Canadian companies need help competing in the startup ‘Olympics’
Note: This post originally appeared in The Globe and Mail. Story by Paul Attfield. Photo by iStock. Executive Pulse seeks input from Canadian leaders on vital issues that affect our business and economy.
Admitting that Canada has “fallen behind” in developing new technologies, one of prime-minister-designate Justin Trudeau’s campaign promises last month was to commit $900-million over the next three years to help Canadian startups reach their full, global potential.
And while a firm emphasis on taking new technologies and innovation beyond our borders is absolutely the right approach, according to some, including entrepreneur Michael Serbinis, simply throwing money at incubators and accelerators may not be the best course of action.
“You can’t do it all and be great at all of it, so I think we need a national innovation policy that goes a little bit further than ‘Hey, we’re going to put $200-million a year in a few accelerators,’” says Mr. Serbinis, the founder and chief executive officer of League Inc., a digital health and wellness startup in Toronto.
“We need a national innovation policy, and certainly what I saw during the election, none of the parties were going to write it on their own; it’s got to come from us.”
Mr. Serbinis has experience with the startup environment in this country. He was previously founder and CEO of Kobo Inc., a digital reading company that competed with Amazon’s Kindle, and prior to that he founded cloud storage pioneer DocSpace, which he sold to Critical Path in 2000 for $568-million. He is also CEO of Three Angels Capital and a board director of MaRS Discovery District, among others.
“Every new tech sector is like an Olympic demonstration sport,” he says, meaning it may not survive if it doesn’t catch on. “But no matter what, as an Olympic sport, there will be one podium and you will be competing with people from China, India, from the U.S., from Western Europe and there are only a couple of guys that ever make it to that end podium because it’s a scale game.”
While many critics say there is not enough funding for startups in this county, Mr. Serbinis says he has not found that to be a problem. When he founded DocSpace in the late ’90s, he recalls that there was no such thing as incubators or accelerators. Today, he says, there are innovation hubs such as MaRS in Toronto and Communitech in Kitchener, Ont., as well as more funding than ever, which makes the whole startup community “the best it’s ever been.”
But, looking at the globally competitive environment, the government has a role to play in supporting our startup communities. For instance, the Canadian government has created programs to encourage innovation, such as the Scientific Research and Experimental Development Tax Incentive Program (SR&ED), which refunds startups between 40 to 60 cents on every R&D dollar they spend.
“Canada did it right as far as the SR&ED program,” says Anthony Cheung, president and CEO of Montreal’s enGene Inc. biotechnology company. “It helped us a great deal. You really can stretch the investment dollars that we raised from investors that way. I know a lot of international venture capitalist companies that are invested in Canadian companies ask the company to stay in Canada because of this program.”
Dr. Cheung gives the example of Singapore, where he says biotech and pharmaceuticals were almost non-existent on the island 20 years ago, but government strategy has seen those industries grow significantly.
EnGene, which develops molecular therapeutics, started up in 2002 and has grown to 22 employees. The people whom you hire are critical to the success of any startup, Dr. Cheung says.
“There’s a joke out there that the No. 1 job for a biotech startup CEO is never to let the company run out of money and the second most important job is to make sure that job No. 1 is carried out,” he says. “So finances obviously are important. The second thing is finding the right people because ultimately in this business it’s all about the talent.”
As someone who has hired people straight out of university, Dr. Cheung has a couple of concerns and feels universities could be doing more.
First, he feels there is a lack of business knowledge in grads who have been trained in the sciences, but are unaware of the process of bringing a drug from concept to market.
Second, he is concerned that many are unable to think critically and creatively.
“Too much emphasis is on kids bringing the right answers,” he says. “If you get the right answers you get better marks; it’s not about the process of how do you get to the right answer. So I think the professors need to start thinking very differently and maybe start teaching students differently.”
Mr. Serbinis says if more schools implemented the kind of co-op program that the University of Waterloo has, more young people would be equipped to start their own companies once they leave higher education.
“Everyone I’ve talked to in [Silicon] Valley references how great it is and how their No. 1 hiring place is Waterloo,” he says. “So getting behind some of these young entrepreneurs coming right out of co-op programs with greater accelerator or incubator money and a place for them to work … I think we’d go a long way.”
Both Mr. Serbinis and Dr. Cheung also say that, given the size of this market — 35 million compared to the 319 million living south of the border — Canada would be best served targeting specific industries for funding and growth, whether they be biotech, cleantech or nanotech.
“I think we’ve got to back winners,” Mr. Serbinis says. “There’s this thing called the Peanut Butter Manifesto that was written by an ex-Yahoo executive who left because [the company] was just spreading itself way too thin on all these different initiatives.
“I feel like the Peanut Butter Manifesto needs to be written for Canada.”