As the Québec government continues to execute its five-year innovation plan, some ecosystem players are calling it a spendthrift approach, prompting a government defence of its financial aid to startups.
On Dec. 12, the Ministry of the Economy, Innovation and Energy (MEIE) awarded $9 million in direct support to non-profit organization Québec Tech, capping off a turbulent year at the MEIE that included the premature departure of Minister Pierre Fitzgibbon and layoffs at Investissement Québec (IQ).
“What scares [me] the most is not helping companies with government money, but instead taking Québec’s position in the world for granted.”
Minister Christopher Skeete
The $9 million funding package will help Québec Tech deliver on its mandate of scaling up and exporting Québec scaleups to international markets. Québec Tech, formerly known as Startup Montréal, recently selected the first five startups that will receive financial and operation support as part of its Stage V initiative. The funding will be deployed under three streams: trade missions with IQ International, service contracts such as market intelligence reports, and human resources specialists.
The financing package, Québec Tech’s rebrand, and new export mission are all part of the provincial government’s five-year innovation strategy billed at $22.5 million. Introduced under former Minister Fitzgibbon, who left politics in early September, the initiative was taken over by Ministers Christine Fréchette and Christopher Skeete, the latter assuming responsibility for the innovation portfolio.
Skeete took to LinkedIn to defend his ministry’s financial decisions, saying that Québec companies “cannot compete at a global scale” without government assistance.
“To be a world-class company, you must have the best technology. How could a Québec-based company rival a foreign company that produces more, for less money, at a global scale? The answer is it cannot, without help,” Skeete wrote in French.
How much support is enough?
Provincial aid to startup and small business support programs has risen significantly under Québec Premier François Legault, the Journal de Montréal found.
On Dec. 14, the francophone publication published a comprehensive database of all provincial government aid to businesses, startups, and associated organizations since Legault took office in 2018. For startups and enterprise aid alone, it totals over $15 billion in loans, subsidies, and direct investment. According to the analysis, this represents a 67-percent increase compared to the previous government.
The lion’s share of this money went to large corporations in the form of direct equity and subsidy rather than programs to aid small businesses, as revealed by the analysis and pointed out by founders on LinkedIn. At least five government programs to support small businesses and early-stage startups were slashed this year, including Impulsion PME, a key investment-matching program for startups raising their first rounds.
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“Is the amount invested by our government sufficient for our ecosystem? Probably not, but it would be anemic without them so it does make a difference.”
Richard Chénier
Some founders support direct government funding for businesses, especially as a salve for flagging private investment. In a recent interview with BetaKit, UFrost CEO Julien Michalk said that government programs are “mandatory,” especially for hardtech companies that require more capital at the prototyping stage.
“The main challenge is that we are asking our government to support the entire innovation chain, including the start-up phase. And this is partly due to low participation from the private sector in supporting local innovation,” Chénier told BetaKit.
“Is the amount invested by our government sufficient for our ecosystem? Probably not, but it would be anemic without them so it does make a difference.”
Some in the tech industry, however, think that business-friendly policies to incentivize entrepreneurship could be alternatives to the current intervention model.
Eric Boyko, founder and CEO of Stingray Music, told the Journal de Montréal that though he was ambivalent on the question, the “capitalist libertarian” view would be to eliminate subsidies and cut taxes on businesses.
Innovation minister weighs in
In response to what he called “lots of talk in recent days” about government aid to businesses, Skeete outlined why the MEIE financially supports companies in a LinkedIn post, international competition being the main reason.
If the government fails to step in and provide assistance, “these companies will shutter, causing job losses and regional economic downturn,” he added. However, the government must be “prudent and respectful” of how it spends taxpayer money while remaining competitive.
David Bordeleau, CPO and CTO at Eugeria, responded in a LinkedIn comment that though a wide array of aid programs are available, all of them offer small amounts while requiring a large amount of paperwork.
“Entrepreneurs could easily lose a significant amount of time knocking on the doors of multiple incubators and accelerators, as well as municipal, provincial, and federal programs,” Bordeleau wrote in French. “Not to mention that some programs shut down during the process or an innovation falls through the cracks of the criteria.”
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In a November interview with BetaKit, Skeete said that increasing private-sector investment was necessary to better commercialize research developments and boost Québec’s productivity.
Data from Réseau Capital shows that Québec’s funding landscape is bimodal. It hasn’t favoured either public or private investment—rather, both have grown. However, Québec has long relied more heavily on public funding compared to other provinces. The province saw its share of private investment drop from 60 percent to 52 percent in 2023, which Réseau Capital attributed to a funding downturn.
“What scares [me] the most is not helping companies with government money, but instead taking Québec’s position in the world for granted,” Skeete wrote.
Feature image courtesy Medicom.