Industry and Technology Committee on Oct. 20th, 2025

[Alexa Young]

That's very important. All of our customers are important. As we look to bring new projects on board like the Robert Banks Terminal 2 project that I spoke of earlier, we're really focusing on looking west. Some 50% of the global GDP is going to be in the Asia-Pacific by 2040. If you think about all of the customers in those markets who are looking to build their cities, heat their homes and feed their families, we're really the gateway of the Canadian farmers, miners and manufacturers who are trying to get their goods to those markets.

We're looking to expand and find markets around the world, and Asia Pacific certainly is at the top of our list.

[Parm Bains, Liberal, Richmond East—Steveston, BC]

You talked a little bit about interprovincial trade barriers and regional productivity. We have a national supply chain office in Vancouver. Could you talk to us a little bit about its role, the relationship of your port with the office and whether there is strong industry engagement with the office? What can the office do better?

[Alexa Young]

Linda talked earlier about the importance of data, and certainly, when it comes to the supply chain, data is king in having real-time visibility into what's happening in the water and on the ground across the supply chain partners. The office has been a helpful resource in being a facilitator of the sharing of information and coming to grips with some of the best digital tech tools that can be put in place to increase that visibility and do that real-time sharing that allows us to plan better across the supply chain to sequence train and vessel traffic, all of which is already demonstrating some success.

[The Chair, Liberal, Ben Carr]

Thank you very much.

That was very insightful. I appreciate your making yourselves available to the committee and lending your expertise here today for our study on productivity.

Colleagues, we're going to briefly suspend to turn over to the second hour.

[The Chair, Liberal, Ben Carr]

Colleagues, we are going to resume the second half of our witness testimony today. We have a number of new witnesses, all of whom are here in the room with us.

We have Chad Bayne, partner, founder, and co-chair of Emerging and High Growth Companies, Osler. We have Mark McQueen, founder of Wellington Growth Partners Incorporated. From the Leaders Fund, we have David Stein, co-founder and managing partner, and Gideon Hayden, co-founder and managing partner.

There are upwards of five minutes—and I will stress upwards—for your introductory remarks. We are running behind, so I'm going to be a little bit more stringent with my cut-off time in this second hour here.

Please do your best to be succinct. You saw how things work here. If you haven't been a witness before, please ensure that if your earpiece is plugged in, but not on your ear, keep it on the sticker in front of you. If it's not plugged in, there's nothing to worry about, although I'm sure there will be questions posed in French throughout the course of the testimony today.

With that, Mr. Bayne, we'll go to you first. You have upwards of five minutes.

[Chad Bayne, Partner, Founder & Co-Chair, Osler’s Emerging and High Growth Companies Group, As an Individual]

Thank you, Mr. Chair.

Good afternoon. I am honoured to have the opportunity to participate in this committee meeting. My name is Chad Bayne. I am a partner at Osler, Hoskin and Harcourt LLP, a national business law firm with its headquarters in Toronto. I also founded and co-chair the firm's emerging and high-growth companies practice, where we work with start-up and scale-up companies from the ideation stage to the late stage and everything in between.

Please note that I am appearing in front of this committee in my personal capacity, and the views I express here today are my own and do not necessarily reflect the views of my firm.

Before becoming a lawyer, I was a computer engineer. I graduated from the University of Waterloo and worked primarily for Newbridge Networks in Kanata doing a combination of software, hardware and chip design. Between that and my current career as a lawyer, I have been involved in Canada's tech sector for over 30 years.

Growing up in Kanata, just a stone's throw from here, in the 1980s and 1990s, I witnessed the true potential of the Canadian tech sector with global giants like my employer, Newbridge, as well as Nortel, Cognos, Corel and JDS, to name a few. In fact, growing up in Kanata was a key factor in my desire to be a part of the Canadian tech sector.

Ottawa's hi-tech cluster's birth, which arguably rivalled that of Silicon Valley during the 1980s and 1990s, when Ottawa was commonly referred to as Silicon Valley North, can be traced back to Northern Electric, the formation of Bell-Northern Research and the foundation of Microsystems International—BNR's chip factory—all occurring from the late 1950s to the late 1960s, a generation prior to the beginning of Ottawa's tech boom. The Government of Canada played a pivotal role in the genesis of the Ottawa tech sector by helping Northern Electric build research labs in Ottawa, heavily subsidizing Northern's digital telephony strategy and assisting with the foundation of Microsystems International. This helped catalyze the local industry by yielding such breakthroughs as the Meridian SL-1, the world's first all-digital private automatic branch exchange, and the MIL MF7114, one of the world's first microprocessors.

What Microsystems International could be most famous for is creating the environment for a young Sir Terence Matthews and a young Michael Cowpland to meet. It's worth noting that both of them are immigrants to this country. As many will know, they left Microsystems and founded Mitel together, and the first product that Mitel created was based on Michael Cowpland's Ph.D. thesis. After Mitel, Terry founded Newbridge and Michael founded Corel. The birth of the Kanata tech corridor can largely be attributed to the two of them.

Dick Foss and Bob Harland met at Microsystems International as well and went on to found MOSAID, another Ottawa-area tech leader and a key player in the computer memory market globally. In addition to Mitel, Newbridge, Corel and MOSAID, other companies, such as Chipworks, JDS, Tundra, Cadence Computer Corporation, Calian and CrossKeys—all headquartered in the Ottawa area—can trace their founding teams or first employees to Microsystems International. Many of the early venture capital investments in Canada were into companies started by former Microsystems International employees, and many of the first angel networks in Canada can be traced to former Microsystems International employees.

Microsystems International ultimately became part of Bell-Northern Research, which then became part of Nortel. At the time, if people remember, Nortel was the most valuable company in Canada and one of the 10 most valuable companies on Earth. Until Nortel's demise in 2009, the Microsystems International semiconductor lab in Ottawa was the largest of its kind in Canada. For that generation, Canada was considered a world leader in the areas of digital telephony, semiconductors and optics, all of which can be traced to BNR and MIL, which the Government of Canada helped to catalyze.

Looking at our neighbours to the south, the most significant expansion of technology in human history can be attributed to three key events—the Manhattan Project, the space race and the Cold War—all funded through U.S. government spending. Silicon Valley can trace its birth ultimately to U.S. defence spending, as can the Internet, which can trace its birth to the Pentagon through its predecessor, ARPANET.

The World Wide Web came out of the CERN in Switzerland, another government-funded entity. The entire Israeli tech sector, arguably the second-most successful tech ecosystem in the world, is a direct by-product of Israeli defence spending and government-funded research. Without government funding of significant primary technology research, many of the most important technology hubs on Earth and their output may never have existed. This cause-and-effect relationship is quite self-evident based on recent history.

Innovation ultimately drives the domestic economy through the commercialization of primary research by entrepreneurs, which leads to the creation of jobs, which then leads to the creation of wealth and ultimately creates a virtuous cycle. It is worth noting that, of the top 10 public companies by market capitalization in the U.S., the first eight are either technology companies or technology-adjacent: Nvidia, Microsoft, Apple, Google, Amazon, Meta, Broadcom and Tesla. By contrast, five of the top 10 Canadian public companies are banks—RBC, TD, BMO, Scotiabank and CIBC—and two are related asset managers, Brookfield and Brookfield Asset Management.

Only one company in the top 10 in Canada is a true technology company: Shopify. As a side note, it's interesting to point out that Shopify was founded in Ottawa—the home of the last great Canadian tech ecosystem. It is arguable that Ottawa was the only place in Canada that at the time had the muscle memory necessary to build a tech company like Shopify.

[The Chair, Liberal, Ben Carr]

Mr. Bayne, I'm afraid I'm going to have to cut you off there, but there will be opportunities in your line of questioning to come back to some of your introductory statements.

Thanks very much.

We're going to Mr. McQueen.

[Mark McQueen, Founder, Wellington Growth Partners Inc., As an Individual]

Good afternoon, everybody, and thank you.

I am Mark McQueen, the founder of Wellington Growth Partners. Prior to this I spent five years at the CIBC after it acquired my venture debt fund. I raised five funds over 18 years and ran their innovation banking practice for half a decade. Well before that I spent five years on Parliament Hill—your future's up here some day as a witness.

Canada kept pace with the U.S. economy from 1961 to 2000, and then the wheels came off. As a tech company financier when the 2000-era, dot-com bubble famously burst, I recall how quickly Canadian investors pulled back from financing our innovation economy and life science start-ups.

American investors took the Nasdaq market swoon in stride, and 2004 saw the IPOs of Google, Salesforce and DreamWorks Animation, among others. More than 50 biotechs hit the U.S. public markets that year, while most Canadian investors hid when our economy came knocking, favouring real estate, mining, and oil and gas.

This has been our reality for the last 20 years, with serious repercussions for our standard of living. I'm glad to hear you're considering those topics today.

According to StatsCan, the U.S. saw labour productivity grow at twice the Canadian rate between 2000 and 2021. Analysts found that a major component of the disconnect between U.S. and Canada stems from the fact that while productivity growth at Canadian information and cultural services firms was two-thirds higher than other Canadian businesses, similar American-based firms outgrew the rest of the U.S. economy by a factor of four. Growth capital was the key.

Over the 10-year period ending in 2023, U.S.-based entrepreneurs raised an average of $156 billion U.S. a year from VC funds and institutional investors. A great year in Canada would see $7 billion Canadian of similar investments. America has about eight times our population but invests 22 times the capital in its start-ups, ignoring exchange rates, and that's every year.

Whether or not you see the CANDU reactor or the Avro Arrow as a success or a failure, both initiatives speak to a time when Canadians were proudly prepared to take new technologies to the world, rather than tinker on the IP of another nation. Giving Ericsson's $470 million of taxpayers' money to advance foreign-owned R and D on 6G networks is not a national innovation strategy.

Over the course of my time leading Wellington Financial, we identified thousands of jobs that were supported by what amounted to about $1 billion of capital in our private funds.

One B.C.-based software company, for example, grew employment from 30 staff to 450 following our three different capital rounds. Government can play a role via SR and ED, for example. Those are small dollars compared to what foreign automakers seem to negotiate out of the federal government.

For our innovation entrepreneurs, they’ll be the first to tell you that a lack of sufficient growth capital is the only thing that undermines their ability to create new high-paying jobs and commercialize the IP that's created on our campuses.

I have four recommendations to help address the shortfall, and two relate to tax policy.

Canada has been a centre for mining and oil and gas financing for decades, and our flow-through share policy obviously has been a great support of that. The innovation economy cannot access that same program. Do you wonder why we're not a leader in attracting that same capital?

Consider this. If I have a full-time job and I want to start a retail honey business in my backyard, I can spend tens of thousands of dollars over the next three years on start-up expenses and write that money off against my income. If I invest $3,000 in Chad's AI company, I need a capital gain down the road to write off, if I were to have a loss on those dollars.

We are consciously prioritizing side gigs over commercializing IP. An angel tax credit is long overdue.

Third, let's privatize the Business Development Bank of Canada and take it public on the TSX. Simply put, if you want more agile players, more growth capital in our economy, the BDC just so happens to be the only obvious vehicle available to spur the right kind of private sector-owned competition with our personal and commercial banking sector.

The taxpayers of Canada have $15 billion tied up in shared equity in the BDC today generating a core net income last year of $492 million, which means we borrow $15 billion every year to keep it in business, paying about$477 million in interest on that for $50 million of dividends last year.

No investor will pay 3% in margin interest to earn a gross return of 3.2%.

If BDC was focused merely on filling the gaps, as required by the 1995 act, outstanding loan balances wouldn’t have grown fivefold to $42 billion over the past 15 years. To put that size of this bloated balance sheet in context, National Bank's average business and government loan book is just $70 billion, and the Canadian Western Bank's was $29 billion prior to that acquisition.

Of BDC's $50 billion of assets, just $3 billion are in the venture capital space. That's 6%. If we're trying to support our economy in the innovation sector, this is not how you would do it.

[The Chair, Liberal, Ben Carr]

Mr. McQueen, I'm afraid I'm going to have to cut you off. We're 20 seconds over at this point.

Thank you very much.

Mr. Hayden, the floor is yours for up to five minutes.

[Gideon Hayden, Managing Partner, Leaders Fund]

Thank you, Mr. Chair and members of the committee, for the opportunity to speak with you today.

David Stein and I have been building and investing in technology companies for over two decades. I started my first tech company out of university and sold it to Torstar. David's first company grew to $100 million in revenues before being acquired. He then co-founded a second company, which was acquired by Salesforce.

Our businesses were founded in and run from Canada. With Leaders Fund, we've invested in over 25 technology companies since founding. Five of them have reached over $1 billion in valuation. Through these experiences, we have seen how to build outlier companies that generate jobs, economic growth and large tax bases.

Last month, we released a study analyzing 3,000 venture-backed companies founded by Canadians between 2015 and 2024. This study is in front of you now.

Two major findings emerged. First, company formation is slowing in Canada. In each year from 2015 to 2020, the U.S. produced roughly 13 times more high-potential start-ups than Canada. By 2024, that gap had widened, with the U.S. creating 45 times more.

Second, our best founders are increasingly leaving Canada. From 2015 to 2020, roughly 70% of Canadian-founded start-ups were started in Canada. By 2024, only 30% were started here while the number of Canadian-founded start-ups based in the U.S. more than doubled.

Just imagine if the vast majority of Harvard and MIT computer science graduates were moving to Canada to start their companies. The U.S. government would be doing everything in its power to reverse that trend.

Canadian founders will build more companies as big as Shopify. Those companies create IP, high-paying jobs and significant tax revenues, and ultimately increase prosperity. We should ensure that they're building those companies here.

[David Stein, Co-Founder & Managing Partner, Leaders Fund]

I'm going to continue.

After that study, we also spent a lot of time talking to founders to try to understand why the data is the way it is. Our conversations with founders highlighted that they're leaving Canada because of lifestyle, taxation and talent. It's those three things.

Building in Canada was a lifestyle decision. They could get the best of both worlds. In exchange for higher taxes and regulations, they could build and live in Canada and benefit from our health care, education, housing affordability and low crime while serving the large U.S. market next door.

These founders now believe that our lifestyle advantage has eroded. In the last decade, housing costs have risen over 70% in most major cities, while crime has increased dramatically. Car thefts are up 250% and, this year alone, violent crime is up 50%. There's a shortage of family doctors, while wait times for common surgeries have doubled.

Regarding taxation, Canadians pay 53.5% income tax over $235,000 in earnings and 26.5% in capital gains after the recent government rollback, whereas in the U.S., the top tax rate kicks in at $852,000 Canadian in earnings, with no capital gains on the first $21 million in profits. That's what we're competing with. If you move to the U.S. and put your start-up there, you start under something called the QSBS, which is part of the big, beautiful bill. You start that company and the first $21 million in gains has no capital gains.

On talent, we used to issue visas for skilled foreign workers in a few months; it can now take upwards of four years, which is slowing down access to talent. We need bold action to encourage more high-performing businesses and graduates to start and stay in Canada. Patriotism alone will not get them there and keep them here.

We have a few recommendations to follow on the others.

The first is to incentivize start-up formation. Let's look at the U.S. and consider following its lead by coming up with a Canadian version of the QSBS, where we eliminate capital gains for tech start-ups. Let's allow immediate deductibility for Canadians if they invest in Canadian start-ups. Let's accelerate visa issuance and speed for skilled foreign workers.

The second is to incentivize buying Canadian products. Ways to do this are through immediate deductibility for businesses to buy Canadian technology and government procurement of winning Canadian solutions.

The third is to get more leverage out of existing programs. Ways to look at this are through providing a tax credit for businesses based on their increased investment in R and D; using successful founders and investors to improve SR and ED programs; and providing incentives for top graduates to stay in Canada.

We need a shock to the system. If nothing changes, we risk losing not just a generation of founders, but the capital, IP and prosperity they would have created here.

Thank you.

[The Chair, Liberal, Ben Carr]

Thanks very much.

Colleagues, we're going to head into our line of questioning. We are tracking for us to probably not have the final half of the second round. This would mean that the Bloc, the Conservatives and the Liberals would not have that third question toward the end. We'll see where we get.

Mr. Falk, six minutes is yours.

[Ted Falk, Conservative, Provencher, MB]

Thank you very much, Mr. Chair. I'm going to be splitting my time with Mr. Guglielmin.

Thank you to all of our witnesses. I wish we had more time, but I'll jump right into it.

Mr. Hayden, in a Globe and Mail article, you indicated that a program like SR and ED costs billions, yet it's not as effective as it could be.

Could you provide this committee with some ideas as to how that program could be improved?

[Gideon Hayden]

Start-ups move on an incredibly fast timeline. We talked about uncertainty in the previous panel. What we're hearing from a lot of founders is while the intent of the program is very good, the actual ability to access and get through the red tape that's part of the program just takes too long. There's a lot of regulatory capture and consultants, which cost a lot of money. It's really just about how you accelerate the time to receive these applications, approve these applications and make sure that this capital is going towards true technology companies. I think there's also some abuse of the system as well.

[Ted Falk, Conservative, Provencher, MB]

Right.

I have sometimes heard complaints about the program that it has to be designed to include the possibility that whatever you are doing can fail. Is that a positive or a negative of the program? Should we be rewarding failure?

[Gideon Hayden]

Building start-ups, investing in research and doing R and D, that's risky. It doesn't always work out. Should that be a criteria? I don't know; I'll leave that up to you. I think that's just part of building a company. That's part of doing research. Sometimes it doesn't work out.

[Ted Falk, Conservative, Provencher, MB]

Thank you.

Mr. Bayne, you talked about all the human capital that's leaving our country. What policy changes could we make to retain it?

[Chad Bayne]

The first thing we need to think about is just the nature of how we essentially have changed our environment over the last number of years. The change to the potential capital gains rate created a shock wave in the tech community.

[Ted Falk, Conservative, Provencher, MB]

You can thank the Conservatives.

[Chad Bayne]

I think that ultimately created an environment, as well with COVID, where there's a disintermediation in terms of the community, where people are now working more remotely. This made it easier for people to ultimately decide to pick up and leave because they could work remotely.

I think having that potential change—again, it didn't go through—created essentially a slap in the face to the entrepreneurial community in this country. Based on my experience dealing with a number of entrepreneurs, there is a real backlash in a segment of the population that I would say is generally apolitical. Generally, the tech community became very political in a very short period of time.

[Ted Falk, Conservative, Provencher, MB]

Thank you. I'm out of time.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Mr. Hayden, you have proposed eliminating the capital gains tax on start-ups.

One of the things I was very proud of during the last campaign was our commitment to remove the capital gains tax as long as it was reinvested in the Canadian market. Could you elaborate on how you would see this policy working in practice? What kind of effect would it have on retaining both capital and talent within our country?

[Gideon Hayden]

It's a great question.

My colleague, David, mentioned in his remarks the QSBS in the U.S. where for the first $21 million in gains, there are no capital gains on an exit of any start-up. It doesn't have to be technology; it can be in any industry. We personally know many founders who are making that calculation. They are saying, “It's costing us hard-earned dollars to build our company here. We want to be in a place that rewards entrepreneurial spirit and celebrates those wins.”

At a bare minimum we have to match what's happening in our neighbour to the south, but I think we could go a step further. We could eliminate capital gains for start-ups, period. The point is that we can't just be in parity with the regulatory regime in the U.S. We have to be better. I think that would be a great start to catalyze and change the tone, frankly, to reverse what Chad was talking about.

[Michael Guglielmin, Conservative, Vaughan—Woodbridge, ON]

Thank you.

Mr. McQueen, in your critique of budget 2024, you suggested that the $2.4 billion investment in AI was insufficient and performative. I know that there's one thing that we export out of this country really quickly, and that's our large talent pool. We develop the AI talent pool, and they go work for American companies. A lot of the people I've spoken with in the AI industry find attracting investment very difficult within Canada, especially when it comes to commercialization.

Could you elaborate on what specific aspects—scale, timing, design or delivery—fail to meet the needs of the high-growth tech in AI firms in Canada?

[Mark McQueen]

It's about the environment, which I think David and Gideon touched on a bit. What we need is growth capital. Universities can spin out graduates, and they can create IP at a campus research lab, but if there's no capital to fund that seed or that angel round, let alone the venture or growth stages that would follow, all of that was for naught. The government announcing an AI strategy is all well and good, but what we need is risk capital for the front end. That is not buying servers from foreign multinationals so that Canadian software companies that already exist can use those servers; it is to ensure—like the VCCI has done, which our industry lobbied for 15 years ago now—that we accentuate those kinds of programs. That's the best way to grow companies, not to reward multinationals.