By Canadian Press

Tech CEOs say Liberal innovation agenda does little to help firms scale up: poll

Jan 3, 2019 | 1:00 PM

OTTAWA — The federal government’s big-ticket efforts to support high-growth tech firms are offering little for emerging companies that have already outgrown the fledgling start-up phase, according to a new survey of CEOs in Canada’s sector.

The insights are among the early findings of a three-year research project focused on properly defining mid-sized “scale-up” firms, outlining what prevents them from growing into big companies in Canada and ensuring they’re central to policy discussions.

“Scale-ups do not see their interests reflected in the federal innovation agenda,” said a document summarizing the opinions of executives at 48 of these firms during interviews last summer. The research is a collaboration between industry and the University of Toronto.

The research is partly funded by Toronto-based tech company Delvinia. Adam Froman, the firm’s founder and CEO, said he’s made use of many different federal programs over the last 20 years — and has seen the gaps for scale-ups.

The problem, he said, is that without ongoing support, made-in-Canada firms are being purchased by foreign entities, which also gobble up valuable intellectual property Ottawa helped pay for.

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“We’re exiting too early and the government doesn’t recognize it,” Froman said.

Ottawa, he said, remains focused on helping firms with annual revenues under $10 million a year, when it should continue its supports for the “most-at-risk companies” bringing in between $10 million and $100 million per year.

“If we can actually help more companies become $50-million companies, $100-million companies and stay in Canada, this will have a material impact on the future of Canada’s economic prosperity,” he said.

Froman added that scale-ups are looking for continued support beyond financial help and “handouts.” For instance, he said the government could do a better job promoting “Canada House” as a space where Canadian firms can host events in the United Kingdom and ensuring federal agencies are agile enough to provide advice and services for fast-growing companies like Delvinia.

Since taking power in 2015, the federal Liberals have made big bets in hope of lifting Canada’s fast-growing sectors. Ottawa wants Canada to produce global-scale firms that will generate long-term growth and create lots of jobs.

Among the measures, Ottawa has dedicated $950 million worth of public funding towards five tech “superclusters,” created a $100-million program to make the federal government a bigger customer of domestic firms’ innovative products and made changes designed to entice foreign, high-level talent to move to Canada.

But CEOs interviewed for the survey, taken between June and September, said despite Ottawa’s efforts federal policy has mostly focused on helping smaller, start-up firms.

“I think there’s a lot of frustration,” said Steven Denney, the researcher at University of Toronto’s Innovation Policy Lab behind the study. “I think a lot of the frustration stems from what I would say is a perceived lack of recognition.”

For example, the summary said CEOs wanted government to give more opportunities to domestic firms when it comes to procurement.

Denney said there’s a lack of data about companies in this scale-up category, which the project is also trying to properly define as way to frame policy debate. As he zeros in on a definition, Denney said these firms should have at least $10 million in revenue and between 60 and 65 employees and be considered high-growth according to OECD standards.

“If we can’t define it, we can’t talk about it,” he said.

A spokeswoman for Economic Development Minister Navdeep Bains said Thursday that helping businesses grow, scale up and go global is a top priority.

“Our government has taken concrete action to make it easier for scale-ups to access capital, access new markets, and access talent,” Dani Keenan said in a statement.

“We will continue to work closely with business to provide the right conditions for businesses to succeed and create good jobs for Canadians.”

In a September report, an advisory group assembled by Bains’ department that included industry leaders said Canada has a strong entrepreneurial culture and startup capacity — but that it underperforms when it comes to scaling up companies.

“The problem is that government programs tend to focus on entrepreneurs and small-and medium-sized enterprises,” said the economic strategy report on digital industries. The report said the government must refocus some of its programs to help high-performing scale-ups grow into global firms.

Andy Blatchford, The Canadian Press