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Evidence of meeting #14 for Government Operations and Estimates in the 41st Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was osme.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Tom Hayes  President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association
Herman Yeh  President, Canadian Information Technology Providers Association
Jason Gillham  Director of Operations, 2G Robotics Inc.

4:05 p.m.

Conservative

Kelly Block Conservative Saskatoon—Rosetown—Biggar, SK

Okay.

4:05 p.m.

NDP

The Chair NDP Pat Martin

That's pretty well it, Kelly.

For the NDP, Alexandre Boulerice.

4:05 p.m.

NDP

Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC

Thank you, Mr. Chairman.

Thank you for being with us today. Thank you for your presentations.

Mr. Gillham, I would like some clarification on a point that intrigued me. You've created a kind of little submarine that goes around with a laser that recreates the images it captures in 3D. That's fascinating.

4:05 p.m.

Director of Operations, 2G Robotics Inc.

Jason Gillham

Images of Austin Powers often come to people's heads when they hear about this. It's a sensor that can be deployed onto robotic submarines. It will create what's called a point cloud of the underwater asset it's looking at. If this microphone, say, were under water, the robot could come and sit in front it, take a scan of that microphone, and then provide a 3-D model of what you're seeing under there.

4:05 p.m.

NDP

Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC

Unless I'm mistaken, you learned about the Canadian Innovation Commercialization Program through an intermediary organization. It wasn't the Office of Small and Medium Enterprises that contacted you or sent you documentation.

Is that the case?

4:05 p.m.

Director of Operations, 2G Robotics Inc.

4:05 p.m.

NDP

Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC

Mr. Hayes, earlier you said you had the feeling, although it was not based on any official source, that the members of your association were not really aware of the existence of this program, apart from those who were already doing business with the government. I simply wanted to emphasize that you are not the only ones. In committee, we heard from representatives of the Canadian Federation of Independent Business, which conducted a poll that revealed that 94% of its members were unaware of the existence and role of the Office of Small and Medium Enterprises. I believe that statistic supports your feeling.

You told my colleague Ms. Block that the office could do more. We get the impression that, for the moment, the office is only a website. It appears that, if people don't visit the website, they will have few ways of learning that this assistance is available.

Having said that, I would like you to explain to us—I'm speaking to the three of you—how the office has helped you, in concrete terms, work your way through the administrative maze, move your file forward and get things done. In other words, when you learned about the existence of the office and knocked on its door, did the office prove to be a solution or a problem?

4:05 p.m.

Director of Operations, 2G Robotics Inc.

Jason Gillham

Going through that process for me.... We applied through the MERX electronic tendering system. That's how we had to apply for this project. At that point it was fairly straightforward. There was an online application form. We completed that and then submitted it, just like we would submit for any other programs we've been part of up to now.

At that point we were contacted and basically told that we had been approved--“conditionally pre-approved” was the exact term. They then matched us with the testing facility. At that point it became, certainly for a small company of just a few people, a fairly onerous process to deal with the bureaucracy of the system. It required a sort of persistent patience is how I would describe it, where we had to maintain persistence, but then it would go off into a land that we didn't understand and then come back to us as another question we weren't expecting, let's say. So we had to maintain this patience.

4:10 p.m.

NDP

The Chair NDP Pat Martin

You have one minute, Alexandre.

4:10 p.m.

NDP

Alexandre Boulerice NDP Rosemont—La Petite-Patrie, QC

With regard to the Canadian Innovation Commercialization Program, the approach currently being used is to rely on existing products and to help SMEs commercialize them by putting them in touch with their first customer or, in cases where no assistance is found for them, by awarding them contracts so that their first customer is the federal government. The program is genuinely based on commercialization. However, it isn't a program based on ways of furthering innovation. Do you think it would be justified if the purpose of one of the components of that program was to encourage people to innovate?

4:10 p.m.

NDP

The Chair NDP Pat Martin

That was a one-minute question, so perhaps we can have a very brief answer, please.

4:10 p.m.

Director of Operations, 2G Robotics Inc.

Jason Gillham

The program was definitely geared toward companies that were in the very late stages of development. There are a lot of programs already that help you get to the stage we're at. It's the only one I'm aware of that really helps you get that first customer, which is critical for small and medium enterprises.

4:10 p.m.

NDP

The Chair NDP Pat Martin

Very good. Thank you, Mr. Gillham.

Thank you, Alexandre.

Now, for the government side, Jacques Gourde has the floor.

4:10 p.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Thank you, Mr. Chairman.

Thanks to the witnesses for being here today.

My first question is for Mr. Hayes.

You said you belonged to an organization that manages venture capital funds. Based on what criteria do you determine whether a company is eligible for your funds?

4:10 p.m.

President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association

Tom Hayes

Sure. I apologize. When you were asking me the question I was buying my friend here a drink, because I too was enthralled by the story and like the technology. Maybe he needs some investment. Afterwards I'll talk about the criteria and he can decide whether he's interested.

On the sweet spot in our fund, you can't generalize, because various funds pick different aspects of the spectrum. But we're what we call an early-stage investor. We look for companies that have at least demonstrated commercial acceptance of their product or service. That's why this program is so important. As my friend said, that first sale is critical to demonstrating that there has been commercial acceptance.

Quite often the companies we invest in have no revenue but are on the verge of revenue. We prefer to see revenue, but don't see it in every case. We examine the management team. We look for at least some semblance of a competent, domain-experienced management team that has some skin in the game, so to speak, recognizing that we're going to provide most of the funding, at least initially.

We look for companies that make innovative use of technology where there isn't a lot of competition out there. They're not in a competitive commodity business, but something that gives them an advantage, at least for a short term. We all know that with anything that's successful, the window of opportunity doesn't remain open for a long time.

Most of these companies would focus on large geographic markets, and in some instances the world, but they certainly wouldn't be confined to a small geographic market. For the most part they would be exporters, which is also important and a benefit to Canada to have those dollars coming back to the country.

On the size of deals, we look at anything in the first round from $500,000 to $1 million, recognizing that we'll probably have to do subsequent follow-on rounds. We ask for a board seat. We're minority shareholders. We don't manage the companies, but we hopefully help add value and help the companies as they go through their growth phases.

So have I sold you?

4:10 p.m.

Director of Operations, 2G Robotics Inc.

4:10 p.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Your answer takes the words out of my mouth because you indirectly also answered my second question. However, perhaps you can give us some more details.

A Canadian company qualifying under the Canadian Innovation Commercialization Program becomes eligible for your investment fund since it showed it had a competitive advantage over other companies. Do you try to make them all eligible, or is it really a privilege to be able to obtain funding from the Canadian Innovation Commercialization Program?

4:15 p.m.

President and Chief Executive Officer, GrowthWorks Atlantic, Canada's Venture Capital and Private Equity Association

Tom Hayes

That wouldn't be a final determinant, but it would be extremely helpful if, in the presentation the firm makes to us, they can demonstrate conclusively that they have a reference customer. In an appropriate situation the reference customer might happen to be the government, whether it's DND or, in the case of the Newfoundland company, the coast guard. That would certainly help make a compelling business case in presenting to any equity funder.

4:15 p.m.

Conservative

Jacques Gourde Conservative Lotbinière—Chutes-de-la-Chaudière, QC

Thank you.

4:15 p.m.

NDP

The Chair NDP Pat Martin

You have concluded? Very good.

For the Liberal Party, today Kirsty Duncan is joining us. Welcome, Kirsty.

November 1st, 2011 / 4:15 p.m.

Liberal

Kirsty Duncan Liberal Etobicoke North, ON

Thank you so much, Mr. Chair.

Thank you, everyone.

Thank you to the witnesses. Thank you for your time, your effort, your testimony.

I'd like to begin with Mr. Gillham.

Your words “persistent patience” really stuck with me. Could you tell us what you saw as the advantages or the successes of the program? Could you outline the things that truly helped you? What were the weaknesses, and what would you have liked to see?

4:15 p.m.

Director of Operations, 2G Robotics Inc.

Jason Gillham

I'll probably have to get you to repeat them as we go.

One of the real benefits we've seen is getting that first reference customer. It's critical for small start-up companies to have that initial purchase. I know we talked about persistent patience being something that was not necessarily desirable but it's possibly also something that's a benefit from an education standpoint--to learn that process and understand it. So if that process is in place, it's challenging for us to go through it, but it's also an educational component. So I wouldn't necessarily say that's just a disadvantage. It also helps you learn how to deal with governments, how to work through that process. It's the same for large corporations that have the same high levels of bureaucracy relative to small companies, which we would be.

What were some of the other questions?

4:15 p.m.

Liberal

Kirsty Duncan Liberal Etobicoke North, ON

You've given me one benefit.

4:15 p.m.

Director of Operations, 2G Robotics Inc.

4:15 p.m.

Liberal

Kirsty Duncan Liberal Etobicoke North, ON

Did you see other benefits to the program, and were there negatives?