Michele Romanow: “The talent market was insane for the last six months…That era is over.”

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Canada is rolling out the red carpet for technology workers, researchers, academics and other high-talent professionals, looking to extend its prowess as a tech hub. At the Collision tech conference hosted last week in Toronto, Fran?ois-Philippe Champagne, Canada’s minister of innovation, announced the government is investing $443 million into artificial intelligence through commercialization and attracting more talent.?

At least $160 million of the funds will go toward recruiting and developing researchers. The move follows years of Canada capitalizing on fewer people seeking to enter the U.S. for work.?

But the country is starting to experience an economic downturn and more startups and companies are announcing layoffs as they seek to extend their runway and become profitable.?

I sat down with Michele Romanow — a renowned Canadian entrepreneur and star on Dragon’s Den (Canada’s version of Shark Tank) — at Collision to discuss inflation and how founders should be thinking about this new era of economic activity. Below follows our conversation, edited for brevity and clarity:

How are you thinking about inflation and an economic downturn as an investor?

You have to see where the opportunities are going to be and if your business can continue to keep pace with inflation. We’ve [asked] a lot of our founders, “can you endure price increases, and will the market withstand that?” You should be doing a ton of testing to figure out where that magic point is in your market. You should be going very deep on negotiating with your vendors and suppliers on almost every single domain because as things creep up by 10% or 20% or even higher, we are no longer going to be in a business where capital is free. So the benefit of having a business that is profitable, that is generating EBITA (Earnings Before Interest, Taxes, Depreciation, and Amortization) is going to be 10 times more valuable than it was even six months ago.

When we started Buytopia, whiteboards were really expensive — they were $500 each — so we went to the hardware store, bought six pieces of wood and whiteboard paint and we painted ourselves whiteboards. We used them for the next five years. And I remember thinking we saved $3,000 on whiteboards. I don't think anyone for the last 13 years of this bull run has thought of saving money on whiteboards. The moral is you can do a lot with less; you can do an enormous amount with creativity and it's now the time to start thinking about that.

Given that context, how should startups be thinking about fundraising and valuations?

Valuations are certainly going to come down. People are going to look way more at real traction on revenue and a path to profitability versus growth at all costs. The market rewarded very different things six months ago: it was grow as fast as you can and take market share as fast as you can. It’ll be a very different way of operating.

We’ve seen layoffs across tech. For many, these were hard earned talent that they poached from other companies. How should founders be thinking about timing and when to let people go versus holding on and riding the storm??

Layoffs are just a normal part of operating and sometimes you grow too fast. You have to respond to what the market wants. We do everything to protect our staff and our people. That's the worst part of your job as a founder: having to terminate someone. But part of being responsible is to figure out what you can reasonably afford in this market.?

We want companies that are going to be around for a decade and 100 years and when we make a really big deal of small layoffs, I don't think that helps our ecosystem. It is far more helpful when we can do this with a lot of love, a lot of grace: when we put people's names on boards and find other companies for them. People are going to have to provide very tangible value to keep their jobs and that's just a part of where we are right now.?

The talent market was insane for the last six months. People were getting multiple job offers and they could demand a lot of things. That era is over.?

The government announced a new fund to attract more tech talent. What role do you think government and policymakers play in the tech ecosystem of building it up or regulating it? What’s that line??

Government's played an enormous role; the first role they play is using Canadian tech themselves. When the PPP loans went out to small businesses in the U.S., the U.S. government chose to use all of the modern fintechs: Kabbage, OnDeck, Square. The Canadian government used the five big banks. There’s nothing wrong with big banks, but if we’re investing in technology companies that can do things faster and more efficiently, the government should be leveraging that talent as well.

The second thing we need is to continue to build talent in this country, and that's done through a very long series of investments in education and STEM. Every company will be a tech company, whether you are Lululemon making activewear or a mining company — there will be technology involved.

The third thing the government has a really deep influence on is the funding that goes to companies. It makes a huge difference when the government can put their finger on the scale for their own companies. The nature of technology companies is they are global monopolies. These companies get to such a scale by nature of what they do and to have countries own certain things…it’s really important that we get this right. Because it will not be like a commodities market, it will not be a highly competitive fragmented market. It will largely be winner take all…so when a country has started one of these it's really powerful.

Tech is still a male-dominated industry. What is your advice for other women who are looking to become founders or work in tech??

You need to dance to your own drum, and I am a firm believer that perspective matters on everything. I have never viewed it as a disadvantage to be a woman. People doubted me, and I used every single ounce of that doubt and channeled it into a complete motivation to prove people wrong. If that means I have to do 120 pitches versus 100, that's what I'm gonna do. I think you have to do the table stakes of working exceptionally hard to create success. This is not an easy job. I've never said it's an easy job. It's a job where you have no control of your time. If you want to do this, you 100% should, but make no mistake, this is not an ideal work-life balance job.

What do you think the future holds for the talent market?

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