In recent months, the abrupt termination of entrepreneurship support programs, particularly in Québec, has sent shockwaves through Canada’s innovation ecosystem: teams decimated, services interrupted, and hundreds of entrepreneurs left without crucial support. Beyond the legitimate emotional reactions, this situation reveals a fundamental problem: the danger of building an entire ecosystem singularly dependent on government funding.
Even when these programs return in some new form, the sudden funding gaps and uncertainty create serious disruptions in companies’ growth trajectories. Entrepreneurs find themselves in distress, sometimes mental distress. In some cases, their projects face irrevocable risk. Some turn to programs and partners in other provinces or outside Canada; others contemplate bankruptcy.
The distorted client-supplier relationship
When the government acts as the primary funder of support organizations, it essentially functions as a client purchasing services destined for entrepreneurs. This dynamic creates several critical distortions:
1. Existential dependency on a single client
When a client represents 50-70 percent of an organization’s revenue, its decision to stop purchasing services amounts to a death sentence. What entrepreneur would knowingly build a business entirely dependent on the goodwill of a single client? Yet this is precisely the model that underpins our entrepreneurial support ecosystem.
2. Priorities dictated by the payer rather than the users
In this unbalanced relationship, organizations inevitably align with the priorities and timelines of the payer rather than the real needs of businesses. Three-year government budget cycles and strict accountability requirements necessarily contaminate the strategic planning of these organizations.
3. The paradoxical irony
The irony is striking: we preach revenue diversification to entrepreneurs while maintaining support organizations dependent on a single funder. Resources that should be dedicated to serving entrepreneurs are constantly diverted toward securing the next funding cycle.
Difficult government choices; methods to reconsider
The consequences of abrupt defunding are immediate: expertise and social capital wiped out with the stroke of a pen, discontinuity of services for entrepreneurs, and a generalized mistrust toward any publicly funded support program. The Canadian entrepreneurial fabric, already fragile, becomes even more vulnerable.
It is often said that “to govern is to choose,” particularly in times of budgetary pressures and economic uncertainty. But should we allow funding programs to expire without a clear plan for continuation?
It’s a mistake to think organizations are instantly replaceable, like rows in a spreadsheet. Six months before funding expires, the best employees often leave, and entrepreneurs don’t magically find another seasoned advisor who understands their situation.
Obviously, organizations would benefit from adopting a more entrepreneurial culture themselves. But how can they generate private revenue when supporting early-stage companies or entrepreneurs in difficulty? Governments, which like to “pick winners,” also have a role to play in this transition toward greater autonomy.
Beyond the crisis: toward a new model
Supporting a strong startup ecosystem is like tending a garden of seedlings, not knowing in advance which one will bear fruit. Yet government funding often acts like a binary tap: fully open (with the urge for cash to flow out), then completely closed, while waiting for a new plan or strategy, the next budget, or the next call for projects.
This difficult period offers us an opportunity to collectively mature our approach. Knowing that the impact of support services is almost impossible to measure and attribute in the short term, we need to rethink the way we collectively operate.
From our experience at MAIN, we feel that we must:
- Design shared platforms that reduce fixed costs for support organizations;
- Clarify roles between organizations to avoid duplication and entrepreneur confusion;
- Develop autonomous communities where established entrepreneurs support younger ones
We need to work together to create a more diversified, dynamic ecosystem with hybrid funding models and increased adaptability.
Only in this way will we better serve Canada’s economic development while being less vulnerable to budget cycles. The entrepreneurial potential of our country deserves a support system as innovative and resilient as the companies it supports.
Louis-Félix Binette is the executive director of MAIN, a Québec-based nonprofit dedicated to strengthening the entrepreneurial support ecosystem through community building, service innovation, and knowledge sharing.
Image courtesy Wilfredo Rafael Rodriguez Hernandez, CC0 1.0 Universal, via Wikimedia Commons.