your client, saying, ‘Actually, we need to push

that out and then we need to adjust hiring.’ Until Bridgit, we were MANDEL managing these changes for large projects with spreadsheets and conversations, which was really inefficient,” says Grace Paladino, KAILEE HR director of the Toronto-based construction firm Skygrid. Field is sold on a project-by-project basis, but Bench works on a standard software-as-a-service model, where a company signs on PHOTOGRAPH

18 MARCH 2020 / REPORT ON BUSINESS PHOTOGRAPH CE a CO O pr De co O Mallorie oject Laur ve nt ra lopmen sit ct en e or Br Lak fo Sk odie r ts e Da yg and and rid on sh hea Be and ex ac ried skill co win te pr Bu time Th aimed ing measur co pr co coz some other fo of launch to To a bea a Br industry ou in wa the has ing te in ra the Set up Be av mar and of of is subscription-b a fo ing. struction ce major shar ch “A An Bridgit Th r r te cts unusual fi oj oduct pect mind. odie er co 10 the up uld rry wh mp t t nch, Kit rd er its ro an a y in te houses big rt d ce those ke ne a the the Ca Fi in ec of ft de MAR ag hub to e e’ lack mp y le sea set nt ain . ove n fir co ich sa co and wo gr shif ed the lar an chener- er ft annual t. s Bu w s co ti handle our ed 40%. na ed ve e ne to cit 15 maint e y our of o st CH in les mmon Last ow one ex Br so incr on unt, ting lish Th y. ge rd number of month-t de loca we kit mp t sinc da loper of co ar of r fo King st hiring ting w it te y’ ta doub sa with industry in engineer hir ft 20 in pect ey odie the s. s, st a He ing much e e s ve r ak chen mp our ke wo rev emp am busines te suc wa use ease an hiring full-time 20 No fo launched, va quart the es. co the ta the on It mor tha co e ag tion es ains llit lopment. eholder Wa s of ad the y’ r / ased s lent East anies uld, the ed riet building, re ar enue need ge le mp is ” ce re ntr ve REPOR up is Bridgit ex and a go bu the s to near e curr pr t’ lo re of sp ea, in e ner ement te o-month cr co ss their a to mber hea s of er sleek, opens this bet an isting y als act small, ” ex he ye oject t —bu sour support just pool. ac with Design emp s. big rl ow wo will s, an , rev fic , ENR sa of fo unt co acr support T Lak y ent and bu al fo Bridgit yd tr e. fu oo dquart or e we and as te ON s, ys e, und aims d. didn rk st mp a ev , r enue tur and co Be win ay t ce te a -b s os we lo t Anticip Be the , tha r in lik emp artups re e Th wo ce BUSINE sa wo is lo we if Br Bridgit in te a Ont it’ cust sinc 400 en co am ased ye ntr s. s one fo nch, than let e. of initiall To nch ad District, les re tha smaller e yo am ntr ’t odie. t s the a gr the to e ma firm enough od-f up Bridgit “W ll rk es. fo er r It ha co bet model e lo act Black ar duc wo build- , —just ro ent ario of gr other u omer ow e ’s build no as r SS pa . a s t e with le re co ye 40% de d ve car- chi- Th e’ U. U. wa nt and Bu can the not the the ea or ar list or- we te set rk 50 at on ail rt ed an ve ps w. 19 In th es to to n- of rs S. S. o. ’s y e e a s s r - t - - - t . ENVIRONMENT CELEBRITY A PLASTIC ALTERNATIVE develop budget planning tools. For all of the above, ease of use is the name of the game. Brodie is keen to draw on Toronto’s pool of design talent, since Bench and Field are both highly visual tools with clean, intuitive dashboards. There have been challenges in building a team—construction isn’t the only sector with a limited hir- Kelowna state of mind ing pool. “There are only so many people in tech, so in Waterloo, When venture capitalists approached Matt How did a companies end up poaching from Bertulli two years ago, the Pela CEO was a bit startup born in others,” says Lake. In pursuit of tal- wary. “I didn’t have a lot of experience in VC. Saskatchewan ent, Bridgit focuses on recruiting But many of my friends do,” he says. “Most of and based in outside the typical pipeline. One of them kept telling us that a lot of venture capi- Kelowna earn an Brodie and Lake’s most recent mar- talists will give you a great deal of cash, but investment from keting hires was a bartender with they will be more of a pain in the ass. So be Jay-Z, the world’s a college background in media but really careful who you take money from.” richest rapper? no product marketing experience. Pela eventually did take money from Marcy Thanks to quick The pair got to know him after fre- Venture Partners (MVP), a new VC fund co- growth, a worthy quenting a restaurant in Kitchener founded by Jay-Z. They had something Pela message and a and say they were impressed by the wanted more than money. couple of lucky quality of his conversation. “We try Casually dressed in stretchy black pants, a connections to hire around people’s characteris- navy T- shirt and low-cut black sneakers, Ber- By Anthony A. Davis tics over their experience, and it’s tulli, 38, looks ready to jump on his Santa Cruz working,” says Lake. mountain bike and explore the trails zigzag- Bridgit has nearly equal gender ging through the nearby hills of B.C.’s Okanagan Valley. Instead, parity and pay equity across all he sits in a glass-walled boardroom in the company’s sixth-floor levels of seniority. But Lake insists Kelowna headquarters explaining how Pela snagged a $2.5-mil- that balance is not a guiding part of lion investment last October from America’s wealthiest musician. Bridgit’s hiring practices—rather, His company produces compostable phone cases from Flax- it’s a natural consequence of its stic, a biodegradable material invented by company founder Jer- recruitment strategy. A recent job emy Lang and composed of flax straw, along with other materi- posting for a project manager is als. Approximately 1.5 billion smartphones were manufactured looking for a “strategic thinker” globally in 2018; 80% of owners buy a protective case, according who “can think on their feet and to Statista. Old phone cases are often thrown away with every isn’t afraid to do so... Experience upgrade. As a result, 400 million pounds of plastic that cannot be in software implementation is a recycled is discarded every year. bonus, but not a requirement,” it If enough consumers switched to Flaxstic cases, claims Pela, reads. Explains Brodie: “By opening millions of pounds of plastic would be kept out of the world’s land- up how we talk about these roles, fills and oceans. Pela—the Spanish word for “peel”—says when we’ve ended up with a diverse pool properly disposed of, its cases biodegrade in anywhere from three of hires. It started out as a matter of to 24 months. necessity, but we eventually real- On the surface, that doesn’t sound like a product that would grab ized it was just better practice.” the attention of a performer like Jay-Z, who is hardly known for As investment in the construction tree-hugging lyrics. But the star is celebrated for his business acu- tech industry gains momentum—in men, in addition to his sometimes prophetic writing. In his 2008 the U.S., VC funding for construc- song “A Billi,” he foresaw becoming rap’s first billionaire. Last tion software startups surged 324% June, Forbes magazine confirmed the 50-year-old rapper, born in 2018, according to Crunchbase Shawn Carter, had fulfilled his prediction. data—Brodie and Lake are optimis- Jay-Z founded MVP, a seed and early-stage investing platform, in tic about Bridgit’s prospects. The March 2018 along with two partners, his longtime pal and business company has raised $13 million in associate Jay Brown and Silicon Valley VC veteran Larry Marcus. equity financing, half of which came MVP bills itself as a “hits-driven” investment business “with a pas- through a Series A round completed sion for building game-changing consumer businesses.” HULL in December 2018. According to So just how did an eco-minded startup in Kelowna—B.C.’s Lake, there’s space for competition. third largest city—attract an investment from a trio that includes DARREN “Tech has just begun to tap into hip hop’s first billionaire? It took a sudden growth spurt, a lucky the construction sector,” she says. connection and an investing strategy partly based on knowing a “There’s certainly room to grow.” good thing when it presents itself. As Jay-Z has said: “I didn’t go PHOTOGRAPH

20 MARCH 2020 / REPORT ON BUSINESS PHOTOGRAPH CE he O Ke adquar Ma lo at tt wna, the Ber te rs Pe B. tu C. in la lli in his re Buick, “W ad ment em ba In fo and thing to the glo ber suddenl yo sa wa deg “I ‘W go wa ge tha ‘If shortl de wa seed. gr look to Mo beau tion tions tic equipment, onl ol pl ucts st beau holes co such lulose. mer er we art t d One His No Back astic. llo ed co ys ew r ck mpounds ve od a. u a it’ ash an ell, s st s Sa look y e t y y ev we wing lo ra pr so and because sense s, al ed childhood so ga unts can s ed MAR e in we tiful tiful lop we dr Lang “I to fo me. Lang. with w ma y al sk aa such Bu eryw dab flax in fo of y tha fa wa n. lik ma re ev s flo pl ma da r ove busines quiz str Ha thinking ed Ho a af co 43 d re at ther co es r y home CH He the te long t Ba we “A limit finding something think ery da ys astic-lik e t le. Who te at te secluded because beach my or y, Lang, something. came , che ybe ong , uld rials sional in wa eerie. in str nsult we we Pe 20 alt as her tha s y, ove rial ing y Lang r ll “Wha zicall in learned sa his ang deri we 20 a ex er-lasting the fa those I wh my la’ ii. ong, and instincts. ute erna sit ed nt ve wa nd 20 the t. e. it see wa wh ll. r wo in / do we pl of dri fo s s int ?” His mind ant wh e ” es r, REPOR en we a abou fo lit co I ve single-us nsils. And 08 da st fa n school y lif with ained Th r? fo s wn t Lang en hill, Sa ahea something. pr uld ba the it re e ve the ti o r tle the ory at uld in d rmer a beach scar ” with o re can d’ fields e und ems Christmas ve fa cleaning vie a biodeg e tha et ck 10 sk abou brit fr with his s spent as yo T t the ’ We piec it co str digging mil lef yo do we his flaming He making ty om -y big ON can And pl ” horiz at ma w. d bu ed, of tha wa we t u re an untry s tle his da ung ma to aw ear-old 10 ug his st high oon, wa this y nt of much BUSINE on fo 18 “I t ge wa my t e es all burned his te ” old pl s ve be t ern d. 1 , wa en biopol still much use -month- r de ra app up he re must he suit fa s ba digging er us. ans t ant rials or on y Kauai’ of nt fa r “I the wa fa tr to vir hea str ’ up older rmer dab s mem- ther wh str pr both- fields va dri Lang ck fr ed Th Lang SS ther Ca pl their sa sa ac sa ” ther an lica on tha ab bio- we wa just this ce Je ys on- on- od- om ca- as- aw As ys oil d, oil it id, id, ed be ve 21 n- to to of to y- y- at le le r- e, it l- ,” e a s s ” s r t - . , . . What about flax straw? If it was because of his deep experience in investing in the music content so tough it could tangle up farm and tech space. But when the three met, recounts Marcus, “it turned machinery, surely it could make a out we had a lot of shared values around investment philosophies, strong basis for a new material. particularly in going after brand building and companies that really In 2009, working with engineers at have potential for positive impact in culture. So our whole fund is the University of Saskatchewan and based around consumer and positive cultural impact.” funded by a provincial grant, Lang With MVP, says Marcus, he and the Jays are focused on support- began experimenting with shive, a ing companies that promote health, wellness, inclusivity and sus- lightweight, corky substance found tainability. So far, MVP has invested in such entities as Rihanna’s in flax straw. His team tested various Savage X Fenty lingerie company, which bills itself as an “inclu- combinations of biopolymer bind- sive” line for diversely shaped women; Hipcamp, a website that’s ers, including “crazy stuff”like bees- like Airbnb for campers (Will Smith’s Dreamers VC also invested); wax, to try to make a strong, mould- and the recently launched Wheels, an electric mini-bike sharing able, compostable substance. Lang service founded in Los Angeles. Last October, MVP added Pela to eventually landed on the right com- that list, investing $5 million in the company’s future. bination of wheat, cornstarch and flax biopolymers in 2010. He dubbed the material “Flaxstic.” Now he had In its first six years in Saskatoon, Pela crawled along as a basement to figure out what to make with it. operation, with Lang and his immediate family putting phone cases When Pela was founded in 2011, into envelopes on weekends. That changed in 2017, the year Ber- the iPhone 4 was really taking off. tulli joined the company as CEO. Before that point, Bertulli was the However, with the upgrading mania startup’s first significant investor. He’d met Lang in 2014 at a Mas- prevalent in today’s phone market, termind Talk, an invite-only networking event for entrepreneurs. “the average person will keep their Quipping that his background is “selling shit on the internet,” phone for about 24 months,” says Bertulli founded Demac Media in 2008. He guided the Toronto- Lang. “Yet the plastic case that will based company into place as Canada’s largest e-commerce agency, protect it will last something like running platforms for clients such as Staples and Sleep Country hundreds of thousands of years and before Chicago-based Bounteous acquired it in November 2018. probably end up in a landfill or ocean An outdoorsman, Bertulli admired what Lang aimed to do for and not be recycled. That seems the planet through Pela. “I started investing in Pela because I liked ridiculous and overengineered. So I the concept,” he says. “I wanted to sell something that’s better for decided to start with a phone case.” my soul.” Now the company’s majority owner, he would only say he made a mid-six-figure investment. Bertulli didn’t think Pela would be a phone case company. He At first glance, Larry Marcus, who assumed there would be better, more marketable uses for Flaxstic. both manages MVP and is an equity “I didn’t realize until late in 2017 how big the phone case market is.” partner in the fund with Jay-Z and Even so, in Bertulli’s e-commerce world, phone cases had Jay Brown, appears to have little always been a no-fly zone. Other than OtterBox—known for its in common with either of his col- expensive, heavy-duty protective plastic cases—there were few laborators. The “two Jays,” as Mar- brand names, and profits on such a commoditized product were cus calls them, are both Black and generally thin. “There are still hardly any brands,” says Bertulli. grew up steeped in the world of rap “There’s no Warby Parker of phone cases. There’s no sex appeal. and hip hop. Marcus, who bears a There’s no message.” resemblance to Seinfeld’s George But Pela has a message. Its “big, hairy audacious goal,” accord- Costanza, lives in San Francisco, ing to its website, is to help make a waste-free future. Bertulli’s attended business school at the mission as CEO was to find the eco-conscious consumer out there University of California-Berkeley in the phone case marketplace who cared about that message. And and is, he adds, “more of a funk and he did. rock and reggae guy.” After testing five fictional “personas” Pela might target in its An active angel investor and men- marketing, the company settled on one: Olive. “We gave her a tor, Marcus was a founding investor name,” explains Bertulli. He rattles off her attributes. “She’s under in Pandora, a music recommenda- 35. Urban dwelling. She rides her bike to work. She’s been veg- tion and streaming site. He’s still a etarian or vegan.” She’s interested in environmental conservation managing partner at Walden Ven- causes and shops at Whole Foods, Patagonia and Lululemon. “We ture Capital, a sprout-stage invest- even have a list of books she reads,” he says. ment firm focused on digital media In 2018, Pela began using Instagram to market its line of colour- and cloud services that he joined 20 ful phone cases—embossed with eco-friendly images of turtles, years ago. whales, honeybees, waves and more—to the Olives out there. When Jay-Z and Brown decided Around that time, awareness about the billions of pounds of plas- to create a VC fund, someone tic polluting oceans began to surge. Pela’s sales started doubling suggested they approach Marcus every 90 days or so for the ensuing year. As Bertulli puts it, “Every-

22 MARCH 2020 / REPORT ON BUSINESS What makes a good startup pitch? Five venture capitalists weigh in

VISION THE FUNDAMENTALS PASSION GLOBAL AMBITIONS CLEAR COMMUNICATION “The two most important “In 2019, we saw a handful “I look at how long “We invest in globally “I always ask myself three things I am assessing of high-profile tech the founding team minded entrepreneurs questions. First, would I when I meet an companies either IPO and spent working on the with industry experience work with (and for) this entrepreneur are whether then struggle or fall apart idea, because if you’re and a relentless mission management team? If so, they have a huge vision in the lead-up to an IPO. really passionate about to conquer the world. it’s easier to help them and if I believe they While they each had their something, you have We expect that ambition recruit, raise money, find are going to be able to own unique struggles, probably spent years to manifest in how the help, etc. Second, will realize that vision. The these situations served tinkering. And I ask technology is built, as I make a lot of money? first speaks to whether as a good reminder to whether they would well as in the culture This helps me figure out the business idea is built the investment world to pursue this opportunity of the team. As fintech if the idea is big enough. on a unique insight that make sure we remain even if they could not investors, we look for And third, is the market can form the foundation disciplined in monitoring raise money for it, unique product offerings easy to understand? They of a huge company. and evaluating the because I want to know that intelligently address should be able to convey The second speaks to metrics: gross margins, if they are obsessed with large problems affecting the story and opportunity whether the founder has customer acquisition costs it. I’m not as interested a big portion of the clearly enough to excite the drive, self-awareness, [CAC], lifetime value of in entrepreneurs who economy. These attributes me.” authenticity and personal the customer and the CAC want to raise a round are important because —Matt Roberts, partner, growth mindset to build a payback period. [All of of financing to start a they set the foundation for ScaleUp Ventures massive business.” those indicators] generally company in an area that is constructing large, long- —Janet Bannister, need to look healthy considered ‘hot.’” term businesses.” managing partner, Real and as though they are —Boris Wertz, founder —Karim Gillani, general Ventures scalable for a company to and general partner, partner, Luge Capital be successful.” Version One Ventures —Sean O’Connor, venture capital fund manager, Conexus Ventures thing started to hockey stick. We’d found our customer.” postable and recyclable sunglasses). The company has since grown quickly to about 45 employees, “I think about 10 minutes into the most of them based in Kelowna. When Bertulli took on the CEO meeting,” Bertulli recounts, “Jay role, he hadn’t contemplated building Pela anywhere else but in Brown said, ‘I love it. We are in.’ Toronto. But then a friend asked him if Toronto was the right place Larry, though, was like, ‘Oh. Well, to grow such an eco-oriented company. You wouldn’t headquarter maybe we should talk more.’” an outdoor clothing firm like Patagonia (based in Venture, Calif.) In the year before it signed the in New York City, suggested the friend. Bertulli considered Victo- $5-million deal with MVP and Kens- ria, Calgary and Vancouver, but a passionate pitch from Kelowna’s ington Capital, Bertulli estimates mayor and economic development folks sold him on the city’s Pela had been approached by about lower cost of living and eagerness to become Pela HQ. While a a dozen New York and Silicon Val- portion of Pela’s cases are made in a Hong Kong facility, it recently ley VC firms. Some of those earlier moved its original Saskatoon manufacturing space to Kelowna as VCs, he says, even came with better well. (Lang and his wife are staying in Saskatoon until their two financial terms. “But MVP offered children, now six and 12, are older.) so much more.” The company’s growth spurt caught the attention of numerous What it had, beyond cash, explains venture capital funds, among them MVP. Larry Marcus first heard Bertulli, was a deep understanding of Pela from Tom Kennedy, the chair of Toronto-based Kensing- of cultural trends and mass media ton Capital, who also knows Bertulli. Kennedy and Marcus had marketing, and ties to numerous invested in some ventures together. “I was intrigued by what I celebrities who could help spread heard,” says Marcus. He was so intrigued he mentioned Pela to the word about Pela. Though the Jay-Z and Jay Brown, who agreed MVP should look into the com- relationship is in its early days, pany further. things seem to be going well. “What Last fall, Pela was invited to meet in Los Angeles at the head- I have learned about Jay-Z and Jay quarters of Roc Nation, the entertainment agency Jay-Z and Brown is that they are super savvy,” Brown co-founded back in 2008. Jay-Z wasn’t there, though Brown says Bertulli. “They are very good and Marcus were. But all three, says Marcus, play equal roles in businessmen.” deciding who gets funded. “If Jay and Jay don’t like something, I’m Then there is that other, immea- not moving it forward.” surable MVP strong point: Jay-Z Bertulli attended with Pela’s chair, Brad Pedersen, a longtime himself. The benefit is not just his friend who founded Tech 4 Kids in Red Deer, Alta., and grew it into own influence, but his close bonds one of Canada’s largest toy companies. They didn’t bring a pitch with famous athletes, musicians deck, says Bertulli. There was almost no talk of financials in what and other influencers through his he describes as a warm and friendly meeting. However, there was talent agency, Roc Nation. As Jay-Z plenty of discussion about Pela’s mission to keep plastics out of himself has put it: “I’m not a busi- oceans and landfills with its cases (along with a new line of com- nessman. I’m a business, man.”

MARCH 2020 / REPORT ON BUSINESS 23 FASHION SOCIAL MEDIA HAPPY MILLENNIALS

Shine theory

To see how Mejuri does things differently, Since Mejuri Releasing a steady stream of visit the Toronto-based jewellery brand’s In- launched in 2015, new pieces helps the company to stagram account: There are no posed engage- it has built a monitor customers’ reactions and ment ring shots, no overstyled tableaux (a dia- loyal following, use that feedback to inform Lan- mond solitaire perched on a snowy evergreen quadrupled its çon’s designs. It also allows sus- branch? Mejuri would never) and, perhaps revenue year over tained engagement with customers, most important, no photos of Ken-doll–hand- year and attracted according to Lisa Hutcheson, man- some men presenting their wives or girlfriends millions in VC aging partner at retail consulting with shiny baubles. The company targets funding. All by firm J.C. Williams Group. “Custom- women who want to buy fine but affordable making jewellery ers are looking for unique products, jewellery for themselves—and judging by its that millennials but [traditional jewellery retailers] rapid growth, the approach is working. want to buy for buy their season and it all arrives. The company’s CEO, Noura Sakkijha, grew themselves Then, as a customer, you go in and up in Amman, Jordan, where her family had By Stacy Lee Kong you see it, and there’s no real fresh- been in the fine jewellery business for two ness,” she says. “So, from a customer generations. She wasn’t interested in joining point of view, a [weekly drop] cer- them. “It was mainly classic pieces, like gold and diamonds, with tainly makes it more interesting.” high price points that were targeted for gifting, specifically to men As Sakkijha anticipated, 75% of buying for women,” she says. “That wasn’t an exciting angle for Mejuri’s customers are buying for me, so I took a detour.” Sakkijha studied industrial engineering in themselves, and 30% of its monthly Jordan, and then moved to Toronto to complete an MBA at Ryer- transactions are from repeat shop- son University before taking a job as an analyst in CIBC’s process pers. About 70% are between the engineering department. ages of 18 and 34, and 100,000 That’s when she noticed a glaring gap in the market. “I started women are currently on one of to earn some disposable income, and I wanted to buy jewellery for several lists waiting to be alerted myself, but my options were very, very limited,” she says. Where to upcoming drops. That loyal fol- were the elegant, unfussy rings, necklaces, bracelets and earrings? lowing has allowed the company Where were the companies speaking to women like her? Nowhere to quadruple its revenue every to be found. year for the past four years (Mejuri In 2015, Mejuri officially launched with a perfectly modern and doesn’t disclose sales figures) and millennial-friendly motto—“buy yourself the damn diamonds”— to build its team to 120 people. The and a clever retail technique. Instead of seasonal collections, the company has even expanded into company uses a “drop” model, in which new, limited-edition pieces retail with four bricks-and-mortar become available for purchase every Monday. The firm’s offerings, showrooms—the Toronto flagship all made from at least 14-karat gold, range from a single stud ear- opened in July 2018, followed by ring ($25) to a dainty gold bracelet holding a single diamond ($195) New York in December of that year, to a chunky herringbone chain necklace ($395), with a few pricier and Los Angeles and San Francisco options, including a $2,150 diamond cluster ring that works equally in the last quarter of 2019. well as single-girl bling or a wedding band. The brand’s 680,000 Mejuri’s expansion plans have Instagram followers eagerly anticipate each new drop. been supported by regular infu- Initially, Mejuri’s business model involved crowd-sourcing jew- sions of capital; the company ellery designs, but Sakkijha quickly realized the company needed received US$1 million in seed fund- a unified look. Enter Justine Lançon, a Parisian art director who ing in 2016, closed a US$5-million has worked for companies such as Lacoste and Veuve Clicquot, financing round led by U.K. firm and had recently relocated to Toronto. “I was looking for a part- Felix Capital in September 2018 MANDEL ner who could help me build and establish Mejuri’s aesthetic and and then in April 2019, a US$23-mil- DNA,” Sakkijha says. “When I found Justine’s portfolio online, it lion round led by New Enterprise KAILEE was evident that she had extensive experience in luxury brands Associates in the U.S. This type of and their creative development. When we met in person, we investment makes it a rarity among instantly clicked.” fine jewellery brands, of which only PHOTOGRAPH

24 MARCH 2020 / REPORT ON BUSINESS PHOTOGRAPH Sa kkijha sho Mejuri wr at oom the co CE in mp O To Nour ro an nt y’ o a s a Sok this ba NEA B fo in One thing amb a I re sa checklist, scale pu is lica ex thr [lea co br rienc ucts. ing inc fa of je ha its tha an the-sc dashbo we in audienc da Lar mean, we br st ve few— g Fo Th All “N flect funding r ys the d ta anding. sed ts pl mes her ex ough eption, ef t co wa te ye our o ha ds and the gr st le . MAR r as llery is will ain anal ou our er e s We fo pa wh of . “A in or-friendl ve te ar ow Va enes ed s ve is tha sa BlueS tha sa to Pe suc busines e’ ar t. rtles go fr am. nsion e. CH ke co Ne lo nd a’ l s lik ” this o Sa seamles on s the ys ytics nes ] ensur dor in ds th. allo of op om abou as pr she the st is and and its built co engineering allo br t al s t bef al ve Bu y. 20 another my mp ro ha engineering e ma . n ce peop w bu ev not wo it’ ” When omer wa int the to oc and, Th lik le of s, “T 20 “I mp e-c sa und, she t tha the to s unglamor d w co Fr y or ws erything an au s ss Yo visual it’ under pl fo co de t sec es anal unif being e el sa er fo / rk er her ys Me think per ne—ha t s the Lar Me ancisc y afr ommer e impos mp pr REPOR I an s ans. ” t?’ le y the cuses full y thenticit s mp s, est. y, rk pr building e’ r than me us busines does she the think serv sa s ond an omise ” and been, fo e a juri aid s lo yze y the ce juri ied ‘H I co –b an oduct. fa Sa she wa te ys anies!” we re shopping a st to r ve identit the can “W y: also wa T ar iv ct cash-ef she ow , chnolog ased y’ led piec gr es kk and mnant ON of sib o point, Sa supp some ev ve on the nt ce re a dent br br as ous co to on the e or sa and s nt fo e’ ow No some and pa pa kk ijha to of s gi ery BUSINE number sinc our do and ys and, abilit re sit le llect ve has its at her and carry e much Th y, cust tha co pr to llo wh pr ve pr ijha. y, . th—an Me rtner st. behind- ly Au all its . pr of tr e. design- 1 to fo ficient, I actic al mp co wh of in Series India- wh oduct. oduct ey glob wh of pr t e at act wing yo y chain ex esent “T mor to ra ta ” build llo them y wa SS ra slick juri, ho of ve da Th re om- ma rner y our tw our she od- an “So her ou dar ich cu- ar pe- lks ich fo ich u his on te its w- ed s, st. 25 p- ys es to at ta w al it d o y y e e e a ” r t , WAREHOUSES ROBOTS SKY-HIGH LOGISTICS

Vertical integration

Scott Gravelle was stumped. He’d been E-commerce is Nordstrom and Gordon Food Ser- searching for a way to make distribution cen- taking over retail, vice, a restaurant supplier. (A deal tres—the kind of vast, automated warehouses but storing all that with a major Canadian retailer that so common in the e-commerce era—more stuff on its way owns several banners has yet to be efficient. Then he saw a documentary about to consumers is announced.) The technology has Walter Tschinkel, a U.S. entomologist who expensive. So Scott generated buzz far outside its home specializes in ants. It turns out the small but Gravelle started base—Attabotics got an honourable mighty insects are the original storage and thinking small— mention on Time magazine’s list of retrieval experts. Colonies of ants dig cham- like, ant-sized—to the best inventions of 2019. bers in the earth to stash their food and larvae. create a distribution Investors have been intrigued When Tschinkel poured molten aluminum system with big since the company’s inception. into these networks, the hardened tendrils potential. Just ask Attabotics has raised nearly US$33 of the casts revealed the prolific excavators’ major players like million in investment capital. Its storage genius: To Gravelle, they looked Nordstrom latest round, in 2019, drew US$25 almost like a distribution centre turned on its By Jeffrey Jones million in funding from Honeywell side. “At that moment, I saw that ants access (which manufactures everything their storage vertically,” says Gravelle, who from aircraft parts to paper shred- used to manufacture skateboards. “This was a massive paradigm ders), the ventures arm of telecom- shift, because humans access it horizontally, from the floor, and all munications company Comcast and other automation systems are derivatives of that row and aisle.” the global investment firm Coatue; Gravelle and his partners launched Calgary-based Attabotics they joined existing backers Fore- Inc. in 2015 (it’s named after the leafcutter ant, whose scientific runner Ventures, based near San name is Atta). Since then, their modular, robotics-based concept Francisco, and Calgary’s Werklund for revolutionizing the supply chains that support e-commerce has Growth Fund. drawn attention from retail and software giants alike. The technol- The early goal for Attabotics was ogy gets goods to customers faster, lowers labour costs and can be to follow a well-worn path in Cana- scaled up as required. It can also reduce floor space by up to 85%. dian tech: develop the intellectual Taking its cues from ants, Attabotics’s fulfillment centres—the property to a point where it would distribution hubs in and around cities from which T- shirts, auto be attractive for a larger player to parts, power tools and food processors get shipped to consum- swoop in, buy it and commercial- ers—work vertically. Rather than using traditional racks accessed ize it. But the company, which by machinery moving across the floor, the system is a grid-like now employs nearly 250 people, structure of cubes and robotic shuttles that travel up and down, as decided to go it alone, believing it well as laterally, on tracks. It’s a bit like 3-D Snakes and Ladders. best understood the technology “The whole idea,” says Gravelle, “was to make ant robots and emu- and its potential. (One of Gravelle’s late successful natural systems to create elegant technology tai- partners, Tony Woolf, is director lored to fulfillment solutions for modern consumer behaviours.” of operations; the other, Rob Cow- Amazon, which all other retailers now compete against, had ley, is now retired.) Because of the already shown the promise of robots in the e-commerce industry, operational success of early instal- investing hundreds of millions of dollars in automation equipment lations, in 2018 Attabotics proved across its massive network. However, while it might save money on to its backers it could be financially human labour, Amazon still has to pay for all the space required to self-sustaining. store orders—its fulfillment centres range from 400,000 to a mil- Under the current plan, the co- lion square feet. Attabotics’s vertical system slashes that footprint mpany aims to expand its offer- and the costs associated with it. “The payoff of this is dramatically ing beyond its main distribution ROBINSON increased density, taking advantage of the ceiling heights of mod- product and go public in three to ern warehouses,” says Gravelle. “When I did that math, we were five years. But Gravelle is clinging SHAUN a fraction of the square footage of a manual shelving warehouse.” to the notion that his firm remains Attabotics has installed seven of its systems so far, at facili- a startup. “Is our core technology ties owned by customers like high-end department store chain achieving industry performance PHOTOGRAPH

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28 MARCH 2020 / REPORT ON BUSINESS PHOTOGRAPH MAR CH 20 20 / REPOR T ON BUSINE SS 29 chronic coughers in the U.S. and U.K., and will publish its findings mid-year. If the results are strong—and BLU-5937 emerges as the best-in-class treatment—Bellus’s stock could more than triple, giving it a US$1.5-billion valuation, says David Martin, an analyst with Toronto boutique life sciences investment bank Bloom Burton & Co. If it fails outright, the stock is headed toward zero again. “We have a high conviction that the upcoming [trial results for] BLU-5937 will be positive,” says Sam Slutsky, senior research analyst with LifeSci Capital in New York. “If this is the case, there is a lot of upside potential.” Bellus is not the only Canadian biotech developer riding a renewed wave of hope. In fact, the industry in this country is coming off its best year in a generation. In 2019, several ROBERTO BELLINI GREW UP IDOLIZING HIS FATHER, Francesco, an Canadian biotechs—including Bellus—listed on the Nasdaq, Italian immigrant who built BioChem Pharma Inc. into one the premier exchange for drug developers. Two with Cana- of Canada’s most successful biotechnology ventures. “He dian operations, Clementia Pharmaceuticals Inc. and Blue- was a very important role model for me,” says Bellini. “He Rock Therapeutics, sold for US$1-billion valuations; two would come home at night and tell us all about his work. He more, Zymeworks Inc. and Aurinia Pharmaceuticals Inc., made it look interesting and made it look like the things they surpassed that level as their stocks soared. Venture capital were doing were important.” investing in the Canadian sector hit a record $921 million last They were. BioChem developed the 3TC molecule, a vital year, according to Refinitiv, a financial data firm, while sev- ingredient in the drug cocktail that transformed the fight eral Canadian biotechs raised over $100 million to further against HIV/A IDS in the 1990s. (It’s included on the World their development, the kind of big-league funding needed in Health Organization’s list of essential medicines.) It also order to be taken seriously. Memories of the dismal 2000s, made “Dr. B,” as his son calls him, wealthy; the Laval, Que., when VC investing dried up and R&D spending in Canada company sold out to Shire Pharmaceuticals Group PLC for by Big Pharma dropped off, are starting to fade. “I’m the most $5.9 billion in 2001. bullish I’ve been on the Canadian sector,” says Peter van der Now Bellini is trying to finish what his father started. For Velden, managing general partner of Lumira Ventures, an 18 years, the pair have tried to repeat the success of BioChem early backer of Aurinia and Zymeworks. “People are build- with their publicly traded biotechnology developer, origi- ing really, really exciting companies.” nally named Neurochem Inc. and now called Bellus Health But two things are missing from the scene: Canadian Inc. The Laval company’s attempts to create a wonder drug money and Canadian pharma giants. Most of our big institu- for Alzheimer’s disease and a treatment for a serious kidney tional investors outside Quebec have remained absent from condition both flopped, crashing the share price each time. the country’s sector, missing out as global trends in drug Fortunately, in biotech, failure is not only part of the discovery, including precision medicine to target genetic game—it’s the norm. Entrepreneurs face incredibly long defects and the use of artificial intelligence in preclinical odds, as their drugs must pass a series of trials with animals research, have delivered promising new treatments. and then humans before earning regulatory approval. If suc- Meanwhile, 99 years since the discovery of insulin at cess proves elusive, there are options: do more trials, find the University of Toronto, this country has yet to produce another promising molecule or quit the game. a global developer of patented medicines. (The exception, The Bellinis are not quitters. And they could finally be on Bausch Health Cos. Inc.—formerly known as Valeant Phar- the verge of that long-sought repeat success. Bellus’s latest maceuticals—is headquartered here for tax reasons and drug candidate isn’t targeted at a life-or-death disease but a dismissed by industry watchers as a not-really-Canadian nagging ailment that impacts the lives of millions of people: pharma company.) The country doesn’t lack the ingenuity chronic coughing. The Canadian firm is in a race with Big to create groundbreaking drugs. It’s just missing the ability Pharma heavyweights to be the first to get to market with its to build large, sustainable, Canadian-anchored companies treatment. Regulators haven’t green-lit a drug for cough ther- around them. apy since dextromethorphan—a staple in over-the-counter But with all the activity and recent success in Canada’s cold medications—in 1958. Analysts believe the market for biotech sector, there’s hope we can produce a “Gilead of the the new class of drugs will be worth billions of dollars annu- North”—a firm like the Silicon Valley giant that grows from ally and that Bellus’s version could be the best one. Some the petri dish all the way to the Fortune 500. That’s a mission of the most sophisticated investors in biotech have piled in, for Roberto Bellini. and the company is sitting on US$100 million in cash. Can the son deliver a winning drug, match his legendary There’s just one thing: Bellini, now Bellus’s CEO, still has father’s legacy and create Canada’s first Big Pharma? Or if he to prove that his molecule, BLU-5937, actually works. The can get the world to stop coughing, will the temptation be company is running trials involving 65 of the most acute too overwhelming to sell?

30 MARCH 2020 / REPORT ON BUSINESS THE GREAT SCIENTIST HAD SECURED HIS LEGACY, BUT A SECOND SUCCESS PROVED ELUSIVE. LUCKILY, HIS SON WAS READY TO RISE IN HIS PLACE!

FRANCESCO BELLINI WASN’T QUITE READY TO RETIRE from the in the 1990s and was looking to develop two treatments: one entrepreneurial life when he sold BioChem in 2001. It had to slow the onset of Alzheimer’s and another to treat suffer- been a wild ride. The company’s great discovery prevented ers of a rare and often fatal kidney condition. He and Power the HIV retrovirus from mutating. But the founders (includ- Corp. bought a 24% stake in mid-2002. Dr. B became chair but ing fellow researchers Gervais Dionne and the late Bernard wanted to get back in the game; by year’s end, he was CEO. Belleau) realized 3TC worked best in combination with the Dr. B declared he’d hit “the big home run.” He thought the existing HIV treatment AZT to control the virus. It meant Alzheimer’s drug, called Alzhemed, could reach US$4.5 bil- those with HIV could live to full life expectancy, a dramatic lion in sales. Investors bought in. improvement over earlier treatments. BioChem sold world- But then, key human trial results published in April 2005 wide rights to pharma giant GlaxoSmithKline to get 3TC showed the kidney drug wasn’t as effective as expected, to market for both HIV and hepatitis B patients. By 2000, sending the stock down by 30%. The big blow came in 3TC-based drugs generated £948 million in annual sales for August 2007, when the U.S. Food and Drug Administration Glaxo, translating into $196 million in royalties for BioChem. determined results from Neurochem’s late-stage Alzhemed But success had its side effects. Atlanta’s Emory Univer- human trials were “inconclusive.” The stock fell 44%, and sity claimed it invented 3TC and even obtained a U.S. patent analysts slashed their targets, one to 50 US cents. in 1996, sparking a messy legal fight that was later settled. Dr. B wouldn’t give up. He swore by the effectiveness of BioChem was also targeted by short sellers; one even set off Alzhemed, declaring he had a “moral responsibility” to take bombs at the company’s facilities in November 1997 in an it to market. The company would do so, but only by produc- attempt to hurt the share price. ing it as an off-the-shelf, unregulated “nutraceutical,” sold Facing an underperforming stock and questions about alongside natural products like omega-3 and ginkgo biloba. potential revenue growth, Dr. B decided to sell to Shire. He The medical researcher sounded like an old-style pitch- had properties in the Laurentians, Florida and Italy; an art man as he predicted the renamed Vivimind would surpass collection; a vintage wine cellar; a hunting lodge; and his US$1 billion in sales by targeting not Alzheimer’s patients name on McGill University’s life sciences complex, courtesy but healthy people afraid of losing their memories. Vivim- of a $10-million donation. His legacy as a Canadian biotech ind revenue was less than a thousandth of that sales target legend was secure. when Bellus sold the business in 2013—to another entity Dr. But Dr. B wasn’t content. In retrospect, he wished Bio- B controlled. Though he no longer owns it, he still believes in Chem had had the wherewithal to keep going. “Everybody Vivimind and “takes it to this day,” his son says. thinks I did a great thing at BioChem,” he said in 2003. “A nd I It was time to admit the elder Bellini didn’t have another did. I built a $6-billion company. But inside me, I failed… I did BioChem in him, at least as CEO. In 2008 he signalled the not succeed to build a Canadian multinational at BioChem.” company was abandoning Neurochem’s Alzheimer’s ambi- In the early 2000s, he struck a partnership with Power Corp. tions by convincing shareholders to change the firm’s name of Canada to begin investing in other life sciences startups. to Bellus. He slashed staff and decided to step back. “I didn’t He soon found one he believed had the potential to surpass have any more energy,” say Dr. B, now 73. “I’d fought too BioChem. Neurochem had grown out of Queen’s University many things. My son was there, ready to take my place.”

ROBERTO BELLINI IS A GOOD-NATURED and disarmingly cheerful individual, taller and thinner than his diminutive, roly-poly dad. He speaks in a scratchy, high-pitched voice and laughs easily. “If you don’t have good humour in this business, you’re in a lot of trouble,” he says. Bellini started out as a middle-class kid, a self-described “nerd-jock” who loved to read but also excelled at sports, captaining school teams. The family’s lifestyle changed as BioChem took off during his teens and they moved out of their Town of Mount Royal, Que., bungalow to a bigger home. Bellini spent summers during high school working in Bio- Chem’s labs, where he determined he wasn’t cut out for a career in a white coat. Instead, he was keen to be involved in the business end and went straight from completing his bio- chemistry studies at McGill University to joining the family office in 2002, first as an analyst and then as assistant to the CEO of one of its portfolio companies. If Bellini ever had ambitions to match his father’s accomplishments, he says they were gone by the time he took over as CEO of Bellus, just shy of his 30th birthday (Dr. B remains

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PHOTOGRAPH another US$750 million if it hit its milestones. But the Merck drug, Gefapixant, had a weird side effect: It turned off not only P2X3 but also another receptor that led to a loss of taste. Neomed’s drug was much more selective, sticking mostly to the receptor it was supposed to target. If Merck had just committed a significant sum to a drug with an off-putting side effect, what could Bellus do with a similar treatment devoid of that problem? In February 2017, eight months after the Kiacta failure, Bel- lus licensed global rights to the Neomed molecule and sold a few small assets to raise about $5 million for preclinical trials on animals. That year, the company ran two trials. In one, it showed its molecule, BLU-5937, suppressed coughing BUT IF THIS YEAR’S CHRONIC COUGH TRIAL RESULTS are as good in guinea pigs. (How do you make a guinea pig cough, you as expected, will Bellus sell out? Those few Canadian bio- ask? By putting it in a chamber infused with a fine mist of technology companies that show enough promise typically citric acid and histamine.) It also devised an experiment that get acquired, enriching their mostly American or European gave rats a choice between drinking from a bottle of water funders. “If BLU-5937 succeeds, there will probably be a lot or quinine. Rats fed BLU-5937 avoided the bitter quinine at of interest from Big Pharma in buying the company,” says the same rate as those in the control group. By contrast, rats Bloom Burton’s Martin. that took Merck’s Gefapixant were equally likely to drink the Gaining scale in pharma is an uphill battle for any startup, quinine. It was a strong indication that Bellus’s drug didn’t let alone a Canadian one. “If you want to build something mess with taste impulses like Merck’s did. big here, you’ve got to fight the forces, and the forces are the Those preclinical results, published in September 2017, mentality that it’s just not the Canadian way,” says Zyme- turned heads. That December, the company raised $20 mil- works CEO Ali Tehrani, an Iranian immigrant who’s trying lion in a stock offering on the Toronto Stock Exchange. Next to do just that. up was a study to see how the drug affected healthy humans. For decades, Canada has lacked the capital, infrastructure In November 2018, Bellus showed the drug was not only and wherewithal to build domestic pharma giants (we’ve safe in a trial of 60 healthy adults but that fewer than 5% done better with copycat generic-drug makers, notably experienced any taste alteration at expected doses, com- Apotex Inc.) as the short-term interests of shareholders pared to 59% in Merck’s latest trials. It was good news. The and patients favoured partnering with or selling out to Big company immediately raised $35 million, led by U.S. biotech Pharma. It goes back to insulin: The diabetes treatment has venture firm OrbiMed Advisors LLC. long been championed as Canada’s greatest medical dis- The stock rose, and analysts picked up coverage. Then, on covery, our “gift to the world.” It was actually a gift to the June 20—three years to the day of the Kiacta meltdown— economies of the United States and Denmark, where pharma Bellus soared by 44.5%. The reason? Merck, during an inves- giants Eli Lilly and Company and Novo Nordisk A/S built tor day presentation, highlighted Gefapixant, not just for their respective businesses on the strength of making and chronic cough but also as a potential treatment for sleep selling insulin, while the U of T’s Connaught Labs lacked the apnea and endometriosis. Michael Nally, Merck’s chief med- capacity to produce it in sufficient quantities. ical officer, called it a “huge commercial opportunity.” The Canadian build-and-sell cycle doesn’t have to continue “I was ecstatic,” Bellini says with a wide grin. “A ll of a sud- forever. California’s Gilead Sciences Inc. grew from a startup den, they’re talking up the fact that this is a platform. We to a Big Pharma giant. There’s no reason that can’t happen had good data and had positioned it well.” Now Bellus could here, says Richard Glickman, an Aurinia cofounder. “It will push the story that it had a better offering than one of mighty take the vision of a CEO who will fight the battle—because Merck’s hottest prospects. Two months later, Bellus went it is a battle.” public on the Nasdaq—10 years after dropping its listing— Bellini is coy about Bellus’s future. “We’re preparing to raising US$70 million in an oversubscribed offering. continue developing this asset on our own. At the same time, Dr. B was worried the IPO would excessively dilute exist- we’ll be looking at our options to do partnership deals, licens- ing shareholders, but Bellini argues having a well-financed ing deals or even potentially mergers and acquisitions, and company benefits all shareholders. “If my dad was in my we’ll look at what the best option is for our shareholders.” shoes, he’d do the same thing,” he says. Dr. B is more certain. “The biggest problem in Canada is Now comes the potential payoff. The company is currently that there is money for startups but not [domestic sources enrolling 65 chronic cough sufferers in a study. Half will be for later-stage financing] to bring products to market. That treated for 20 days with escalating doses of BLU-5937 and is why companies that have interesting technology have to the others with a placebo. Subsequent trials will likely follow sell themselves. And that’s probably what will happen even with upwards of 500 patients. Bellus is also looking to start with Bellus. They’ll add value to a molecule, but they will be human trials this year to see if the molecule curbs an itchy bought… If we find a good merger that will be good for our skin condition after it showed successful results in mice. employees and for our shareholders, we should do it.”

MARCH 2020 / REPORT ON BUSINESS 33 34 MARCH 2020 / REPORT ON BUSINESS PARKLAND FUEL GOBBLED ITS COMPETITORS TO BECOME A GASOLINE GIANT. WHAT WILL IT TAKE TO KEEP GROWING IN AN UNCERTAIN MARKET? SNACKS—AND LOTS OF THEM

BY JOANNA PACHNER

On an aggressively sunny day in mid-October, a local radio station team is setting up for a live broadcast from the reopening of a Calgary gas station. As news events go, this might rank pretty low on the buzz scale, but it’s a big deal for Jeff French. Parkland Fuel’s vice-president of network development and retail pro- grams paces the store, making chit-chat with the employees operating a spin-the-wheel game for gasoline discounts. This is one of a handful of stations the company has in its hometown, he notes— a surprising fact, given that Parkland runs the largest fuelling network in the country.

PHOTO ILLUSTRATIONS BY KYLE BERGER

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This regional approach is also evident in the firm’s early-2019 acquisi- operations, retail is just one of three divisions. The commercial tion of Sol Investment Ltd., the largest arm, which supplies diesel and propane to marinas, airports and independent petroleum supplier in other industrial clients, is another. But it’s the wholesale supply the Caribbean. The purchase brought division, and its elaborate logistics system, that Espey is most Parkland into 23 markets. It quickly proud of, calling it Parkland’s “core competency.” reduced supply costs by sending ships The CEO points out that much of Canada’s petroleum distri- carrying fuel on milk runs around the bution infrastructure—namely, pipelines and terminals—was islands rather than having them go installed in the 1950s. In southern Ontario, for example, a fuel back and forth to Texas refineries on truck must weave through downtown Toronto to reach the termi- the Gulf of Mexico. Shortly after, Park- nals where it can load up with gasoline. “That’s so inefficient!” he land bought Miami-based Tropic Oil says. So Parkland put facilities in the exurban cities of Hamilton to serve as a new regional centre. As and Milton, where fuel brought in by train could simply be loaded Espey points out, “In Florida, there are directly into the truck. no pipelines, and we have synergies Espey admits he initially underestimated how big this sup- with supply in the Caribbean via ship- ply advantage would be. When Parkland bought Pioneer, it pur- ping.” Ergo, another no-brainer market chased a company with $55 million in EBITDA but that quickly ripe for Parkland’s efficiency machine. reached $75 million—largely due to synergies. “We tend to buy better and have better logistics than others,” says Espey, striking an unusually boastful note. “We call it the ‘no-brainer synergy.’ ” The supply system is underpinned by a logistics group Espey terms “the engine room of the business.” Using sophisticated While devising logistics that send petro- algorithms and optimization software, the team buys fuel from leum across vast distances at the lowest cost may every refiner in Canada and most in the U.S., and then moves it set Espey’s eyes a-twinkle, getting consumers to around by rail, truck and ship. This ability to buy at the best price buy it is a different challenge. Retail now repre- is a key reason for Parkland’s steady organic growth of 3% to 5%, sents a significant portion of Parkland’s global says Newman. “They have the scale, and pennies here and there revenue and roughly 30% of its cash flow—and it add up to millions of dollars.” isn’t Espey’s forte. As consolidation opportunities in Canada began to thin, in 2016 When he joined the company, the CEO asked the company took this approach stateside. The U.S. market is a longtime Parkland executive to show him how much more fragmented: According to NACS, a convenience and the service station business had evolved. Over the fuel retailer association, about 60% of American convenience course of a day driving around Red Deer, Espey outlets that also offered fuel in 2018 were single-store operators, learned, for example, that before the introduction and these stores sold about 80% of all fuel purchased in the coun- of at-pump payment, fuelling stations (known as try. Parkland has completed six major acquisitions there in the the forecourt) were usually installed parallel to past two years, mainly in the Midwest, and Espey sees “a good the store (the backcourt) to make driving in and pipeline” of future targets—the company’s current market share out easier; people had to go into the store to pay anyway. Now, pumps are positioned so customers face the store when fuelling, giving retailers a chance to lure them inside. The stores’ importance to gas retailers has been growing dramatically in recent years. Parkland’s fore- and backcourts used to deliver roughly equal gross profit. At upgraded or new sites, it’s closer to 70% for non-fuel purchases, says Espey, “and that’s where we want to be long term.” Backcourt margins are also significantly higher. According to a recent analysis by Matthew DiLallo for U.S. investing website Motley Fool, the average net profit per gallon of gas is just five cents (U.S). “Fuel sales, which typically account for 60% of a gas station’s revenue, only contribute roughly 38% of its profit,” DiLallo estimates. Meanwhile, in-store products carry gross margins above 30%; on prepared foods and fountain drinks, these can be north of 60%. The convenience game rests disproportionately on a few key factors: price, cleanliness, safety and, most important, location. “Gas, washroom, hungry—it’s totally impulse,” says Espey. Hence, picking the right site is paramount. “You get the wrong corner, you’ll get 30% less volume,” he says. Before deciding on a location, Parkland’s network-planning group prepares 30 to 50 pages of analysis, covering traffic counts and patterns, community development plans, demographic trends and planned road changes, among many other factors. The suburban Toronto area north of Highway 407, for example, is a hot zone for new gas stations, targeting commuters moving into the housing developments that are sprouting up. The key is to move in soon enough to snag the best locations and grow with the community but not so early as to precede significant traffic. “There is a real art to it,” says Espey.

38 MARCH 2020 / REPORT ON BUSINESS “We get it right 80% of the time.” To handle the consumer end, in 2014 Parkland hired Ian White, an 18-year veteran of Canadian Tire who at one point had led that company’s gas electrification is lower than elsewhere station network. His first task was integrating and because the country is very wide and upgrading the then newly acquired Pioneer sta- skinny, plus cold temperatures are not tions. By changing store layouts and the product ideal for electric cars,” says Hansen of selection, he raised same-store sales by double Raymond James. He noted the biggest digits—and showed Espey and his colleagues how markets for electric vehicles in North good merchandising could deliver a giant boost. America are in cities on the coasts. The company has been converting about 70 sites “When you think of where Parkland to the On the Run brand (and building 30 new has been growing, it’s been through ones) per year, with the aim of reaching 475 loca- central U.S. and the Caribbean, in areas tions by 2025. that are less urbanized.” Getting people to buy more than a pack of gum An increase in electric cars will affect requires creating the right experience, explains not only gas sales but also convenience White, who serves as senior vice-president of stra- store revenue, since consumers won’t tegic marketing and innovation. “Historically, a gas stop at gas stations as often. To sur- station was a grungy, badly lit place. Now custom- vive, gas retailers will have to broaden ers can see from the canopy right into their offerings. “In an era of disruptive the store and know it’s bright, full and change, fuel retailers must move from safe. Our aim is to take them that addi- vehicle centricity to consumer centric- tional 20 feet into the store.” To tempt ity,” write the BCG consultants. them, On the Run features a broader That’s very much in line with Park- product mix, including a rapidly land executives’ thinking. The com- expanding lineup of roughly 40 prod- pany is exploring a number of ideas ucts under its own 59th Street brand that would make customers come back (named after the company’s first sta- more often, such as adding lockers tion location). Today, the average cus- that would act as package pickup loca- tomer spends $10 to $15 in the store. tions. Parkland is also running a pilot with M&M Food Market to sell frozen prepared meals. And it’s experimenting with options like letting customers pre-buy fuel or having fuelling trucks For all of Parkland’s recent growth, Canada’s deliver it to their cars, White says. $39-billion gas station industry isn’t exactly an “A nd if we deliver fuel to you, could we engine of the new economy. Michael Ervin, the deliver something else?” senior vice-president of consulting firm Kent Ultimately, gas station convenience Group who has long tracked the industry, notes stores could outlast many other retail that, despite a recent three-year upswing, the formats. “Studies have shown that only discount stores and sector has experienced a quarter-century-long convenience sectors are growing in retail, while many retail decline, with the number of service stations down stores are closing,” notes Brenda Johnstone, publisher of the 40% in that time. According to a 2019 IBISworld trade magazine Convenience & Carwash Canada. As Park- report, low crude prices have whittled their rev- land invests in more store retrofits and improves its mer- enues by almost 2% since 2014. Revenues may rise chandising game, it’s pushing ever deeper into terrain long with oil prices, but gas stations’ margins tend to dominated by Couche-Tard, which has about 2,200 stores in shrink as operators typically absorb a larger por- Canada (both with and without gas stations), and 7-Eleven, tion of the costs than they are able to pass on to which provides retail services to oil companies wishing to consumers. stay focused on gas. Espey’s team is now even thinking about Long-term trends aren’t encouraging. Even if opening urban convenience stores without pumps (No need gas-fuelled vehicles continue to dominate, rising for the expensive real estate full stations require). Some fuel efficiency will dampen demand for gasoline, analysts and investment managers call Parkland a “mini according to the 2019 Boston Consulting Group Couche-Tard,” but Newman insists the two companies have report. That could push up to 30% of fuel retailers very different strategies. “Parkland is a more focused fuel into the red by 2035. distributor, and everything it does feeds into that—not only But there’s also the rise of substitute fuels, such gas but diesel, propane, lubricants,” he says. He points out as electricity and natural gas, to worry about. So that the company’s profits come largely from the supply side. far, electric vehicle (EV) adoption has been slow, The mention of the Quebecois rival brings a cagey smile to with zero emission vehicles making up just 2.2% Espey’s face. “I like Couche-Tard. They’re incredible…” He of passenger car sales in Canada in 2018. But if hesitates before finishing the thought. “They’re very good.” trends elsewhere move into North America—in But later he clarifies what he really means. “Couche-Tard is a Norway, roughly half of new vehicles are zero retail company that also does fuel. We’re a fuel company that emission—the dynamics may change. “In Canada, also does retail.”

MARCH 2020 / REPORT ON BUSINESS 39

WEALTH SMART MONEY

CATHERINE WOOD CEO AND CHIEF INVESTMENT OFFICER, ARK INVESTMENT gies, such as CRISPR gene editing MANAGEMENT LLC, NEW YORK CITY to cure diseases, they will be lost. You have a five-year target of more When Catherine Wood launched her firm six years ago than US$7,000 a share on Tesla. Why to focus on disruptive innovation, it was a bold move. But are you so bullish despite Elon Musk’s the former chief investment officer of global thematic antics and tweets? strategies at U.S.-based AllianceBernstein was convinced We keep our eye on the prize. Tesla of the opportunities in new technologies ranging from has competitive advantages versus driverless cars to genomics. Today, the firm oversees other automakers in moving toward electric and autonomous vehicles. US$11.1 billion in assets, and the firm’s U.S. flagship ARK They include advanced artificial Innovation ETF has outpaced the S&P 500 Total Return intelligence chips, lower battery Index handily since inception. In Canada, ARK manages costs, more than 13 billion miles of the new Emerge ARK ETFs. We asked Wood, 64, why she real-world autonomous driving data is bullish on Tesla and Bitcoin, and bearish on banks. and over-the-air software updates. I bought my Tesla Model 3 in Septem- ber 2018, and today I have a better Why did you bet on disruptive innovation? car than I had then. We forecast 37 million electric I watched the traditional asset management busi- vehicles will be sold in 2024, and Tesla will keep its ness heading toward passive indexation. But I also 17%-to-18% market share. We don’t think regula- saw five innovation platforms—artificial intelli- tors will permit driverless taxis until late 2021, but gence, energy storage, robotics, genome sequenc- the expected gross margins are 80% to 90%, and ing and blockchain technology—that were evolv- Tesla could win the lion’s share of the U.S. market. ing and spawning new technologies. Indexes are What other potential high-growth stocks do you own? backward looking. I felt there was a void to fill, and We own Illumina, a DNA gene-sequencing com- we could also be disruptive to our own industry. pany that enables breakthroughs in genomics, and I consider ARK to be the first sharing-economy Invitae, a genetic-testing company. We have three company in asset management. We push our origi- gene-editing stocks: CRISPR Therapeutics, Intel- nal research into social media [for feedback]. lia Therapeutics and Editas Medicine. Stratasys How will focusing on disruptive innovation help you is a 3-D printing company making strides in aero- outperform passive indexes? space—it can produce small engine parts cheaply. You need to go back to the late 1800s and early 1900s Grayscale Bitcoin Investment Trust helped boost your to see multiple innovation platforms happening at flagship ETF in 2017, when Bitcoin soared to nearly CT the same time. Back then, it was the telephone, US$20,000 before plunging. Why did you sell?

DIRE electricity and the internal combustion engine. It was a business decision, even though we are AR

ST We expect today’s five innovation platforms to extremely optimistic about Bitcoin. We do believe dwarf the productivity gains and wealth creation it is the reserve currency of the crypto-asset eco- from those three. If we are right, traditional bench- system. But most wirehouses [major U.S. brokers] MORNING mark indexes are going to be populated by value would not let our flagship ETF on their trading plat- CE

UR traps—companies disrupted by innovation. forms with Bitcoin [in the portfolio]. It’s the same SO Where are the value traps? in Canada. But ARK Next Generation Internet ETF 19;

20 We think digital wallets, such as Square’s Cash still owns it. Bitcoin is also one of the largest posi-

31, App and PayPal’s Venmo, are going to take the tions in my retirement account. /Shirley Won T.

OC place of banks. They will become bank branches

TO in our pockets. This is going to happen in the United States and emerging markets. In the era ARK INNOVATION ETF ANNUALIZED % TOTAL RETURN* of disruptive innovation, flat to inverted yield

RETURNS 1-YEAR 35.3 curves are going to be more the norm and that’s 3-YEAR 38.0 not good for banks’ net interest margins. We think SINCE INCEPTION (OCT. 2014) 21.1 SPEERS; oil companies will be disrupted by electric and autonomous vehicles. Railways will probably face S&P 500 INDEX

LANDON a threat from autonomous truck platoons, and 1-YEAR 31.5 APH retailers from more online sales as drone tech-

GR 3-YEAR 15.3 nology gets regulatory approval. If pharma and TO SINCE INCEPTION (OCT. 2014) 12.1 biotech companies don’t invest in new technolo- * RETURNS TO DEC. 31, 2019 PHO

MARCH 2020 / REPORT ON BUSINESS 41 WEALTH

FOR YOUR CONSIDERATION 1,500 (BILLIONS $U.S.)

EQUITABLE GROUP INC. TORONTO REVENUE (2018) $860 MILLION PROFIT (2018) $166 MILLION 1,000 THREE-YEAR SHARE PRICE GAIN 79% MARKET CAP P/E RATIO (TRAILING) 9.9 TSX/S&P 60 APPLE Equitable Bank, the operating subsidiary of Equitable Group Inc., went through a splashy rebranding in 2016. Like its giant rivals, it now has its 500 own distinctive colour (yellow) and a simple logo. But it’s delivered much higher total shareholder returns than any of the Big Six. The firm’s low-key English-born CEO, Andrew Moor, sums up the marketing strategy. “We like the word ‘equitable,’ but it’s long, and we wanted 0 to have an icon on a [smart]phone,” he 2005 2019 says with a laugh, sitting in an office in a generic midtown Toronto building

DECODER where the bank’s headquarters takes up just seven floors. “There weren’t A BIG APPLE CASTS A SHADOW many yellow banks, either. There’s too many blues and reds.” OVER CANADA’S TOP COMPANIES At the time of the refresh, Equitable also launched its purely digital EQ Bank. When a turtleneck-clad TSX 60 isn’t made up disrupters, the S&P/ Steve Jobs unveiled of Canada’s 60 largest TSX 60 has increasingly Over the past four years, EQ has the first iPhone in June companies outright. There’s become an index of gathered $2.5 billion in assets, growing 2007, Apple was already a fair bit of finessing by the disrupted. Three- twice as fast as Moor and his team massive, with a market Standard & Poor’s, which quarters of its constituent predicted, and bringing Equitable’s capitalization of US$100 administers the index. companies are in four total to $32 billion. Of course, that’s billion. But Research In (For instance, it only sectors: financials, energy, still just a fraction of the National Motion, as BlackBerry was counts the value of shares industrials and materials. Bank of Canada, which has $281 billion, then called, was no slouch considered free-floating, All are under pressure from — later that year, it would or not held by controlling technological innovations making it the smallest of the Big Six. rocket past Royal Bank families or employees.) and shifting trends in Competing against larger players of Canada to become the Regardless, if there’s a consumption. Meanwhile, means Equitable has to deftly pick most valuable firm in this blue-chip index in Canada, information technology its specialties. “I’m not going to sell country, with a market cap the S&P/TSX 60 is it. companies, including you conventional mutual funds, for of more than US$70 billion. The run-up in Apple BlackBerry, as well as instance,” says Moor, 59. Thirteen years later, shares, which saw the stock Shopify, Constellation Founded as a trust company in 1970, Apple is a $1.4-trillion nearly double over the past Software and CGI, account juggernaut and the world’s year, reflects not only the for just 7.1% of the index. Equitable is still mostly a mortgage most valuable company. company’s solid results Having had a moribund lender in major cities. Yes, markets in The Colossus of but high expectations for IPO market in Canada for and around Toronto and Vancouver Cupertino isn’t just its 5G iPhone and growing years, and with Silicon are red-hot right now, but they are also 413 times larger than services business. But Valley giants gobbling huge and diverse, and Moor doesn’t BlackBerry today—its the fact that the company up many of our most think a big housing price crash is likely. market capitalization is is poised to overtake the promising startups, “They are global cities,” Moor on the cusp of surpassing S&P/TSX 60 also highlights Canada’s stock market the entire value of all the a weakness in Canada’s looks increasingly out of says. Most of the more than 300,000 companies in the S&P/TSX market. step with the 21st-century immigrants who arrive in Canada 60 Index. While Apple is one innovation economy. every year are drawn to them. To be clear, the S&P/ of the world’s great /Jason Kirby Given Equitable’s digital push, one

42 MARCH 2020 / REPORT ON BUSINESS Congratulations totheserecent might think it’s chasing millennials. But, Moor says, “you’d be surprised at the kind of early retirees who’ve signed up with us.” The bulk of the bank’s appointees clients are ages 30 to 55, and many are do-it-yourself investors. Unlike its larger competitors, Phillip Crawley, Publisher & CEO Equitable can’t boast about having of The Globe and Mail, extends best more than a century of survival. But it also doesn’t have the costly branches, wishes to the following individuals layers of management and legacy who were recently featured in the computer systems that go with that Report on Business Section of history. Last fall, Equitable became the first Canadian bank to shift its core The Globe and Mail newspaper. system to the cloud. Congratulations on your new The next big push: so-called open appointments. banking. Along with other fintech executives, Moor is lobbying Ottawa to make it easier for clients to funnel all their dealings with different

HOW THE BANKS STACK UP AVERAGE ANNUAL TOTAL SHAREHOLDER RETURN (%) OVER THE PAST DECADE*

EQUITABLE BANK NATIONAL 19.6 TD BMO RBC CIBC Ilias Helena Gottschling Jo Taylor Dr. Susan D. SCOTIABANK Konstantopoulos to Board of to President and Moffatt-Bruce 13.8 to CEO Directors, CEO to CEO CDN. WESTERN Great Gulf Group Plan International Ontario Teachers’ The Royal College 12.2 LAURENTIAN Canada Pension Plan of Physicians and Surgeons of Canada 10.710.4 9.7 8.4

6.7

5.0

Efrem Ainsley Nicole Kealey Riaz Raihan *RETURNS TO DEC. 31, 2019. to COO to Chief Strategy to President of Visual Critical Officer Products Visual Critical Visual Critical institutions through one online portal. “A lot of people have a credit card with one bank, a mortgage with another and so on,” he says. “It’s a particularly useful function for small business.” Apart from anything else, Moor notes that Equitable is quite simply a MARCH 2020 bargain for investors: “You can still buy the stock today at less than 10 times To make arrangements for an Appointment Notice, please call trailing earnings!” /John Daly 1-800-387-9012 or email [email protected] Turning Point

lations. But it never made sense to use them to provide broadband. We were persuaded that new technologies—machine learning and AI, optical lasers, cheaper computer processors— would allow us to do it. Rockets are also much more plentiful and can deploy the satellites at a DANIEL lower cost. And advanced manu- GOLDBERG CEO of Telesat facturing techniques, like 3-D since 2006 printing—the constellation will 1972 comprise about 300 satellites, Telesat launches and once our factory is up and Anik 1, the world’s first commercial running, we’ll be able to produce domestic 20 to 30 LEOs a month. communications I should say that everyone who satellite in geostationary had launched a LEO satellite con- orbit stellation before—companies 298 like Globalstar and Iridium— Number of had gone bankrupt. That wasn’t low-earth-orbit satellites Telesat something we wanted to repeat, is expected to obviously. We have always run launch Telesat conservatively, and the Telesat’s principal capital requirements of this shareholders project will be multiple billions are PSPIB and New York-based of dollars. Telesat has $900 mil- Loral Space and lion in revenue and $750 million Communications in cash flow, so we’re a strong company. But it’s a big undertak- ing—and we are very far along the path. We have a very compel- ling design, and we’ve got appli- Going boldly cations in to patent some of the features. We were very quick in For 50 years, Telesat was a leader in geostationary terms of getting the global spec- satellites. Then CEO Daniel Goldberg realized its trum rights we needed to operate competitors were about to blast past it a constellation like this. And we have already launched a satellite, on an Indian rocket, to test our Our sector is exciting—you’re dealing with rockets and design. Over the summer, we did space, and it’s all really cool. But for decades, it has been a test with Vodafone to validate coasting. At Telesat, half our business has been direct- 5G connectivity. We are coming to-home video, through companies like Bell and Shaw’s to the tail end of the procure- Star Choice. It was a nice, stable business that was growing at mid- ment process, and we’ve already single-digit rates. But things started to change, quickly. Netflix began been signing up customers. And delivering video over the internet, and our big customers started losing Telesat has been hiring to fill subscribers. On the other side of the coin, demand for broadband con- some of our competency gaps. nectivity started growing dramatically in all the verticals we served, We’ve also ordered the first including video—Netflix, after all, is just video over broadband. rocket from Jeff Bezos’s com- But our technology wasn’t keeping up. Geostationary satellites are pany, Blue Origin. We are mov- really good for broadcast signals, but for broadband delivery, they are ing as fast as we can—because quite expensive. And it wasn’t the same kind of broadband experience we are not the only company that

you got over fibre or terrestrial wireless like 4G. That is because our has seen the promise of LEO. T satellites are 36,000 kilometres above the Earth, and it takes a second SpaceX, Elon Musk’s company, is OT SC

for the signal to go up to the satellites and back down again. Multiply very focused on building its own LE that second across all the toing and froing IP traffic requires, and you constellation. So is Amazon. It KY get a slow, clunky service. Plus, each satellite takes three years to build will be a bit of a race to capture ION AT and costs US$250 million or more, so the network isn’t as resilient. this opportunity, and Telesat is TR There’s nothing new about low-earth-orbit (LEO) satellite constel- right there. /Dawn Calleja US ILL

44 MARCH 2020 / REPORT ON BUSINESS A new decade. A fresh mindset on mining.

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