Shopify announced on Thursday it will sell its shipping and fulfillment department to Flexport, laying off 20% of its staff in the process.

The move would allow Flexport, which partners with Shopify, to advertise the last-mile delivery services Amazon is known for. Shopify鈥檚 e-commerce customers will have access to the full range of Flexport鈥檚 freight services that can ship internationally as well as domestic home delivery.听

The announcement is another example of how tech鈥檚 attempt to latch onto e-commerce during the pandemic was a huge swing and a miss.

The broken promises of e-commerce

During the pandemic, tech companies thought they could tap into a brand-new, long-lasting consumer behavior that was ripe for disruption. That hasn鈥檛 been the case.

Funding to logistics startups 鈥� from everything to delivery to freight 鈥� dipped dramatically in 2022. You could blame, in part, the economic downturn that hurt every corner of the private market, but 2022 saw about half the money the logistics sector garnered the year prior, in part due to changing consumer behaviors.

Shopify spent years cultivating its in-house logistics firm, which included the $2.1 billion acquisition of last-mile delivery startup last year. At the time, it seemed like a smart move 鈥� the pandemic accelerated e-commerce and delivery needs as people warmed up to having their groceries and home goods delivered to their door. Like working from home, the tech industry thought that level of online shopping activity would stick, and quickly hired warehouse workers and customer service representatives, and built new fulfillment centers.

Well, it didn鈥檛 stick, and what followed was a slew of layoffs and mea culpas. During a call with around 11,000 workers laid off back in November, said his investment in e-commerce . Shopify, which previously laid off 1,000 employees (10% of its staff) in November, said layoffs were driven by consumers . Amazon and laid off hundreds of warehouse employees in the process. for online furniture retailer , which reportedly laid off around 2,600 people in the span of four months, according to the SA国际传媒 Layoffs Tracker.听

For what it鈥檚 worth, this is a big win for Flexport, which bills itself as a one-stop logistics platform for businesses to organize delivery across multiple in-person and online retailers 鈥� something Amazon hasn鈥檛 been able to promise. Yet.听

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Existing backers , , , and also put money in the round. The Toronto, Ontario-based company has now raised a total of just over $60 million since its 2014 inception, according to SA国际传媒 data. This latest financing is more than triple the amount raised in its , led by New York-based FirstMark, in December 2018, according to SA国际传媒.

The company declined to disclose the valuation at which the Series B was raised.

Ada, a SaaS operator, has built an AI chatbot onto its ACX platform with the goal of helping companies such as , , and save money and improve customer satisfaction. It currently has more than 100 customers.

I hopped on the phone with CEO and co-founder to get a better understanding of what the company does.

鈥淲e鈥檙e on a mission to strengthen customer relationships through an incredibly easy-to-use automation platform,鈥� he said. 鈥淣on-technical teams use a Lego-like block building experience to build a chatbot that automates upwards of 80 percent of all customer conversations.鈥�

Ada can train its chatbot to understand and address topics specific to each business while getting up and running in weeks. A proprietary Natural Language Understanding engine helps the chatbot to understand meaning and context without perfectly constructed sentences, 鈥渁llowing it to navigate around jargon, typos, spelling errors and more than 100 different languages,鈥� according to the company.

The Ada advantage

The benefits of using Ada, Murchison said, include a dramatic reduction in customer service wait times. For example, one customer, AirAsia (with more than 100 million passengers) said the use of Ada cut down its wait time from one hour to less than 60 seconds.

It also increases customer satisfaction for an increase of 50 to 60 percent in rates in some cases, according to Murchison. Plus, it allows 鈥渁 perfect memory of clients.鈥�

鈥淲henever you talk to an Ada-powered bot, it always remembers who you are,鈥� he told SA国际传媒 News. 鈥淎nd then it鈥檚 always improving based on the conversation you had.鈥�

Additionally, it can automate the purchase of software for SaaS (software-as-a-service) companies.

鈥淲e鈥檙e turning what used to be a customer service cost center into a revenue generator,鈥� Murchison said. 鈥淲e鈥檝e built an operating system for the customer experience.鈥�

The company claims it helps automate over tens of millions conversations annually, and has: reduced customer wait time up to 98 percent; solved more than 70 percent of customer inquiries 鈥渋nstantly鈥�; and achieved customer satisfaction scores of 90 percent.

Growth

While Ada is not yet profitable, it鈥檚 been seeing ARR (annual recurring revenue) growth. According to Murchison, ARR tripled in 2018 and 2019, and he expects it to triple again this year.

The company has 150 employees, 100 of whom were hired over the past year, and its new capital will go toward deepening the sophistication of Ada鈥檚 technology.

鈥淲e doubled our average automation rate last year, and we have a long roadmap of new ML features we鈥檙e going to accelerate the growth of with this new round,鈥� Murchison told me. 鈥淲e also want to expand our capabilities so we can support greater diversity and use cases, and types of customers.鈥�

Ada also plans to use its new funds to 鈥済o more global.鈥� Currently, 30 percent of its business is outside North America.

鈥淚 think it will be a lot more than that in the next couple of years,鈥� Murchison said.

Investor POV

础肠肠别濒鈥檚 said his firm was impressed with the origin of Ada. The co-founders, Murchison and , actually created the product to solve a pain point around scaling customer support they were facing at another company.

鈥淭hey pivoted the business to solve the problem,鈥� Fletcher said. 鈥淎nd they have done it in such a way that gives customer service reps as well as business users and owners an opportunity to make their own tweaks–even if they are not technical. That not needing to have access to a development team is empowering.鈥�

Accel invested in another Toronto-based SaaS company, , last year. In that case, Accel wrote its largest initial check ever, leading a $200 million round for the company in its first external funding in its 14-year history.

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Canadian venture capital funding is on a tear in 2019, and investments hit their highest point on record in the third quarter.

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Overall, venture investors put a mammoth US$1.8 billion to work in Q3 of this year, according to the Canadian Venture Capital & Private Equity Association (), which published its latest quarterly results this week. It鈥檚 the highest quarterly total since they鈥檝e been tracking and almost 80 percent above Q2 levels.

鈥淲e鈥檝e never seen this before,鈥� said CVCA CEO , regarding both the quarterly totals and the spike in mega-sized rounds for a number of later-stage startups. She sees the rise as indicative of a broader shift in Canada鈥檚 startup sphere, as entrepreneurial companies become bolder in their ambitions and capital demands.

鈥淭here was always this sense that Canada was really great at starting companies but not at growing them,鈥� she said. But success stories like Ottawa鈥檚 , the ecommerce technology provider with a public market capitalization of over $36 billion, have convinced more founders that it鈥檚 possible to build a company with global reach.

Funding Rises, Deal Counts Don鈥檛

The rise in venture funding is due to round sizes getting bigger, but not more frequent.

In Q3, for instance, CVCA recorded 126 venture funding rounds — below Q2 levels and roughly average for recent quarters. The average round size, however, approximately doubled quarter-over-quarter. We look at patterns for the past five years, in Canadian dollars, below:

Chart: Total Quarterly Venture Investment In Canadian Companies

Who鈥檚 Getting Big Checks

Canada is getting a fair share of supergiant funding rounds. In the past three months alone, at least seven companies have announced deals of $100 million or more. (See .)

Bizarrely, the largest round of the year comes out of Newfoundland, a remote Easterly province with a population of just half a million. , a sixteen-year-old provider of software for tracking financial crimes, raised $385 million in a growth equity deal led by Information Venture Partners and Spectrum Equity.

Other companies that have raised big rounds recently include:

• , a Vancouver-based developer of software tools for law firms, raised a $250 million Series D round in October.
• , a Montreal-based agricultural cooperative, raised $300 million in what鈥檚 classified as a venture round with VC backing, although the operation has been around for decades.
• , a Montreal-based developer of tools for businesses to build AI products, raised $150 million in a September Series B round.

Tech dominates the venture funding sphere, with 66 percent of dollars so far this year going to what CVCA classifies as information and communications technology. Next is life sciences, with 19 percent of funding, followed by cleantech, with 6 percent.

Exits

Startups are generating some sizable exits too. So far this year, CVCA counts 32 completed exits bringing in $2.2 billion in disclosed returns.

The biggest debut was Montreal鈥檚 , a provider of point-of-sale and merchant services software that went public in March and was recently valued around $2 billion. Other big deals include , an accounting software provider acquired by H&R Block for $400 million, and , a drug developer that went public in May.

The Beginning Of Something Bigger?

While Canada鈥檚 funding totals may be hitting fresh highs, one doesn鈥檛 get the impression that things are overheating. To put things in perspective: Funding for the entire country so far this year is less than one fourth of the total raised in just one U.S. city – San Francisco.

It helps that Canada has three major metro areas — Toronto, Montreal and Vancouver — with significant tech startup hubs. Plus Ottawa, where Shopify is based, has its share of tech talent too. And as Newfoundland鈥檚 Verafin mega-deal demonstrates, even out-of-the-way locales can launch significant companies.

Furlong, for her part, sees positive indicators for continued funding growth, including a rise in the size and number of domestic VCs, government programs to support entrepreneurship, and greater appetite among founders to build big, globally impactful companies.

鈥淭he only variable that everyone is thinking about, is a correction in the economy,鈥� she said.

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So it鈥檚 teaming up with , a tech incubator out of in Toronto, to help foster entrepreneurship among Black founders in Canada through a new program that has been dubbed the 鈥淏lack Innovation Fellowship.鈥�

“We’re committed to changing the face of entrepreneurship because we believe in a future with more voices not fewer,鈥� said Shavonne Hasfal-Mcintosh, diversity and belonging lead at Ontario-based Shopify. 鈥淒MZ’s fellowship program will improve access for Black entrepreneurs by providing a new path to success, which is another important way we’re helping independent business owners in Canada turn their big ideas into businesses.”

Shopify and inaugural founding partner , which was founded by Nigerian-born entrepreneur turned venture capitalist , are contributing capital to the program, which has a total initial fundraising goal of $1 million.

As part of the initiative, selected founders will have access to 鈥済rowth mentors, exclusive workshops designed to reflect the experience of Black entrepreneurs and a dedicated workspace in the heart of downtown Toronto.鈥� The participants will also have access to a 350-person network of investors, according to , executive director of DMZ, a business incubator that has worked with 398 startups that have raised nearly $594 million in seed funding since its inception in 2010.

Entrepreneurs addressing 鈥渁 compelling market or societal need鈥� are being encouraged to apply to the program.

鈥淲e realize that in North America, diverse communities still continue to face barriers to access that other communities don鈥檛 necessarily face,鈥� Snobar said. 鈥淭his concept was born to support black entrepreneurs, and help them build, grow and scale companies. It was also designed to help them build meaningful partnerships and not be impacted because of skin color, background, or where they were raised.鈥�

Founders will not be asked to give up equity, Snobar emphasized.

鈥淲e want to make it as accessible as possible so it鈥檚 completely nondilutive,鈥� he said. 鈥淥nly 10 percent of our community is made up of people who identify as black founders. We want to see that number double or triple.鈥�

Eventually, the program could extend to the United States, according to DMZ.

In February 2019, we wrote this article on minority founders being overlooked. But fortunately, we鈥檝e also covered other initiatives focused on helping Black or underrepresented entrepreneurs. In 2017, we wrote about the efforts of Austin-based , a nonprofit pre-accelerator that is holding 12-week programs for women and people of color tech founders. Also, earlier this month, we reported on how 鈥� a nonprofit fellowship program providing Black and Latinx students with training and mentorship in venture capital 鈥� has teamed up with Intel Capital to strengthen its curriculum and scale its programming. The organization also recently unveiled its inaugural 鈥�31 Under 31鈥� list.

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