Ottawa Wants To Know How To Turn Canadian Startups Into Billion-Dollar Businesses

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OTTAWA — The federal government is closely studying recommendations on how to help Canadian tech startups grow into global success stories — transformations that could eventually provide a boost for the ailing economy.

The findings of a recent report are under analysis by the Liberal government, which has also been told internally that building small and medium tech firms into billion-dollar players remains a key challenge.

The review comes amid debate on how best to revive the economy, which is struggling with low commodity prices.

The study, commissioned by the federal and Ontario governments, outlines possible strategies to help budding entrepreneurs become high-growth operations.

Some startups pack the potential to eventually drive national prosperity and become "significant employers of tomorrow," said the September document produced by the Centre for Digital Entrepreneurship and Economic Performance, an economic think-tank.

"Canada's continued underperformance on the creation of high-growth firms ... speaks to real weaknesses in the entrepreneurial support ecosystem."

The analysis of the findings comes as the Liberals prepare their first budget, expected late next month. Some anticipate the fiscal blueprint to include measures to boost the tech and startup sectors.

"In an environment of stagnant domestic growth and continued global economic uncertainty, Canada has a number of critical economic priorities to address in the months and years ahead," the study says.

Along with diversifying the economy and expanding trade and exports, the document highlights the need to turn research and technological innovation into high-growth Canadian firms that compete on the global stage.

To get there, it explored six "priority areas" for Canada:

  • Focus on better identifying companies with high potential and help them to scale up.
  • Improve accountability by demanding better reporting and more data transparency from startup assistance groups — like business incubators and accelerators. It's seen as a way to shed more light on the actual return on public investments.
  • Attract more large corporations to participate in the success of Canadian incubators and accelerators. These partnerships are much more common in the United States.
  • Boost the quality of mentor programs by connecting more high-potential companies with business leaders who have experience building billion-dollar tech firms.
  • Increase the exposure of startups to international markets.
  • Explore new models to increase the role of investors in startups.

"Canada's continued underperformance on the creation of high-growth firms, and limited transactional activity within its startup community, speaks to real weaknesses in the entrepreneurial support ecosystem," said the report, commissioned under the previous Conservative government.

The new government confirmed it will study the document to further its understanding of how incubators and accelerators can "drive innovation, entrepreneurship and the global competitiveness of Canadian companies," Hans Parmar, a spokesman for Innovation, Science and Economic Development Canada, wrote in an email.

The government, he added, is committed to developing policy based on sound evidence.

startups canada

Research from the Deep Centre shows that, although high-growth firms, like startups, account for a small share of all companies in any country, they account for more than half of net employment growth. (Chart: Deep Centre)

Internally, a federal memo prepared last fall for the deputy minister of Industry Canada, said the six priority areas in the findings "can be taken by governments and the BABI industry (business accelerators and business incubators) to help address weaknesses in Canada's entrepreneurial support system."

The memo and the report were obtained by The Canadian Press under the Access to Information Act. A version of the study has also been posted on the think-tank's website.

Meanwhile, "secret" briefing material sought to draw the attention of Navdeep Bains, the new Economic Development minister, to several "key areas of challenge" facing Canada and businesses in the global digital economy. 

Growing small- and medium-sized tech firms to join the ranks of high-growth and billion-dollar companies was among the important challenges, said the "hot issues" memo. The document was also obtained by The Canadian Press under the Access to Information Act.

Since coming to power last fall, the Liberals have emphasized the country's knowledge-based economy.

Last month, Prime Minister Justin Trudeau used a high-profile international speech to promote the idea that Canada has more to offer than just commodities, although he acknowledged they were still a crucial part of the economy.

"My predecessor wanted you to know Canada for its resources," Trudeau told the World Economic Forum in Davos, Switzerland. "I want you to know Canadians for our resourcefulness."

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