Good afternoon.
I apologize. What I sent is a lot longer than what I'm going to talk about. In my practice, I was over five minutes, so it might not be great for the translation.
Thank you very much for having me today. As the chair indicated, I'm Krista Jones, and I'm the chief delivery officer for MaRS Discovery District, which is North America's largest innovation hub.
MaRS specializes in the commercialization of intellectual property that is developed in our state-of-the-art universities, hospitals and research labs across Canada. We support thousands of Canadian entrepreneurs' start-ups that have the potential to become category-leading companies in technology, climate and the life sciences industries. These industries are critical to long-term Canadian prosperity.
I want to spend a minute on the type of work we do, explaining the much misunderstood term “commercialization”. Simply put, commercialization is the messy business of taking a product or service to market. Note that it's not the act of turning this technology or science into a patent or a product. That's innovation or development—the “D” in R and D.
Commercialization is the crucial and often ignored next step in converting great research into leading companies. The C.D. Howe Institute analysis of federal budgets since 2012 found that research and innovation are mentioned 30 times more often than commercialization.
Commercialization is finding investors to catalyze your business, hiring the right team, creating a growth-oriented business model, finding and understanding your customers and driving sales at scale. The commercialization engine that we have built at MaRS includes experienced founders and operators who have been in the trenches and have successfully scaled companies to become category leaders.
We have built a globally unique set of capabilities that provides start-ups with really practical and tangible supports that enable them to compete on a global scale. A recent independent study of the economic impact of MaRS-supported start-ups showed that over the past 12 years, they contributed $29.6 billion to the GDP, with an annualized revenue growth rate of 20.7%. Their contribution to the GDP is growing at more than 10 times Ontario's compound annual GDP growth rate.
This growth rate is what will build major knowledge-based economies, fuel Canada's future prosperity and build it around our existing strengths in creating globally leading IP.
I want to emphasize my appreciation for the support the government has provided by funding research and development. It it why Canada punches above its weight in research in many emerging tech sectors and why international companies establish their R and D centres of excellence here.
However, at MaRS, we believe that these investments alone will not create sufficient conditions to improve economic output. We need a commercialization ecosystem to translate the IP developed in our universities and in our start-ups into viable commercial assets. Current market conditions are threatening to erase the hard-won gains of the last five to seven years for Canada.
Another major issue is that Canadian businesses and our government are lagging behind their global peers in the adoption of critical digital infrastructure, especially our homegrown IP. Even though Canada is the leader globally in the research and development of AI, KPMG reports that only 35% of Canadian businesses surveyed are using AI in their operations, compared to 72% in the U.S.
When you consider that, according to Gartner, by 2030, every dollar of GDP created anywhere will be influenced by AI, Canada simply cannot afford to miss this valuable economic opportunity.
Unfortunately, this situation is not isolated to AI. Canadian firms in most innovation sectors often derive more revenue from the United States, even at the very early stages, due to a lack of domestic customers and adoption. For example, as little as 19% of the revenue earned by MaRS climate-tech ventures comes from domestic sources. They're getting the revenue and the climate change impact. This is why we need at least equal investment into the commercialization of IP and into growing domestic category leaders as is being invested into branch plants for foreign multinationals. Our future really depends on it.
Our key recommendations for investment in the 2024 federal budget are the following.
Increase and coordinate commercialization funding to enable regional organizations with a national platform to supercharge start-ups across the country, taking advantage of regional strengths. More funding is urgently needed to combat the heightened risk of IP migration resulting from the scale of the U.S. CHIPS Act, which is impacting way more than the semiconductor industry.
We think we need to create more independent wet-lab space to enable the commercialization phase of our life sciences innovation.
We need to increase deep tech and climate early-stage funding. Number one, we're hoping for a rapid resolution of the situation at SDTC in order to continue that money flowing. We also think we need to incentivize more catalytic, philanthropic and private investment directly into early-stage climate tech companies.
We believe we should create incentive programs for the responsible—and I emphasize “responsible”—adoption of Canadian AI technologies. A few examples are extending the pan-Canadian AI strategy to include commercially focused incentives, artificial intelligence being part of the step program and providing incentives to help Canadians start up some businesses.
My last point is to also increase government procurement of Canadian tech.