When writer Peter C. Newman charted the geography of Canada’s business establishment 40 years ago, he uncovered a cloistered world of elite clubs, elegant mansions and ranches—hushed spaces to which the grocery, mining and industrial magnates retreated to savour the spoils of aristocratic wealth. When he revisited this rarefied world in the 1990s, he discovered a new breed of hustlers, led by men who made their millions by their wits, not their genes. “They live for fun as much as for money,” Newman observed in a 1998 speech, “and pursue both to the end of the universe.”
Twenty years later, that landscape is shifting once again, with a new crop of entrepreneurs elbowing their way into the ranks of Canada’s billionaire class. We’ll call them the next establishment: a generation of audacious global entrepreneurs, who are contemptuous of borders and make their mark by massively disrupting entrenched industries that never saw it coming. They are serial entrepreneurs who care less about the trappings of wealth than the intellectual challenge of reordering our ever-expanding digital universe just a bit faster than the next software genius. “The people who understand those dynamics are the next group of folks that will be reshaping all industries,” says Chamath Palihapitiya, a former Facebook executive from Toronto who founded the Silicon Valley venture capital powerhouse Social + Capital Partners in 2011. “We’re in the very early innings of a massive, 30-year secular change.”
These leaders, some of them scarcely out of their 30s, are building explosive, mould-breaking brands capable of extracting vast wealth from social networks instead of holes in the ground. This emergent club includes Canadians like Uber chairman Garrett Camp, Slack co-founder Stewart Butterfield, Vice Media co-founder Shane Smith, low-key Alibaba executive vice-chairman Joseph Tsai, Shopify’s Tobias Lütke and David Baazov, whose Montreal firm, Amaya, executed a brash $4.9-billion takeover of PokerStars last year, transforming him overnight into one of the global kingpins of online gambling. And while they all have an innate ability to transform failure into fortune (sometimes multiple times), the members of the new new Canadian establishment came of age during the dot-com collapse and have internalized the lessons of BlackBerry’s fate. They understand their fortunes could disappear in the time it takes to delete an app from a smartphone.
Few fit this description better than Butterfield, the 41-year-old B.C.-born founder of Slack with a net worth of $1.64 billion who is intent on killing email as we know it. Butterfield’s ascent involves an abrupt change in the company’s focus that has become the stuff of legend in Silicon Valley. A few years ago, Butterfield, who founded Flickr in 2002, assembled a small team in Vancouver to develop a multi-player computer game. The scheme was a complete bust, but after firing most of the employees, Butterfield, a former philosophy student whose hippie parents named him Dharma, found himself pondering the internal messaging tool the team had created to replace the confusing nested strings of emails such projects generate. In offices, reading and answering email is a time suck. The tool, which organizes messages in “channels” corresponding to projects, could be a game-changer, he thought.
Within a year of launching Slack in 2013, Butterfield was surfing a frothy tidal wave of interest, with the user base growing by a stunning 5.5% per month. He moved the company to San Francisco to partake of what he has described as the city’s “gold rush mentality.” Sand Hill Road venture capital firms, including Social + Capital Partners, anted up US$180 million in equity, bidding up the company’s value to US$2.8 billion in just over a year. Achieving that unworldly valuation in such a short time has Butterfield fielding lots of questions lately about tech bubbles and whether these sudden fortunes are built on solid foundations or merely the giddiness of a moment. “I don’t think it’ll pop and there’s nothing left,” he assured his CNBC interviewer in early November.
As easy as it is to draw parallels to the dot-com bust, it’s an oversimplification that fails to see what this group has accomplished or to acknowledge their tenacity. This cohort is driven not by wealth but by the desire to see their vision succeed. “I don’t particularly care about money,” Shopify CEO Tobias Lütke told the Globe and Mail last year on the eve of the company’s IPO on the New York Stock Exchange. “I care about working on interesting problems.”
If you want to make a clearer distinction between the heady days of the late 1990s and this breakout group of entrepreneurs, like Uber co-founder Garrett Camp, it’s that they have vision. “They see a world that doesn’t exist yet today,” observes Mike Kirkup, a 10-year BlackBerry veteran who runs Velocity, an accelerator at the University of Waterloo. They eschew traditional corporate hierarchies, which are cumbersome and slow to adapt to change. “Right now, entrepreneurs are creating lean, flat and fast-moving organizations, and that’s their chief advantage,” Kirkup says.
This goes beyond creating a different way to conduct business—it’s a new ideology for people to follow, says Art Mesher, a Waterloo, Ont., tech investor who ran Descartes Systems, a logistics technology firm, for a decade. The new establishment visionaries take their cues from Google and place a very heavy premium on creating and then protecting the intellectually electric, counter-corporate culture that gave rise to their staggering wealth. “I can smell the culture when I walk into the room,” says Mesher, who is now chairman of Nulogy, a rapidly growing Toronto supply chain technology firm.
Few are disrupting that culture inside and outside the boardroom more than Vice Media co-founder Shane Smith. Every generation of businesspeople has its characters (Peter Nygård, the flamboyant fashion mogul, springs to mind); Smith now fills that role. He is one of the progenitors of Brooklyn’s hipster scene—a shaggy, tattooed, larger-than-life titan who, last fall, dropped $300,000 on a lavish Las Vegas meal for 25 friends after winning $1 million at a high-rollers’ blackjack table. He approaches business in the same brash manner, cajoling the likes of Rupert Murdoch and one of Silicon Valley’s top venture capital firms to invest heavily in Vice’s expansion. The company raised $500 million in financing and deals in 2014 alone. “I don’t care about money,” Smith told the New York Times last May. “We have plenty of money. I care about strategic deals.”
This generation doesn’t care about borders and regulations, either. “These people are doing incredibly unreasonable things,” observes Toronto-based venture capitalist Daniel Debow, who founded Rypple, a performance measurement software firm backed by LinkedIn’s Peter Thiel, and sold it in 2012 to Salesforce. “They don’t look at the border as a business model.”
If there is any threat to the longevity of the next generation, it’ll be their ability to keep up with the frenetic pace of business they helped set. Members of the next establishment operate in the howling whirlwind of the post-BlackBerry world, where the technology disruption cycle is measured in months, not years. It’s creating an environment in which business execs in their late 30s are considered to be middle-aged. Slack, scarcely a year past its launch, already faces rivals. “You can’t just sit back and enjoy the moment you have,” says John Ruffolo, CEO of OMERS Ventures, the venture arm one of Canada’s leading pension funds. He describes this generation as one propelled forward by paranoia. “Just when you’ve finished disrupting someone, a new class of entrepreneurs is trying to disrupt you,” he says.
For companies experiencing hyper-growth, the difficulty of finding enough talented people—not just software engineers but also sales, marketing and design staff—in Canada’s largest centres becomes a determining factor in how they grow. For some, the only solution is to move to a place like Silicon Valley, where the talent pool runs deep.
Senior management stability is also critical. In 2010, when Chinese e-commerce and B2B site Alibaba was seeing its own explosive growth, Tsai, the company’s Canadian executive vice chairman, made a key move, altering the company’s corporate structure to a partnership model meant to encourage continuity and collaborative decision-making. Mesher says Tsai’s relationship with Alibaba’s founder, Jack Ma, is reminiscent of some other significant tech industry pairings, notably Microsoft’s Bill Gates and Steve Ballmer, and BlackBerry’s Jim Balsillie and Mike Lazaridis.
So while lone wolves, like Amaya’s David Baazov, are hardly unusual among the business elite, tech investors also know these kinds of deep and enduring relationships represent a source of advantage and stability in firms experiencing extremely rapid growth, says Kirkup. With visionaries like Butterfield and Smith constantly pushing their companies to change directions rapidly in order to pursue market openings and new partnerships, Ruffolo observes, “you’re really betting on the adaptability of the team.”
What’s far less certain, of course, is whether the go-go members of the next Canadian establishment will be exposed to the sort of tech bubble meltdown that waylaid a generation of dot-com entrepreneurs 15 years ago. Butterfield, for his part, says high valuations don’t necessarily imply a bubble. Still, with multiples soaring, the pace of disruptive entrepreneurs will continue to accelerate: Witness the recent alliance between Uber and Shopify, which will allow the latter’s customers in selected cities to get same-day delivery through a service Camp’s company has branded UberRush. Camp is also launching an app that integrates the online and bricks-and-mortar shopping experiences, a move that sounds like a shot across Amazon’s considerable bow.
Sitting idle isn’t an option. Camp has even set aside US$50 million to start Expa, a startup studio—a company that creates new companies.
For Garrett Camp and Shane Smith and the rest of the next establishment, the best defence against a wealth-destroying correction, it appears, is to take several other industries out at the knees.