Thank you.
I'm here today representing Canada's Venture Capital and Private Equity Association in my capacity as a member of the board of that association.
Richard Rémillard, who is the executive director, is out of the country; otherwise he would normally make the presentation on our behalf. However, I am also involved in a private venture capital fund, so I have some familiarity with the program.
CVCA represents the majority of players in the private equity and VC industry in Canada. We have over 1,800 members in the association, managing about $75 billion in assets under management.
When the CVCA was asked to appear and comment on the Canadian innovation commercialization program, our executive director took an informal survey of the members to ascertain their knowledge of the program and to get input leading up to today's presentation.
Surprisingly, or not so surprisingly, other than myself, knowledge of the program among CVCA members was practically non-existent. In my case, I read about it in some publication over the past year--I'm not sure where I saw it--and passed on the information to the CEO of one of our portfolio companies in the venture fund that I manage, a company called Virtual Marine Technology, based in St. John's, Newfoundland. Based on that, they subsequently made use of the program.
I take from this experience among the CVCA membership that the program is not widely known and more should or can be done to publicize it. In general, the CVCA supports the use of government procurement programs as a tool to enhance industrial innovation among Canadian firms. We note the support this program has received through the Jenkins committee and report; I think it was recommendation 3: “Make business innovation one of the core objectives of procurement, with the supporting initiatives to achieve this objective”.
One of the policy initiatives the CVCA has been advocating is to encourage major defence contractors to meet their IRB obligations by investing in venture capital funds in Canada that focus on investing in early-stage technology companies. Accelerated credits could be given to these contractors if they agree to invest in VC funds, similar to the credits that are given to university-based research by these same contractors. In the case of universities, I understand they get a five-to-one leverage if one of these contractors does work through a university.
We think that would be of major assistance to the issue in Canada today, which is really the issue of dearth of available venture capital for emerging and early-stage entrepreneurs. This would be one measure the federal government could take to address this important issue.
Let me go back to the program at hand, the Canadian innovation commercialization program. I was in St. John's yesterday. We were closing another investment over there, so I took the opportunity to speak to the CEO of an existing portfolio company we're involved in--BMT--and asked him about the program. Obviously he spoke favourably of it, in that they've used the program to sell a marine simulator to the Canadian Coast Guard. However, he did make a couple of observations that I'll pass on to the committee. In his view, the application process was lengthy and fairly complex, and while that wasn't an issue for his company, because they're used to dealing with these types of contracts, from the perspective of early-stage companies this might be a challenge, given the level or the lack of depth within the management teams.
As I understand it, if a company sells a prototype to a government department and the department wants to buy an additional unit, a second or a third unit, then the full-blown tendering process is required. That can be fairly lengthy and involved.
The other comment he made—and I'm not sure I particularly understand this—is that if the original purchase by a government department was based on specs provided by the initial supplier, then the original supplier is excluded from subsequent purchases by government. How that makes any sense, I'm not sure. In any event, I'm sure there are others here who understand that better than I do.
Just as a general comment, any barrier to selling to your own government, to the Canadian government, is always seen as a negative when you're out trying to sell to foreign companies and foreign governments. And sometimes in fact it is easier to sell to foreign companies than it is to sell back here at home. We find this is quite common among many early-stage companies. We have to prove the technology and the service outside of Canadian markets before folks here will adopt the technology.
From my own personal experience, when introducing a new program there is always learning and there are always challenges and improvements that can be made over time, based on practical experience, and I suspect that's the case here. Again, we, as an association, and I, being in the venture business, are always supportive of programs that support Canadian technology and innovation, and we would recommend that you do whatever you can to improve and strengthen the programs for future implementation and for the benefit of Canadian entrepreneurs.
Thank you.