The news of Startup Montréal’s transition to Québec Tech was an energetic kickoff to Startupfest, mirroring conversations about how best to reinvigorate a provincial tech ecosystem also in transition.
With its new mission of supporting startups to go global from the get-go by helping them successfully reach the export stage, the organization aims to make Québec a bigger brand internationally.
“Scaling companies is extremely important for the ecosystem, because it creates kind of a flywheel effect, where you have team members and even founders investing in the next generation,” said Gabriel Sundaram, co-founder of the tech talent platform Mission.dev.
“There’s … a mental shift, or just a change in perspective, that local entrepreneurs need to have around thinking about going global from the very beginning,” Sundaram said.
The new mission of Québec Tech lines up with the recommendations of a recent Réseau Capital report comparing Québec’s performance with Ontario and BC. Its suggestions include connecting Québec’s deal flow with investors outside the province, as well as improving its brand recognition.
Statistics on the space suggest that Québec is not producing or exporting the volume and quality of successful startups that it could be. The province ranks below Canada’s national average for productivity—and the country is already underachieving in productivity, ranking 37th out of 38 OECD countries. As Dominic Gagnon of Les Affaires points out, Québec is struggling to pull its weight per capita in terms of new startups, producing just 14.2 percent of Canada’s share, despite being home to 22 percent of the population.
“You have to work on all the layers”
Some in the province’s tech community are concerned that while exportable scaleups are a key part of Québec’s offerings, they are not the only part of the ecosystem that deserves support.
To Sylvain Carle, co-founder and director of Canadian Impact / Venture Investment Coalition (CIVIC), the “wedding-cake analogy” is a helpful way to view the ecosystem.
“The challenge of ecosystem development is you have to work on all the layers,” he said. Namely: entrepreneurs need programs to help them get started, funding at the pre-seed and seed stages, and a growth engine.
MTL Newtech is one organization working to provide support to the tech community in Québec. Its general manager, Simran Kanda, is concerned that focusing only on later-stage startups without sufficient investment in other programs “looks great and yields results short term, but long term it dries the pipeline.”
“Strong grassroots initiatives plant the seeds for future innovation and build momentum for continuous motion beyond government funding in a more sustainable way long term,” Kanda wrote in a statement to BetaKit. “While it’s great to support later-stage startups, focusing only on those [that are] ready is like picking low-hanging fruits.”
The transition from Startup Montréal, with its mission to support the local tech community across stages, to Quebec Tech, which is more focused on later-stage, export-ready startups and scaleups with high success potential, has led to a moment of reflection about how best to support the startup space with public funds.
Carle said that 20 years ago, the Québec government decided to provide private fund managers with public funds to stimulate ecosystem growth, instead of investing directly in startups. Though the move made deals possible, public funds have generally been shown to produce lower returns than private funds over a longer time period, per Hamilton Lane data.
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An injection of capital is needed to kickstart the ecosystem, not just in Québec but in Canada at large, said David Dufresne, partner at CMD Capital. He referenced a blog post by his colleague Matt Roberts, which argued that removing the foreign minimum investment requirement from Canadian pension funds has led to an outflux of capital from Canadian venture.
“There’s less capital available, so we’re not seeing the same level of company creation right now as we’ve seen over the last 20 years,” Dufresne said. “That should be a huge concern.”
“We need the Canadian government to force or incentivize the Canadian pensions and corporations to reinject money into venture and private venture without too many restrictions. Just let us do our jobs.”
This trickles down to a less competitive environment for founders to operate in and disincentivizes potential entrepreneurs from taking the leap.
Community renewal
The loss of Notman House as a Montréal community hub has dealt a blow to the ecosystem as a whole, but especially that first layer of the cake. There are fewer homes for community-based events where aspiring entrepreneurs can bounce ideas off each other organically and mingle with role models and potential mentors.
“It’s super hard to get innovation funded because it typically doesn’t fit into forms or boxes,” Carle said, adding that a minimum of three years is needed to establish proof of helpful operations for early-stage programs. “That’s why all these incubators never know what they’re going to make in the next year.” He said their success is almost impossible to quantify and report on, which is what grant applications often require.
“By valuing quality and community at the start of the pipeline, we can maintain year-long momentum and secure the long-term health of our ecosystem,” Kanda wrote to BetaKit. “Ignoring these vital efforts could endanger the future of our innovation landscape.”
But across the Startupfest stages, from pitch competitions to veteran roundtables, a renewed energy was palpable as networking led to deals and new ideas.
“Let’s never forget that the natural [resource] that we’re talking about is the grey matter, it’s the brain power of our entrepreneurs,” Carle told BetaKit.
Québec Tech, for example, solicited the feedback of dozens of entrepreneurs to inform its new mission and program offerings.
To sustain a thriving pipeline of founders, Sundaram said, they need to be connected with and inspired by those who made it big at events such as Startupfest.
“It’s really about changing the narrative and finding opportunities to expose local entrepreneurs to other founders who have built really category-defining companies and shifting people’s mindset in terms of what’s possible,” he said. “So, role models are important.”
Images courtesy Startupfest.