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Canada Shouldn't Count on Accidents to Build Successful Start-Ups

09/08/2015 05:59 EDT | Updated 09/08/2016 05:12 EDT
Digital Vision. via Getty Images

If you care about the future of the Canadian economy, you may have followed an important conversation happening in Canadian editorial pages over the last few weeks. It's about entrepreneurial innovation and the future opportunities it can generate for all.

On one side of the argument are people like Communitech CEO Iain Klugman and Bank of Montreal Vice Chair Kevin Lynch who argue that the Toronto Waterloo corridor has the potential to become a global innovation

"super ecosystem," but needs bold leadership from government, the private sector and universities, along with the necessary infrastructure, investment and mentoring. In this view, innovation incubators and accelerators such as MaRS, Communitech and Ryerson's DMZ would be a key component to ensuring success.

Others led by RIWI Co. CEO Neil Seeman for accidental entrepreneurship, maintaining that there is no place for incubators and accelerators because entrepreneurship can't be taught, and is instead inherent.

Why is this important?

If the last year has taught us anything, it's that in an increasingly global and technologically disrupted world even the most dominant corporations and industries are at risk. Late last fall the Year Ahead 2015 issue of Bloomberg Businessweek forecast an average 2015 price for a barrel of crude oil at between $85 and $90 USD. As I write this, the price is about $46 per barrel and Canada has entered a technical recession.

It's been an oil story this year but former investors and employees of Nortel, Blackberry and the Yellow Pages Group will tell you that disruption is by no means limited to our natural resource industries.

Meanwhile in the U.S., research from the Boston Consulting Group reports that public companies today have only a one in three chance of surviving the next five years. You read that right -- only a one in three chance! We all know about Kodak, Blockbuster and Borders, but can you predict who will be among the public companies that will fail this year? Are you an investor in them? An employee?

In addition to challenges in the corporate world, it's also clear that we've got some other significant problems on our plate:

Global climate change and pollution are effecting both our current and future opportunities and risks.

Aging baby boomers and the associated soaring healthcare costs are, in many parts of the world, putting an immense economic pressure on society.

At the same time, young people are having difficulty finding meaningful work that pays a living wage.

Given these issues, it's clear that as a society we need innovative new firms to step in and help solve our climate, health and social problems, while at the same time creating a profit for investors and jobs for all of us. The important question is: how can we assure that this happens?

Reasonable tax rates and limiting bureaucracy are important, but just getting out of the way is not enough when our global competitors are stepping up to create the conditions for entrepreneurial success.

In Shanghai, China there are over 100 incubators, many of which are larger than MaRS or Communitech. Why is China investing in incubators? Because it works. Major public sector co-investment has kick-started innovation ecosystems from Silicon Valley to Israel.

When people today discuss the most famous innovation ecosystem of all -- Silicon Valley -- they think of Google, Facebook and Apple. They forget that several previous waves of technology enabled the ecosystem that is there today.

In the 1950s and 1960s defense startups (well-funded by government) were the genesis of the valley. The subsequent integrated circuit and PC waves built on their success needed less support from policy makers.

The internet and social media giants are dominant today and the Internet of things wave is ascending and entrepreneurial innovators continue to form new giants, many of who will have been through startup school at Y Combinator or another valley-based accelerator.

Even today Silicon Valley companies indirectly utilize public investments to drive innovation and commercialization.

Google purchased several leading robotics companies in recent years and it's no surprise that acquisition candidates were surfaced through the publicly funded Darpa Robotics Challenge.

Even Elon Musk -- the poster child for 21st century innovation -- utilizes public support judiciously. Tesla, Solar City and SpaceX all have been given a leg up by policymakers. Would you have liked to be an early investor in Tesla? An employee?

Back in Canada our colleges and universities are graduating world-class technology and business students trained to meet the needs of existing businesses. However, as respected entrepreneur Steve Blank has pointed out, "a company is a permanent organization designed to execute on an existing business while a startup is a temporary organization designed to search for a repeatable and scalable business model." They're completely different things, and we need to get better at the latter.

Our incubator and accelerator models are not perfect today. Just as an entrepreneur would, they have been (and are) evolving in response to feedback over time. Nevertheless, they are critical to our future.

Happy accidents are terrific when they happen, but it's never wise to count on them -- it's fun to buy a lottery ticket but you shouldn't count on the proceeds to pay for your retirement.

We simply can't leave the future of our planet, our health, our economy and our children up to chance; we've got a responsibility to help incubate the next generation of great Canadian companies.

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