The Waterloo Region startup ecosystem is coming off of a banner year. Over $2.8 billion in venture capital was raised in 2021, rivalling the total amount raised over the previous decade. Magnet Forensics and D2L both had their IPOs last year and are driving into a new year of exponential growth.
With all the success, it’s easy to forget that the startup ecosystem of today looks a lot different than it did 30 years ago. BlackBerry was still Research In Motion, with a focus on wireless modems. Google, whose multi-coloured signs a dominate the Kitchener skyline, didn’t exist yet. The founders of future local powerhouses like Bridgit and ApplyBoard hadn't started kindergarten yet.
Mike Kropp has been around long enough to truly appreciate the dramatic changes over the last three decades. Kropp is President and CEO of PEER Group, a developer of factory automation software for the semiconductor industry. PEER Group is celebrating its 30th anniversary this year.
“Back in 1992, the startup ecosystem did not really exist in Kitchener-Waterloo. There were companies out there – MKS, Descartes, Virtek Vision, among others. But we were all bootstrapped. If you’re going to do it the hard way, that’s probably the hardest way to do it. Scraping by and grinding away year after year,” Kropp said.
Founders Kropp and Bob Harris met while working at ATS Automation. At the time, most software for semiconductor manufacturing was custom written. The two had an idea to create reusable software that would connect automation tools and factory information management systems. Kropp said it was a massive leap of faith for him and Harris.
PEER Group’s solutions play a critical role in manufacturing semiconductors – an industry that’s been in the news due to worldwide chip shortages over the last two years. Despite those shortages, Kropp said, a record one trillion devices were shipped last year. Rather than a shortage, Kropp framed the situation as an unexpected surge in demand.
“That’s where our software products are used – to enable the manufacturing of chips. When we look at it here’s a small company in Kitchener-Waterloo that is one of the premier suppliers to the global semiconductor industry, it’s amazing,” Kropp said.
Reaching 30 years in business is an impressive milestone. It’s even more impressive in tech, where the failure rate for startups is notoriously high, and the lure of a big exit can be a siren song to any founder.
For Kropp, long-term success comes from building a company where people enjoy the work and their colleagues. Using performance, innovation, compassion and integrity as guiding values, PEER Group has weathered the ups and downs of market changes and challenges.
“We like to focus on the ups and forget about the downs, but some of those do reinforce our learnings and shape what we do. The 2008 financial crisis was very humbling because companies were going out of business and we managed to make it through by the skin of our teeth.”
Kropp said that having good financial stewardship has been critical to managing challenges in the market, including never spending more than they earned. PEER Group has also focused on growing through revenue rather than venture capital.
“Even 30 years later, we have no outside investors in the business. We like to say the inmates own the asylum,” he said.
Still, Kropp said that even though the last 12 years have seen year-over-year growth and increased profitability, the company still sticks to its financial plan.
“We learned more in the down than we did in the up. That’s when you need to be really good managers. It’s not hard to manage on the way up. But it is way harder to manage on the way down.”
That strength of management and culture is reflected in the company’s employees. Out of PEER Group’s 230 team members, 40 have been with the company for more than 10 years. Kropp pointed back to their vision for the company in 1992.
“We want to love coming into work and love the people we work with. We tend to find people who are going to fit our environment. We say we’re a great company to work for, and sure enough, we’ve been on the Great Places to Work list for 10 years,” Kropp said.
PEER Group’s culture also includes a drive to give back to the community through volunteerism and fundraising. One of the organizations PEER Group supports is KidsAbility. The Waterloo-based centre supports more than 9,000 children and youth on a journey to reach their communication, social, physical and behavioural goals each year.
PEER Group supports KidsAbility through employee fundraising efforts, corporate matching programs, and the PEER Group Plasmatix Plasma Car Races. The last race before the pandemic saw more than $62,000 raised that day, including $25,000 from PEER Group towards an endowment for the KidsAbility Foundation which now totals $100,000.
Lisa Talbot, Executive Director for the KidsAbility Foundation, said the agency is grateful that PEER Group has made KidsAbility its charity of choice with their employees.
“Thankfully, PEER Group understands that KidsAbility is infinitely more secure with the endowment fund they established in 2017 to provide a stable annual income for ongoing and future needs of children, youth and families in our community,” Talbot said. “PEER Group’s willingness to dream big and rally together makes them tremendous partners to help change even more lives and bring childhood dreams to reality.”
Kropp said the fundraising efforts help strengthen bonds between employees. Each quarter, the company picks a different organization to donate to. This quarter, PEER Group is doing a fundraising drive for the Kitchener Waterloo Humane Society with bingo nights and an online auction.
Doug Suerich, Director of Marketing at PEER Group, said the auction had generated a competitive spirit for bidding and donating items for the auction. One of the items Suerich has seen added is a vintage, 20-year old PEER Group branded bucket hat.
“That nearly-priceless PEER Group bucket hat sold for $105 at our auction,” Suerich said. “In total, the auction raised over $2,600 from employees for the K-W Humane Society and generated a bunch of good-natured competition along the way.”
Looking forward, Kropp said he believes the company can double its revenue every five years based on its current trajectory.
“It’s not just about doubling revenue. Along with that, we want to make sure that we double our charitable donation, too. We want to continue to have a positive impact in the communities we live in.”