With the federal election in full swing and the national conversation focused on racial tensions, climate fears, and way too many memes, tech-focused policies appear to have dropped in priority.
“The big thing here is understanding the difference between startup and scale-up.”
The Council of Canadian Innovators (CCI), a lobby group representing more than 100 scaling Canadian tech companies, is trying to re-focus the innovation conversation, releasing an open letter over the weekend, hoping to make tech and innovation policies top of mind for Canada’s federal parties.
More than 110 Canadian tech CEOs signed the open letter addressed to Liberal leader Justin Trudeau, Conservative leader Andrew Scheer, NDP leader Jagmeet Singh and Green leader Elizabeth May, calling for the parties to outline their plans to support Canada’s innovation economy and scale-ups.
BetaKit recently spoke with CCI’s executive director Ben Bergen about the open letter, Trudeau’s government and its report card on tech and scale-up investments over the past four years, as well as what the lobby group hopes to see from each of the parties moving forward.
The need for the open letter
The letter, which was signed by the likes of Axonify CEO Carol Leaman, Borrowell’s Andrew Graham, and Allen Lau, CEO and co-founder of Wattpad, stated that Canada’s productivity is lagging and its future economic prosperity at risk. The letter emphasized the need and desire for tech leaders to work with political parties during the election to address these challenges.
While the Liberal government had a strong focus on developing the innovation economy through significant tech financing during its first term, current party platforms (at least of those that have been shared) have had less focus on the topic.
The Liberals mentioned innovation at least ten times in their 2015 platform, committing to hundreds of millions for an “Innovation Agenda”. While the Liberal’s current platform did offer some plans around cleantech investment, taxation of multinational tech giants, and international protocols on ethical technology, the word innovation did not appear at all – a continuing trend from Budget2019, which also saw less focus on innovation.
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The Conservatives have yet to release their full platform, but have promised to reduce red tape for tech companies, support research and development and tax credits for green technologies, as well as have tech giants pay their “fair share”, without offering details.
The NDP’s platform makes mention of small businesses, scaling high tech success, and aerospace innovation, without any solid promises. And the Green Party platform focuses mainly on cleantech and addressing AI and automation’s effect on jobs.
“The thing about an innovation economy that’s very different than, let’s say, a tangible economy, is that you constantly need to have conversations with industry leaders [and] with governments on policy frameworks,” Bergen argued. “This isn’t just a ‘lower taxes, build good roads, and get a trade agreement and call it a day,’ this is about using things like standards and regulations, intellectual property frameworks, [and] data governance structures, in order to achieve success.”
Bergen told BetaKit that the open letter is meant to start a conversation between Canadian tech leaders and whichever political party forms government.
CCI focus areas
“The big thing here is understanding the difference between startup and scale-up,” Bergen told BetaKit. “Canada has done a great job in the startup space, we generate lots of small firms, but where we really struggle is on that commercialization … if you look at any kind of indicators, we do quite poorly on that.”
He explained that the CCI and its members want to shift the focus away from the startup narrative towards a discussion around scaling. While the letter remained purposely vague on specifics in hopes of being seen as willing to work with any of the four parties, Bergen, in discussions with BetaKit, dove into what the CCI is hoping to see addressed on four main fronts: talent, capital, procurement, and data.
Talent
The CCI is looking for each of the federal parties to address how they would handle the upcoming talent gap, which will see 220,000 unfilled jobs in Canada by 2020. CCI is also calling on federal leaders to make committments on job retraining programs, and how they would handle retaining highly skilled workers and unviersity students, with Bergen stating that 67 percent Waterloo computer science graduate students, for example, leave Canada for places like Silicon Valley.
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The lobby group has also been instrumental in supporting the federal government’s Global Talent Stream, which was made permanent by the Liberal Party in Budget2019. Bergen lamented that no other party has outright committed to keeping the program in place. Having previously called the program’s two-week visa processing time a “game-changer” for Canadian scale-ups, Bergen said CCI hopes to see each of the parties make that commitment, as a key part of helping Canadian tech companies scale.
Capital
Another key component to supporting scaling companies is capital. The CCI has been vocal in the past about advocating for changes to government support programs like the SR&ED Tax Incentive Program and Industrial Research Assistance Program (IRAP), in order to better support growing companies.
“You often see federal government programs cap out SMEs [small-and-medium-enterprises] at 500 people,” Bergen said. “So things like SR&ED or IRAP, once you hit X number of employees, aspects of it go down in terms of what you can benefit from.”
“Should we be helping to fund the R&D [research and development] for multinational companies?”
“A 500 person company in Canada might be [a] large tech company, but globally, that’s still very, very small, compared to the giants that are out there,” he added. “How do we make sure that we’ve got a policy framework that doesn’t just sort of stop at X dollars in revenue, but actually continues on in order for those companies to not just become successful, but to really become global players.”
In Budget2019, the Liberal government proposed eliminating the income threshold for accessing SR&ED in order to “better support growing innovative businesses as they are scaling up.” However, no changes were made to IRAP, with the CCI stating at the time that the federal government needed to do more.
The CCI is also challenging the Liberals, as well as other political parties, to consider whether foreign companies should be able to access programs like SR&ED and IRAP, which is currently allowed.
“Should we be helping to fund the R&D [research and development] for multinational companies? That’s the question mark that we have put forward to all the political parties … should innovation dollars be focused on domestic companies,” Bergen stated.
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The most recent federal budget also proposed a change to employee stock option grants, proposing a $200,000 annual cap on grants for employees of large, long-established, mature firms. The CCI has expressed disappointment in the changes, however, calling the stock options a way to attract much needed highly skilled talent from Silicon Valley to Canada.
Bergen stated that CCI and its members are looking for comments from each of the political parties on whether reversing the stock options cap is something they would move forward with.
Following the Monday leader’s debate, The Logic reported that Scheer commented on stock options, but made no commitments around lifting the Liberal’s proposed cap. The Green Party has stated it would eliminate “loopholes” in the taxation of stock options, and the NDP Party platform calls for an end to stock option deductions and has previously supported cracking down on the program.
Procurement and National Data Strategy
The CCI is also looking for parties to make commitments and consider challenges around the longstanding issue of procurement.
“Phoenix pay systems [is a] really good example of that. The way that the RFP [request for proposal] process was written, it basically prevented any Canadian company from being able to bid,” Bergen argued. “How do we work to kind of unbind [and] uncork the challenges around procurement so that successful companies that obviously have strong bids and are Canadian can actually get in there and try [to] win contracts.”
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The lobby group has also been vocal in the past about creating a national data strategy, and expressed disappointment earlier this year when the Liberal government made no mention of its plans on the topic in Budget2019.
Bergen told BetaKit that 83 percent of the member respondents CCI recently surveyed pointed to a national data strategy as a key issue, effecting everything from health data to natural resources.
“The Liberals announced something several months ago, but it didn’t really have much teeth on it,” he said. “We’re looking really for the government to have a strong national data strategy.”
The Liberal’s report card
On the Liberal government’s innovation agenda over its past four years in office, Bergen noted there have been “positive signs.”
He pointed to both the government’s implementation of a National IP Strategy and making the Global Talent Stream permanent as steps in the right direction to address the open letter’s concerns around scaling Canada’s innovation economy.
“We’ve begun to see the first steps of that moving forward, i.e. funding and the likes,” Bergen said. “I do think that there’s been some challenges, though, where you have seen the Prime Minister write a letter of support for the Amazon bid.”
Bergen also called out the Liberal government for its engagement in bringing foreign tech into Canada “at the expense of domestic” tech companies.
“There’s been some positive, but definitely some areas that don’t hit the right chord in terms of wanting to create a strong domestic, innovative ecosystem,” he stated.
Bergen explained that the main thing Canadian tech innovators are looking for is a level playing field. “I don’t think that they’re looking for any sort of preferential treatment. But foreign firms are often given sort of rolled out red carpets, expedience, and policies. So how do we make sure that we’re keeping domestic innovators at the center of discourse around innovation in this country.”