Finance Committee on Sept. 21st, 2016

[The Chair, Liberal, Wayne Easter]

Thank you.

On that, I had a meeting with the Nova Scotia government a while ago. One of their concerns was the turnaround in terms of how long it takes to get a project through. Do you have any information on what the results are in terms of how long it takes from the time an application goes in to the time it comes out of the system? Can the system be speeded up so that answers are granted?

The second question is related to what Ms. Raitt was talking about: the ability to get enough capital. I believe Nova Scotia is moving ahead. They have issued an RFP, I believe, for a funding arrangement administered by the private sector that would provide funding up to a pool of $25 million or some such thing.

Could you give us information on both of those?

[Peter Hogan]

Yes, Mr. Chair.

On your first question, we do have a service standard. For our business development program, our standard is a decision on an application within 75 days 90% of the time. That's the standard for the entire agency. We're very strong in Nova Scotia in terms of turning projects around on a timely basis.

With respect to your question, yes, it's true that the Province of Nova Scotia is in the process of issuing an RFP. They'll be contributing $25 million, I believe, and the hope is that it will attract additional funds from private sector and other investors. That will be a pool of funds that will be available for investing in companies in Nova Scotia and beyond.

Over the past couple of years, a number of new funds have been established in Nova Scotia and in Atlantic Canada, and I think that speaks very much to the investment opportunities. Also, from a private sector point of view, that speaks very much to the growth that we see in start-up companies, particularly in the ICT sector.

[The Chair, Liberal, Wayne Easter]

Thank you.

Mr. Caron.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Chair.

My thanks to the witness for his presentation.

I actually had some questions in line with what Ms. Raitt asked. I think you're the eighth presentation we've had in two days, but I don't recall an agency or a section of an agency coming here and talking to us about venture capital the way you have.

You're saying that venture capital and start-ups are on the rise and that a variety of sectors where there will be future industries are very promising in that way. I want to know how you are fostering the links you have with venture capital. Are venture capital firms successful on their own? Or do they need the contribution and help of ACOA to succeed?

[Peter Hogan]

Thank you for the question.

We are doing a number of things to increase the amount of private sector investment that's coming to Nova Scotia in particular. One of the things that we've had for four years running now is the Atlantic Venture Forum, which is held once a year in June. As part of that, we'll have a number of companies that will make a pitch, an elevator pitch, with their product or service. They'll give a quick overview. As part of the Atlantic Venture Forum, we invite angel investors and venture capitalists from several different areas—not just from Canada, but beyond—to be in the room. They come there to see what kinds of companies there are in Nova Scotia, and not just in Nova Scotia, but throughout the Atlantic region.

They're there to see some of the opportunities that we might consider making an investment in. We're not directly supporting those venture capital or angel investor companies. They're coming on their own because they're looking for new opportunities. It might be that in some cases we may have an investment in one or more of those companies, but the investors are there because they've seen the product or the service and they say yes, that's something they're willing to make an investment in.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

The one we had earlier tonight was very interesting. I believe it was from the Prairies. Saskatchewan said they had problems in terms of research and development and attracting capital, while in the case of Nova Scotia it seems to be the opposite.

Do you have conversations within agencies on best practices or on what makes you successful that you could share with other agencies or a part of the agencies?

[Peter Hogan]

Yes, there are regular discussions among the RDAs in Canada, the regional development agencies, to talk about best practices. Those conversations do take place.

To come back to your earlier point, I want to stress while we've had some success with start-up companies and attracting outside private investment, it's a relatively recent phenomenon, so we still have a way to go to see that take off. But to date, we've had success.

In my opening remarks, I mentioned Volta. It's a physical space that provides mentoring and coaching support for start-up companies. Volta has been in existence for about three years. They've graduated 29 companies, and those 29 companies have raised a total of $30 million in equity investment from private sources. There are some public sources in there, but there are a lot of private investments.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

I'm the critic for ACOA for the NDP and I did a tour of Atlantic Canada. I asked your counterparts this question, and I'm asking you as well.

Something I heard about from ACOA public servants was a concern that with the new structure, with the centralization and the elimination of the ministers of state for the various agencies, there will be a shift in the culture that might be problematic. I'm just reporting to you what I heard. The main concern seems to be that, instead of ACOA determining the needs and making suggestions up to the minister and the department, it might become more focused on implementing programs that would be decided higher up and then come down.

I'm just summarizing and explaining very quickly here, but that seems to exemplify the concerns and the fears. What do you have to say about this? Is this something that you heard on the ground as well? Is it something that has been shared with you?

[Peter Hogan]

It's not an issue that has been brought to my attention. I think the current structure helps us to be aligned with the overall priorities within the Department of Innovation, Science and Economic Development. In fact, many of the priorities.... I referred to the Atlantic growth strategy earlier on, which involves all four Atlantic provinces as well as the federal government. The priorities that are identified in there, such as innovation, trade, and investment, have been long-standing priorities of ACOA, so we continue to focus very much on them.

I think the opportunity for us in terms of being within the ISED portfolio is that it helps us to have a sharper focus on identifying those areas that need more work. From my vantage point, ACOA is still based in Atlantic Canada, and we continue to focus very much on the clients we serve.

[Guy Caron, NDP, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Guy.

Mr. Grewal, you have five minutes.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you, Mr. Chair.

Thank you to our witnesses for being here today.

I have a quick question. You mentioned in your opening remarks that Nova Scotia is starting to become somewhat of a start-up hub. What percentage of your funding is going to start-ups versus small and medium enterprises? I'm assuming that very little is going to multinationals.

[Peter Hogan]

Yes. Again, thanks for the question.

It varies from year to year. If we happen to have an unusually large project, the percentage can be greater. In some years, we might see upwards of perhaps 15% or 20% of our investment going into start-up companies.

If I could just dwell on start-ups, too, the definition is.... In terms of what we're investing in and what start-ups are, they are not necessarily always starting from zero. Some of them may be a little more advanced. The amount of assistance we're providing to start-ups really does vary.

[Raj Grewal, Liberal, Brampton East, ON]

There is a sweet taste of success with a company that got funding from ACOA in Nova Scotia. The company's name is Acadian Maple. It's a pretty cool story. They make maple syrup. It's a family-run business. You guys helped them out and now they're serving all the maple syrup to every Starbucks in Switzerland. In my humble opinion, that is exactly what the economic development agencies are all about, because you're giving small companies like Acadian Maple an opportunity to do business all around the world.

In your opinion—and I'm sure you guys have these statistics—for every dollar you've invested, how much is the return in Nova Scotia?

[Peter Hogan]

There have been independent analyses done with the assistance of Statistics Canada for the support that ACOA provides. Roughly, it's about $5.40 for every dollar that we've invested, that is, $5.40 in increased GDP for the region.

[Raj Grewal, Liberal, Brampton East, ON]

I think that's phenomenal. It's a great number.

How many projects do you guys turn down?

[Peter Hogan]

Typically, what we do if a client or a company approaches us looking for assistance is that we'll work with them to help shape the proposal and ensure that it meets our criteria. What we try to do early on if there's not a fit, or if there are some significant gaps that the company needs to address—for example, they might not have their share of financing or they might need to do some more work in identifying a market—is that we'll steer them in that direction.

In some cases, we might be able to assist them with undertaking a marketing study. Rather than just have the applications come in and then say they don't make the cut, we'll sit down with them and say “Look, at this stage, this is what we suggest in terms of how you might proceed.” Maybe we can help with undertaking a marketing study or doing some other work like that.”

[Raj Grewal, Liberal, Brampton East, ON]

How long does it take for a company that meets all your requirements, has a good business plan, and is probably already doing business...? Let's take Acadian Maple, for instance. How long did it take for them to get their application processed and money invested in their company?

[Peter Hogan]

That would go back to our service standards. In terms of a business development program for a commercial enterprise like Acadian, our service standard is 75 days 90% of the time.

[Raj Grewal, Liberal, Brampton East, ON]

That's pretty good.

My biggest emphasis on why we need economic development programs is that you guys have a good understanding of the regions you represent and you work with. In your opinion, is your budget adequate for the projects that are coming in? My other question is, if we were to increase your funding, would you be able to hit the same metric of $5.40 in increased GDP?

[Peter Hogan]

To date, it's certainly been my experience in Nova Scotia that if there is a good project, if they're seeking ACOA funding, and if it meets the criteria, then there are very few cases, if any, where we've not been able to support that. If the decision was made to provide the agency with additional resources, could we utilize those funds to focus more on innovation and diversification? Absolutely.

[Raj Grewal, Liberal, Brampton East, ON]

Thank you.

[The Chair, Liberal, Wayne Easter]

Thank you, Mr. Grewal.

I want to throw one thing in here if I could, Phil.

[Phil McColeman, Conservative, Brantford—Brant, ON]

Go ahead.

[The Chair, Liberal, Wayne Easter]

When you're looking at Nova Scotia—and I'm sure Lisa can relate to this—you can see that Halifax is booming, but that's not the case in either Cape Breton or in mainland Nova Scotia. How does ACOA Nova Scotia handle that?

When I look at the figures for Atlantic Canada—and I said this to the other ACOA reps who were here—I see that our productivity is the worst in the country when you look at the region as a whole. It's probably quite high in Halifax. We're having outward migration from rural Nova Scotia, but probably not Halifax.

There are quite a number of factors that are negative. How do you handle that? Do you see a difference between Halifax, Cape Breton, and mainland Nova Scotia? Where are you putting your thrust? You can drown in a river that's three inches deep, so sometimes when everything's going well in Halifax, everything looks good, but what about the rest of the province? That is what I'm asking. Is ACOA doing enough in that area?