Saturday’s Globe and Mail ran a piece titled Canadian innovation which focused, in part, on the collapse of Nortel and what that means for entrepreneurship in Canada. Without a strong research focused market leader, like Nortel, as a breeding ground for new entrepreneurs, where do they come from?
The Globe identifies taxation, training and business practices as problems, noting that they are focused primarily on creating small players. There are tax breaks for R&D, for example, but not for commercialization. The Globe also riff’s on the theme of venture capital:
There is another constant theme – the shortage of homegrown venture capital. That is particularly noticeable now, as U.S. venture capitalists pull back to concentrate on their domestic markets.
Even in good times, U.S. venture capitalists like to keep close tabs on their Canadian firms they invest in, and encourage the opening of U.S. branch offices. Eventually, the Canadian firms move more and more operations south to satisfy investors.
In fact, for some time US investor haven’t been looking to Canada as a source of innovation. Deloitte & Touche’s 2008 Global Global Trends in Venture Capital survey highlights this, as they asked venture firms which countries had the best technology in various sectors. The story isn’t pretty for Canada.
In software, Canada is a distant 8th place secondary choice – this despite having one of the top ranked universities in the world for software engineers in the University of Waterloo. What this chart says is that Canada is a distant second choice for global investors. To me it says that they’d rather their companies hired Canadian engineers than invest in Canadian companies.
The story is similar in biopharmaceuticals, where Canada has a 7th place ranking.
And in telecommunications, the country that launched the worlds first communications satellites, and built its technology sector around communications networks doesn’t rank. Investors don’t think the technology here is sufficiently innovative. They look to places like Israel and Finland – punching far above their weight – and ignore Canada.
There are rays of hope in this report. 2% of investors felt that there might interesting innovation in Clean Tech in Canada. Mostly, however, this report tells us that investors feel that Canada has lost it’s innovation edge. The result is that investors aren’t flocking here to spend their dollars, and with the decline of the Canadian Venture Capital industry, there isn’t home grown capital to support Canadian entrepreneurs.
It’s a vicious cycle.