Thank you, Mr. Chairman and members of the committee, for having me.
I'm Terry Rock, CEO of Platform Calgary here at the relatively new Platform Innovation Centre in Calgary's East Village.
Platform Calgary is part of Canada's Tech Network, CTN, which represents 27 technology hubs across the country. We made a submission to this committee through CTN, but I'm here representing Platform Calgary.
Platform Calgary is a member-driven organization representing more than 600 tech companies in Calgary. Together with a network of more than 150 partners, we're committed to making Calgary the best place for anyone to start and grow a tech company.
Tech firms and the entrepreneurial people who start them are vital contributors to the growth of our economy. This work is urgent as Canada looks to reverse declining productivity and to future-proof important industries like manufacturing, transportation, health care and agriculture.
To succeed, our entrepreneurs and innovators need conditions that promote growth, which we break down into three simple necessities: access to talented and ambitious team members, patient and smart investment capital and customers who are themselves pushing to be on the cutting edge. In my simple way of looking at the world, the work of government is mostly about getting out of the way of our innovators; it's about removing friction and incenting smart risk-taking.
We have a mantra at Platform Calgary: founders first, entrepreneurs first, innovators first. These people are the ones building our economy, not us. We're here for them.
As it relates to the work of this committee, much of the conversation in our community has been about the changes to the capital gains tax, and rightly so. These changes have had wide impact on entrepreneurs, on their employees and on angel investors whom we need to back early-stage companies.
I would encourage the committee members to put themselves in the shoes of a start-up founder. During your journey, you might dilute your ownership stake in the company to onboard the investors and employees you require to take your business to the next level. The prosperity generated by your start-up is spread across a variety of different interests. That's what makes these changes so difficult. These changes put a cap on the incentive to grow these companies beyond the prescribed limits that are in place. We're pushing entrepreneurs to think big, and we're punishing them for doing that. That will not improve our productivity.
Now put yourselves in the shoes of a venture investor. You're being asked to risk your money on a team or technology that is often unproven, with no hope of return for at least a decade, often two decades. This is high-risk and sometimes high-reward work. It requires savvy, patience and a return on investment. Without a strong angel and venture investment ecosystem, our economy will simply not have the power of a dynamic start-up ecosystem, a proven driver of shared prosperity.
It gets worse. Canadian founders are already finding investment, and often a new home, south of the border. A recent survey by the Council of Canadian Innovators showed that over 84% of Canadian tech leaders view the U.S. as the best place to grow their businesses. The last thing we need right now is more barriers put in front of our local investors and innovators.
This is a global market. We must be globally competitive. We must be.
I'd like to take a moment to thank the government for its careful consideration of the Canadian entrepreneurs' incentive, the CEI. Changes announced earlier have made the CEI more competitive, but there remain important gaps. Employees are still not being considered appropriately, as 98% of employees in tech companies will not meet the threshold of 5% ownership in a company. This is a disincentive. Ninety-eight per cent of angel and early investors will not own 5% or more of a company and are also excluded. This will decrease early-stage Canadian investment and increase U.S. ownership in Canadian companies. The U.S. already owns the majority of total Canadian equity. This is a disincentive.
To fix this, CTN continues to recommend full harmonization with the qualified small business stock measures in the U.S., including increasing the lifetime capital gains exemption to $13.5 million and including employees and angel investors in eligibility.
Canada has an important opportunity here. A growth-minded capital gains policy could be a catalyst for the Canadian innovation economy, for the investment climate and for our bold and ambitious founders. Research from the U.S. shows that every 5% decrease in capital gains means that 15% more start-ups are created. We should want this.
In the absence of leadership across the country, provinces are pursuing boutique tax incentives for tech investment. We need less fragmentary regional approaches. Instead, we need to get on the same page to address our productivity challenges and innovation opportunities and to position Canada as a leader.
In closing, we are seeing amazing momentum in tech and innovation in Canada. Let's not hit the brakes. Let's back our innovators. We encourage the Government of Canada to work constructively with Canada's Tech Network and with individual hubs like Platform Calgary to harness this amazing potential and to secure Canada's place as a global hub for innovation.
Thank you.