Getting to Scale
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Getting to Scale: 2019 July Accelerating Canada’s high-growth companies Report of the Special Advisor to the Minister of Small Business & Export Promotion This report was supported by Innovation, Science, and Economic Development Canada. The opinions and interpretations in this publication are those of the authors and do not necessarily reflect those of the Government of Canada. This report may be reproduced for non-profit and educational purposes, with the exception of scholarly or professional journals. For more information on reproduction rights, please email brookfield. [email protected]. The Brookfield Institute for Innovation + For more information, visit Entrepreneurship (BII+E) is an independent and brookfieldinstitute.ca nonpartisan policy institute, proudly housed within Ryerson University. We are dedicated to /BrookfieldIIE building a prosperous Canada where everyone has the opportunity to thrive due to an inclusive @BrookfieldIIE and resilient economy. BII+E generates far-sighted insights and stimulates new thinking to advance The Brookfield Institute for actionable innovation policy in Canada. Innovation + Entrepreneurship ISBN: 978-1-77417-002-1 20 Dundas St. W, Suite 921 Toronto, ON M5G 2C2 GettinG to Scale Author ACKNoWLEDGEMENtS SHELDON LEVY SPECIAL THANKS: Special Advisor to the Honourable Mary Ng, The Special Advisor wishes to thank all the people, Minister of Small Business firms and organizations that contributed their time and Export Promotion and expertise to this report. Particular thanks are extended to Minister Mary Ng, for spearheading this initiative; to the many departments and public servants within Innovation, Science and Sheldon Levy is the Special Advisor to the Minister Economic Development, who contributed their of Small Business and Export Promotion and insight; to the Brookfield Institute for Innovation + the former CEO of NEXT Canada, a non-profit Entrepreneurship, for their knowledge and research business accelerator located in Toronto. A longtime expertise in the field; to Matthew King and Stewart champion of innovation and builder of startup Beck for their wise counsel and thoughtful insights; ecosystems, Sheldon also serves on the Advisory and especially to all the innovators, entrepreneurs Board of the Brookfield Institute for Innovation + and business leadership teams, for taking the time Entrepreneurship and on the Leadership Council of to share their perspectives, concerns and solutions Scale Up Ventures, Inc. to the challenge of scaling up—and for their desire to see Canada succeed in the global innovation Sheldon served from 2015 to 2017 as Deputy economy. Minister of the Ontario Ministry of Advanced Education and Skills Development, where he helped drive innovation and entrepreneurship throughout Ontario’s postsecondary education and CONTRIBUTORS: training system. From 2005 to 2015, as President and Vice Chancellor of Ryerson University, Sean Mullin Sheldon initiated Ryerson’s many initiatives to Executive Director, BII+E foster student innovation. Under his direction, Ryerson created the Digital Media Zone (DMZ), an Heather Russek early-stage incubator for student entrepreneurs Director of Policy Innovation, BII+E which has since become an international success. Sheldon is also a founder and advisor to Ryerson Ollie Sheldrick Futures Inc., an accelerator that has exported the Senior Researcher, BII+E DMZ concept to such locations as Vietnam and Mumbai. Sean Zohar Marketing + Communications Specialist, BII+E Sheldon’s prior positions have included President, Sheridan College; Vice President Finance and Drew Shannon, Illustrator Strategy, University of Ontario Institute of Technology; Vice President Governmental and Lindsay Smail, Designer Institutional Relations, University of Toronto; and Vice President Institutional Affairs, York University. Katherine Harding, Pascal Boisvert, Jean Claude Ah-Teck & Chris Lalonde, Translators Aleksandra Szaflarska, Copy-editor GettinG to Scale TABLE OF CONTENTS Letter from the Special Advisor 1 4.0 Recommendations 37 Executive Summary 3 5.0 Conclusion 45 1.0 Introduction 6 1.1 A Rapidly Changing Global Economy 6 Appendix A: Company Characteristics 47 1.2 A Shifting Focus: From Startups to Appendix B: Bibliography 49 Scale-ups 7 1.3 Canada’s Innovation Agenda and ‘Own the Podium’ 8 1.4 Methodology 9 2.0 Scale-ups and Canada 12 2.1 Drivers of Economic Growth: Why Scale-ups Matter 12 2.2 Canada’s Scale-ups: How Does Canada Measure Up? 13 3.0 Findings and Insights 15 3.1 Talent 16 3.2 Access to Capital 21 3.3 Market Access 28 3.4 Government Incentives and Supports 33 GettinG to Scale LEttEr froM thE Special ADviSor July 2019 The Honourable Mary F. Y. Ng MP, Markham–Thornhill Minister of Small Business and Export Promotion C.D. Howe Building 23h5 Queen Street Ottawa, ON K1A 0H5 Dear Minister Ng, Some six months ago, you assigned me a task: players and the potential to become ‘unicorns’ to identify Canadian firms that were scaling their that dominate their sector. And when they reach operations, to go meet them and speak with them, this stage in their evolution, their needs change and to find out how the government can best substantially. They need to secure their intellectual help them reach their potential. More than 100 property, learn to do business in countries around interviews later, that task is complete and I am the world, and cope with global competition—and pleased to provide you with this report on how to they need a significant financial investment to fund help Canada’s most promising businesses scale it all. their operations and give them their best chance at becoming global leaders. Most importantly, they need to hire lots of talent to help them reach their potential and manage their In the last decade, Canada’s governments, along growth—scaling firms are the employment engine with the private sector, have made tremendous of the innovation economy and a key contributor progress building a robust startup ecosystem in to middle class growth. Our objective should be Canada. In all parts of the country, there are now to help these firms scale to the point where they incubators to help startups get off the ground; become large, globally significant going concerns. mentorship programs to provide them with To do so, the government needs to turn its policy strategic, legal, and financial advice; and venture focus towards the unique needs of scale-up firms capital to fund their early stages. to ensure that they have the specific kinds of supports they require. This work represents a tremendous collective effort, and it is bearing fruit in the form of This report is the result of more than 100 interviews promising firms ready to take their innovations with companies and experts within and outside and their operations into a new stage of growth. If government, and as such reflects the voice and they are successful, they can become the kind of perspective of Canada’s dynamic entrepreneurs. companies that will contribute to Canada’s success Its purpose is to help the government by providing in the global digital economy and ensure Canada’s a more thorough understanding of the challenges prosperity for decades to come. faced by scaling firms and outlining the kinds of policy solutions that can be put in place to assist But it is important to emphasize that this is not a them. The government’s objective should be for linear progression. Of the thousands of startups Canada to reap the return on its investments in launched in Canada each year, only a fraction startups, by providing a different suite of supports will demonstrate the ability to scale into global for those that are ready to scale. GettinG to Scale 1 To reach that objective, the federal government of challenges. As a result, support for scaling firms will need to foster and lead a ‘Team Canada’ will require more targeted interventions designed approach to helping its scale-up firms succeed. to help them meet their unique situations. Everyone—provincial, territorial, and municipal governments, as well as public and private sector It is important to acknowledge that many of the institutions, from banks to universities and colleges challenges that scaling firms confront are not to hospitals and telecommunications firms— challenges that could be—or even should be— needs to understand the role they have to play solved via public policy. These are private sector and the responsibility they hold for making sure entrepreneurs growing businesses; much of their these promising homegrown firms have the best success is out of the hands of policymakers. This possible opportunity to scale up, here in Canada. report’s analysis and recommendations are mindful Our institutions need to be ‘pulling’ these firms of this, and attempt to avoid any policy ‘overreach.’ into their support networks, rather than the firms having to ‘push’ their way in, a common theme But where government can play a positive role, among those I met. And both governments and it should. The issue of how best to scale the institutions also need to support these firms by country’s most promising scale-up firms is not being their customers: large procurers should be unique to Canada: other countries around the constantly on the lookout for new technology and world are attempting to solve the very same become early adopters of innovation. problem. The entrepreneurs I spoke with were proud of being Canadian. They want to grow here The effort to help scaling companies reach their and contribute to the lasting prosperity of their potential ought to be a national endeavour, country and their communities. And they are eager intended to bolster Canada’s competitiveness and for a government partner who can offer them the prosperity in a changing global economy. The task kind of support they need. It is my hope that this is akin to a trade mission, but one whose most report will lay the groundwork to continue to build important work will be done here at home.