Evidence of meeting #113 for Government Operations and Estimates in the 42nd Parliament, 1st Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was business.

A recording is available from Parliament.

On the agenda

MPs speaking

Also speaking

Paula Sheppard  Chief Executive Officer, Newfoundland and Labrador Organization of Women Entrepreneurs
Mary Anderson  President, Women Business Enterprises Canada Council
Stephanie Fontaine  Vice-President, Women Business Enterprises Canada Council
Suhayya  Sue) Abu-Hakima (Co-Founder and Chief Executive Officer, Amika Mobile Corporation
David Long  Chief Executive Officer, SageTea Software
Paul Lem  Chief Executive Officer, Spartan Bioscience Inc.
Scott MacGregor  President, SageTea Software

Noon

Conservative

The Chair Conservative Tom Lukiwski

Colleagues, if I could ask all of you, including our witnesses, to approach the table, we'll try to get going as quickly as possible.

Colleagues, we'll convene once again with our new panel of witnesses. We have with us Dr. Sue Abu-Hakima. Also, representing SageTea Incorporated, we have David Long and Scott MacGregor. Finally, from Spartan Bioscience Incorporated, we have Mr. Lem.

Thank you all for being here. I'm sure that you've witnessed how this committee operates. We'll start with opening statements from all of you. I hope that you can keep them to 10 minutes or less, so we will then have enough time for several questions from our panellists.

With that brief opening, I will begin with Dr. Abu-Hakima.

Noon

Dr. Suhayya Sue) Abu-Hakima (Co-Founder and Chief Executive Officer, Amika Mobile Corporation

Thank you very much.

Good afternoon. I did prepare so that I could be succinct and to the point.

By the way, this is the second time I am a witness—not at this particular committee, but I did a witnessing in 2011 as well. Maybe you'll get a bit of progress in 2017.

My name is Dr. Sue Abu-Hakima. I am co-founder and CEO of the Amika Mobile Corporation. Our company in its current form was founded in 2007. This is my second start-up, my second company, my second SME. The first one we built was an AI company that was actually a spinoff from NRC's government R and D labs in 1999. We built it up as a compliance company. It was acquired by Entrust, which is a secure messaging corporation, and it had 18 patents behind it.

Over my 17 years as an entrepreneur, my companies have contributed over $21 million to the local economy. This number is based on investments and M&A results in terms of selling our compliance business unit, the first acquisition, as well as revenues. We've created approximately 250 high-tech jobs over the years, which, according to Invest Ottawa, you can multiply by four, because each one creates four spinoff service jobs. That's a total of about 1,000 jobs that I personally would have been involved in.

The current company is Amika Mobile. It is self-funded by angel investment and focused on critical and emergency communications for public safety and security, including integrations that leverage automatic detection of mobile devices in public places. If you had my product today, I could discover your mobile devices and take you to safety if, heaven forbid, all hell breaks loose, as happened in Parliament in 2014.

Amika Mobile has had approximately $3.5 million's worth of angel investment, which is not a lot, given our output. Our current senior team participates as angel investors, and as such, we are all very committed to the company. We would raise $5 million in investment if we could, but there continues to be an absent venture capital market in this country, especially for women-owned businesses, so we accept it. I've been at it for 17 years. I know how to work through it.

You should know that only about 4% of all companies typically get venture-backed, and female ventures, sadly, get only about 0.1%, which is a really sad number. That's very little. According to a report published by Janice McDonald and Claire Beckton, eight out of 10 women get rejected by banks in terms of financing, even though we run approximately 46% of the SMEs in this country, or close to 950,000, according to their report as well as the Startup Canada numbers.

We are noticing that BDC is starting to be more active with women in terms of loans, but they have very steep terms and a very small equity fund directed at women, in comparison to their $8-billion budget, which they typically focus on male-led ventures. That's a discussion for another day.

Let's talk about procurement.

We certified as an international women-owned business this year. I noticed that earlier you had witnesses on the Canada version of what we did. We've done international certification. That's going to open a lot more corporate customers to us, as they all have set-asides of 20% to 30% procurement for women, which is a huge number. Walmart, in particular—I was at an event last week in Toronto—has announced $20 billion's worth of procurement from women's businesses for 2018. That is fantastic for us. We are already excited and talking to them about it in terms of procuring our products.

We have a multi-million-dollar quotes funnel, so please don't feel sorry for us if we can't get venture capital. We do it through revenues, with many opportunities from the United States government, which also has a set-aside of 20%. We have over 150 global customers active in our company funnel, but I'm going to skip all this.

We have also won a lot of awards, and we have about 12 patents to our name. This year, we were selected for a third year in a row as the best emergency communication solution by the U.S. Govies, and FEMA has also picked us for a top award. As I mentioned, we have innovative and unique technology. We can do automatic discovery at airports. We are being used in United States stadiums now, and we are growing.

In terms of government programs that we've leveraged—and I'm sure this is the kind of stuff you guys are curious about—we've certainly benefited from government programs such as SR and ED, PRECARN, IRAP, BCIP, and CIIRDF.

I've been an entrepreneur for 17 years in tech, in Canada, as a woman, and with no venture capital accessible, I've been very good at ferreting out other programs for both the start-ups that I've done in tech.

IRAP, I would have to say, was a godsend for quite a while, but at some point they aligned themselves with BDC and stopped funding women, which is ridiculous. They've gone through a review, and now they have a new president. I would like to give him kudos. I'm happy to report that he's supporting women and trying to remove gender bias from NRC, so hats off to him.

SR and ED has also, of course, been a godsend for us, because we're so innovative. We've also partnered with and supported universities and colleges through collaborative research funded through the Ontario centres of excellence, PRECARN, and NSERC to help train students and make professional research more relevant.

CIIRDF is another program that has been a more difficult grants program because of their processes that seem to penalize the SME in terms of workload and administration, but they've allowed us to work with a good partner in Israel and fund a project.

I also wear a community service hat. I served as the vice-chair of the board of directors of the Ontario centres of excellence and I was also an adviser on NSERC's private sector advisory committee in terms of the national centres of excellence. I do understand research. I understand trying to do clusters. I understand trying to build the innovation capability in this country. The reason I do this is I'm trying to encourage more men and women to go into STEM, especially young people. Both of my kids, by the way, are STEM graduates, so I'm very proud of that.

In terms of government procurement, we've responded to at least 50 RFPs from the Government of Canada over the last 17 years. That's a lot of RFPs, and they are a lot of effort. We have not won a single one. That is ridiculous, but it's true. Even in our first company, which was a compliance-based company with content analysis, our products were always selected as the top technical innovative products in an RFP, but we still didn't win the contracts. We were never awarded the contracts.

You're not necessarily going to like me for saying this again, and I'm sure everybody else says it: the reason for this, I have to tell you, is that I'm an SME, and nobody gets fired for buying IBM. We could add Bell to that, or CGI.

12:10 p.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Or PeopleSoft.

12:10 p.m.

Dr. Suhayya (Sue) Abu-Hakima

—or PeopleSoft, or any of those large companies, despite their deployments not working. Once Entrust acquired my business.... Entrust was a secure messaging company that used our content analysis to see what was in an email before deciding to encrypt it and send it off. By the way, you use it in the Government of Canada, and have for a number of years. Once Entrust bought our compliance business—we were selling a compliance server that dealt with email and sensitive content in email—it essentially turned around, and the Government of Canada bought our product. Remember, AmikaNow!, my first company, was a spinoff from NRC that did AI and content analysis. I couldn't sell to the government, so as every other software entrepreneur has done, I eventually had to exit. I built it up and I exited. Then Entrust turned around and sold a site licence to the Government of Canada, 250,000 users, for approximately $5 million. Now I have to tell you that you still benefit from this today, and it still benefits from this today. As an SME, I went in with the golden handcuffs, did my time—my three years—came out, and started a new company. We certainly don't benefit from it today, and this is many years later, about 13 or 14 years now. That's a really good example of our technology certainly being good enough to get into the government, but you don't buy it.

Luckily, in 2010 we finally found out about a new program called the OSME program, the Office of Small and Medium Enterprises, which is part of PWGSC. We went there, and we were very excited. Thank you very much for setting them up. We signed up for their training.

Then they announced through OSME, I think, the CICP, which was the precursor for the BCIP, the build in Canada innovation program. In my opinion—and I've now been an entrepreneur for 17 years—it is a fantastic idea. It is the natural next step in getting innovative technology in trial with federal government departments, especially for someone like us, who has leveraged IRAP and SR and ED. We benefited from your other programs to do the innovation and the leading-edge stuff, and now we can take it into the government.

When they were in trial with us, while the testing labs at CRC in Shirley's Bay were in the BCIP with us, they had their first haz-mat emergency. Isn't that a good way to test if an emergency communication and safety system works? Obviously, they finished the testing. We were successful. They bought the products and they've been paying us support now since 2011, so they're a customer.

The second example is...it helped us understand the process.

Just give me 30 seconds. I won't give you more details on that.

We tried again to reply to RFPs. Again we were not successful, so we innovated again. Again we applied to the BCIP, and this time we were successful with some more work. We actually chose a completely different department, CBSA. I'm happy to report that CBSA has been our customer since 2014 because of BCIP, not because of any responses we've done to RFPs. Again, we integrated with gunshot detection, which is leading edge. The RCMP wanted it, etc., but nobody would buy it. We applied to the BCIP, innovated again, and now the RCMP is testing it through BCIP.

The bottom line, to me.... I know the BCIP is $40 million. I honestly think it should be a $250-million program, very similar to IRAP. I have said before that we keep throwing money at the banks, but that's not where we should go.

I'll stop there.

12:15 p.m.

Conservative

The Chair Conservative Tom Lukiwski

Thank you so much.

Next up we have Mr. Long, from SageTea Incorporated.

Could we have your opening statement, please?

12:15 p.m.

David Long Chief Executive Officer, SageTea Software

Good afternoon. Thank you for your invitation.

Good afternoon.

My name is David Long. I am the CEO of SageTea Software, an Ottawa-based software company. Our mission is to be a global standard for software development. We have won two build in Canada innovation program awards. Our sales to government are approximately $1.25 million to date. When you consider that we are only a little over five years old and started in my wife's basement, I think most of you would consider that quite an accomplishment.

On that note, my wife has said that I never mention her in any of my public statements. Thanks, Tandy Yull. We would not have made it without you.

12:15 p.m.

Voices

Oh, oh!

12:15 p.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

And this is in camera.

12:15 p.m.

Voices

Oh, oh!

December 7th, 2017 / 12:15 p.m.

Chief Executive Officer, SageTea Software

David Long

The purpose of the build In Canada innovation program is to help Canadian companies move their state-of-the-art goods and services from the lab to the marketplace by giving the company that first major reference sale. The Innovation, Science and Economic Development website states that:

Between 2011 and 2013, small businesses accounted for 27 percent of total research and development expenditures, spending $13.0 billion over the period.... Lacking both a credit history and the collateral needed to secure a loan, over 80 percent of start-ups used personal financing to finance their new businesses.

I know there is a need for checks and balances to ensure that government money is spent wisely. As a small businessman who wants to do business with the government, I would also appreciate anything that can speed up the process.

Across Canada, the risk that is taken by entrepreneurs is shouldered, in my view, largely by individual Canadians and their families. Risk stifles innovation, a key theme about which I will make several points and recommendations.

Government should reward risk-takers within its ranks. BCIP may cover the financial risk by paying for the innovation. The test department also takes risks by providing the human and physical resources during the test. These people also have full-time jobs, and agreeing to take part in these tests means taking on extra workloads. For a program like the build in Canada innovation program to be really successful, there needs to be a way to recognize and reward the efforts of the test departments and their people.

Our first BCIP award was for Text-to-Software, our software development platform. To achieve this award, we first had to try and fail our first build in Canada attempt. This was an expensive lesson to learn, and we took out of it the need to hire outside expertise to write our first proposal. I would estimate our investment to make the attempt and win cost approximately $50,000. For a small business, this is no small sum, and we took considerable risk at the outset with only a limited expectation of winning.

While recent process changes have brought improvements, it can still take more than a year from the start of the application process to the awarding of the contract. Small businesses can easily launch and go out of business if they fail to secure sales targets after investing in those opportunities.

This is an example of risk and how it plays into whether a firm can even make it through a BCIP procurement.

Happily, we did win on our second BCIP attempt.

I would recommend that when an entrepreneur is arriving with a new product, service, or solution, it should be a government-wide policy that everyone in government, from director to manager to employee, be required to welcome the innovator in every way they can. Further, after a successful BCIP test, an automatic transition to an internal government incubator, specifically for these successful products, would be an effective way to accelerate innovation. Currently BCIP winners still need to hunt for their next client. This problem could be solved entirely if BCIP companies were automatically connected with demand under an automatic procurement program.

Many bright stars in government have helped us along the way.

One of them was Bruce Covington, a key advocate and our first client for our innovation at Public Services and Procurement Canada . He and his group were very supportive and proactive throughout our first BCIP experience.

I therefore recommend that BCIP winners should be able to rate and recommend their test departments on an official list. If the government were then to have a policy of recognizing and rewarding the top innovative test departments, then it's likely we would see the pace of innovation inside the government accelerate.

Text-to-Software automatically creates customized software from text. In our first build in Canada innovation program test with Mr. Covington and his team at PSPC, we were able to create a customized data classification system for 22.5% of the internal PSPC budget. We showed that going codeless works, completing the project on schedule despite a three-month delay.

It's fair to say that all of us felt that the result of this BCIP test could have gone further. We learned from that experience and have been working with our partner, Meyers Norris Penny, to leverage all the BCIP results we have achieved into new cloud-based services designed for government. These are now available to government departments on the software licensing supply arrangement. BCIP can be thanked for enabling efficiency-minded C-level managers with our new codeless solution.

Also, it was Mr. Bruce Covington at Public Services and Procurement Canada who first recommended that we work with a larger partner. This is what began the relationship we have with MNP today, our largest private sector partner and Canada's largest Canadian-owned accounting, tax, and business consulting firm. With MNP as the lead applicant representing SageTea, last month we were even able to achieve an SLSA, a software licensing supply arrangement, win for all of our BCIP program-tested products. Often a smaller company needs to have a bigger one help it along when doing business with the government. I therefore recommend that the government do more of this by getting private firms, big and small, to work together in complementary ways.

We utilized the BCIP program follow-on sales program to test Text-to-Software at the Department of Fisheries and Oceans. There, using Text-to-Software, we built two customized software applications in only five weeks. These are now available to the Department of Fisheries and Oceans as well as across government through the SLSA.

Today we are just beginning the test of our second BCIP innovation, SageTea Link, with Employment and Social Development Canada as the test department. SageTea Link is an ETL—extract, transform and load—tool. What that means for most of us in the room is that with SageTea Link you can automatically migrate and link valuable data from unsupported expensive-to-maintain systems to new supported ones. This is a huge problem in government.

A key component of our current BCIP innovation is artificial intelligence. SageTea has partnered with Lemay Solutions, an Ottawa-based Al company that is a subcontractor with MNP on the current BCIP test. As a result, we are also now including a new artificial intelligence module with SageTea Link. This new product, SageTea Link Deep Learning, enables our customers with easy-to-use artificial intelligence. MNP is doing a security audit of our software to ensure it meets the government's IT security requirements.

Our experience with the BCIP program and the Office of Small and Medium Enterprises has been exceptional. The build in Canada innovation program is a terrific program. It has made an incalculable difference to SageTea Software's mission to be a global standard for software development.

Thank you. Merci.

12:20 p.m.

Conservative

The Chair Conservative Tom Lukiwski

Thank you very much.

Our final opening statement will come from Mr. Lem.

12:20 p.m.

Paul Lem Chief Executive Officer, Spartan Bioscience Inc.

Hi, everyone, my name is Paul. I'm the CEO and founder of Spartan Bioscience Incorporated. I'm a medical doctor by training. My specialty was in infectious diseases and microbiology.

For my company, Spartan Bioscience, our vision was bringing the power of DNA testing to everyone. What do I mean by this? The analogy I like using is you guys have seen how mainframe computers went to personal computers, which went to the smart phones that everyone carries around in their pocket. That smart phone gives you instant access to information on anything you want—app store, iphone, all that stuff.

Right now the standard around the world is mainframe DNA analyzers, so everyone's samples across all sorts of applications get sent off to a central lab. It could be in a hospital or in a big lab. Then you wait, days, weeks, or months to get your results back.

We have commercialized the world's smallest DNA analyzer. It's about the size of a coffee cup. It's taken us 12 years of R and D. In the last 12 years we've been competing against over 200 companies around the world. Every big multinational since the human genome project has been investing hundreds of millions of dollars in their divisions to try to make this device. It's GE, 3M, all those sorts of people. Our strategic investors are Canon. The leader in cameras and copiers spent over $200 million and used 200 people over 13 years in trying to make this, and failed. That's why they invested in us.

We reached this about two years ago. Now that you have this—

12:25 p.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Pass it around.

12:25 p.m.

Chief Executive Officer, Spartan Bioscience Inc.

Paul Lem

Feel free.

12:25 p.m.

Dr. Suhayya (Sue) Abu-Hakima

I was going to ask, “Now what do you do with it?”

12:25 p.m.

Chief Executive Officer, Spartan Bioscience Inc.

Paul Lem

Exactly. Right now we're hand-building them in Ottawa for $2,000. We're about to get mass manufacturing that will probably drop it to less than $1,000 to about $500. Again, back in the days of mainframe computers and personal computers, I remember when I used to spend $5,000 on a computer, but now of course you have your smart phone that's $100 or $200. The question is, what do you do once you have this platform?

What happened a year and a half ago was with was this company called Brookfield. You may have heard of them; they are one of the world's largest asset managers. They manage thousands of government buildings. Brookfield said to us, “You guys have made this incredible device, and we have the perfect application for you; it is Legionella testing of every government building.” I said to myself, “Right. I remember I've treated patients with legionnaires' disease.” This is basically a severe pneumonia that you get by breathing in water vapour that's contaminated by Legionella bacteria, so I said, “Right, I remember this disease, but why are you talking to us?” Then Brookfield said that the main source that infects people is cooling towers. That's part of the air conditioning system of every office building. They said that the federal government has passed...it's probably this building.

12:25 p.m.

Conservative

Kelly McCauley Conservative Edmonton West, AB

Right.

12:25 p.m.

Some hon. members

Oh, oh!

12:25 p.m.

Chief Executive Officer, Spartan Bioscience Inc.

Paul Lem

This might be one of the buildings we test. It's pretty crazy.

12:25 p.m.

Dr. Suhayya (Sue) Abu-Hakima

Can you test it?

12:25 p.m.

Chief Executive Officer, Spartan Bioscience Inc.

Paul Lem

I could, but I didn't bring any cartridges.

Brookfield told us there are government regulations that apply to all these federal government buildings, whereby they have to be tested every 30 days by something called bacterial culture—you know, in petri dishes, as in high school biology. Brookfield told us that they know the petri dish approach takes two weeks and is not very accurate. They wanted a DNA test that was possible to undertake on site rather than by sending it off to a lab, so we made it for them.

Then they walked us into Public Works and Procurement Canada, and public works—who sets the standard—said to us, “This is exactly what we've been waiting for for years. We always knew that culture testing sucked. Finally, here's the technology we want.” Then they said there's a thing called BCIP that would be perfect for funding the definitive scientific study to show how good DNA testing is vis-à-vis culture testing.

PWPS told us they've been wanting to fund this study for years, but they don't have the budget themselves, so BCIP allowed them to do it. Thus $500,000 has now funded, over 12 weeks, 51 cooling towers in Ottawa, Toronto, and Montreal. The results are about to be released in a few weeks, and I can tell you they are explosive. It's coming, then, but I can't tell you what the results are.

What is happening now is that DNA testing is going to become the standard for testing every office building, hospital, school, shopping mall—every building that has a major air conditioner. We're talking about a multi-billion-dollar global export opportunity, and it's going to be driven by standards, because people don't want to die, especially public sector employees. They care about the quality of the buildings they work in.

Public Works and Procurement Services, for example, has asked us to help them update the standard. It's going to apply to all the government buildings. It's going to be released probably in January or February. We're now talking with the Standards Council of Canada and commercial real estate guys. It's probably going to be rolled out across the world.

We find BCIP was an amazing success for us. If it didn't exist, we wouldn't have this billion-dollar opportunity in which we're probably going to be the world leader. It's going to be incredible.

The thing we're finding now concerns what happens after BCIP. We'll probably be able to engage a government relations firm that's going to help us on the procurement side, because to navigate all the acronyms and who we talk to, such as Treasury Board.... We're just learning all this for the first time.

That would be our one suggestion. After companies graduate out of the BCIP, how do we get help on procurement to roll it out in Canada to every province and municipality, worldwide, to New York—all that stuff?

Thank you.

12:25 p.m.

Conservative

The Chair Conservative Tom Lukiwski

Thank you very much.

We will start now with our seven-minute round of questions, with Mr. Peterson as our first intervenor.

12:25 p.m.

Liberal

Kyle Peterson Liberal Newmarket—Aurora, ON

Thank you, Mr. Chairman.

Thank you, everybody, for being here with us this afternoon. The presentations have all been very interesting. I'm sensing a consistent theme here. BCIP is obviously a good program.

I want to pick up on a couple of consistencies in some of the presentations. I think, Sue, you mentioned that no one is fired for choosing IBM in an RFP. David, you mentioned that we don't reward risk-takers in departments enough; I think that's a similar concept that you're speaking of.

Is BCIP the exception to that rule, in your sense, and is that perhaps why it's as successful as it is?

12:25 p.m.

Dr. Suhayya (Sue) Abu-Hakima

Do you mean in terms of bringing innovation to the government?

12:25 p.m.

Liberal

Kyle Peterson Liberal Newmarket—Aurora, ON

Yes.