Canada has been doing a pretty good job of supporting its tech startups, but I’m calling on government, private investors, banks and pension funds to double down on that support to help make them the country’s engine of growth over the next decade. That’s especially important as our homegrown tech sector achieves critical mass.
Canada deserves good marks for investing in tech companies at the startup stage, but we need more money in the ready-to-scale category. Often, those tech startups that make it out of the gate are snapped up by foreign investors; too few Canadian sources were supplying follow-on capital.
A PwC Canada & CB Insights MoneyTree Canada report on venture capital activity in 2016 shows just that. Canadian VCs and government-backed capital played a more active funding role for tech companies at seed, early and expansion stages of growth. U.S. VCs started to eclipse Canadian investors as tech companies stretched their wings into international markets.
There’s also been an absence of experienced upper-level tech management talent. That’s starting to change as we accumulate second- and third-time entrepreneurs who have exited their companies, are re-investing in Canadian companies and are offering their mentorship and expertise.
At Round 13 Capital, where I’m a partner, we have 14 cheque-writing investors, who have grown and exited Canadian tech companies, and they’re all poised to mentor our investee companies. Canada is starting to get organized that way.
Governments have been doing a good job supplying investment capital and support. Ottawa’s Business Development Bank of Canada (BDC) is one of the most active funds in the country. The recently expired federal Venture Capital Action Plan (VCAP) used $400 million in government funds to attract $900 million in private capital into the business ecosystem. The good news is that the latest federal budget offers the similar Venture Capital Catalyst Initiative. Managed by BDC, the new initiative promises $400 million in late-stage venture capital to Canadian entrepreneurs over three years.
The budget also earmarks $950 million over five years to invest in Canadian “innovation superclusters” — tech hubs selected because they offer the greatest potential to accelerate economic growth.
Canada is currently in a position to attract more foreign talent as U.S. anti-immigration sentiment takes hold. On an anecdotal level, a disproportionate number of the people on our BNN TV show The Disruptors are immigrants or second-generation immigrants who exemplify a culture of entrepreneurship and are hungry to get ahead. Canada should put the pedal down to re-establish our brand as the go-to country to build a tech business or work for one.
Canada’s recently announced Global Skills Strategy, designed to make it easier to attract highly educated and highly skilled workers from around the world, is a good start.
Meanwhile, the Canadian Business Growth Fund announced in March unites banks and insurance companies in a promise to invest $1 billion over 10 years in small and medium-sized Canadian companies. Banks, insurance companies and pension funds all have powerful potential to become more active in the tech sector and back Canadian entrepreneurs, who can hold their own with anyone in the world.
Prime Minister Wilfrid Laurier once said that “the 20th century belongs to Canada.” If we support our homegrown entrepreneurs in the tech sector with the right blend of funding and support, we can make that happen in the 21st.
Bruce Croxon is co-host of BNN’s The Disruptors and partner at Round 13 Capital. On March 27, Bruce will be the moderator of an NP Talks event on how to disrupt your business.