Thank you, Mr. Chair.
At the hearings of this committee on May 17, the committee received input from Mr. Scott Inwood who is the director of commercialization at the University of Waterloo. He outlined the IP policies at the University of Waterloo. He also discussed the commercialization climate in Waterloo region. I am not going to repeat that activity or those types of observations, because Mr. Inwood summarized those quite well.
What I would like to do is make three observations, and feel free to ask me to expand on them. I'll be quite willing to expand on them in the question period, if it's appropriate. After 20-odd years of working as the dean of science at the University of Waterloo and the vice-president of research, and being active in the commercialization area, these are observations of where I see Canada could improve its performance and optimize the return on investment in research in the intellectual property that has developed from that work.
The first observation has to do with ensuring that work suitable for protection and commercialization is actually disclosed within the university system. You might think that this is not obvious, but within the university you have to effectively support the development of a culture that allows people to recognize what something is when it is worth disclosing and protecting. They need to have the ability in their background to identify whom they go to in order to do that.
Despite extensive educational activity and networking within the university, this is something that has to be worked on continuously in order to get, in particular, an undergraduate student to come forward with an idea that they want to disclose and protect.
While we tend to capture a very significant portion of this at Waterloo, it is by continuous activity in terms of identifying and networking with these people. One area that concerns me, although I won't say it keeps me awake at night because nothing keeps me awake at night, is individuals that have a really good idea, particularly at the undergraduate level, but they're not aware of how to go about disclosing it. We spend a lot of time actually working at that type of activity.
Another observation would be regarding very early stage investment. Significant resources in budget 2012 were put in place for what I'd call late angel and venture capital funding. In my opinion, to some degree the greatest need is in the early pre-commercialization investment. This is the de-risking component, the proof of principle component associated with any intellectual property at the very early stages of its commercialization. I often call it archangel investment. It's the investment before the angel investor is willing to come forward.
Some funds are available. The scientists and engineers in business initiative through FedDev is a very good example. NSERC has an ideas to innovation program, I to I. A number of programs are run at the provincial level. All of these programs have relatively complicated application procedures. The timeline for decision-making is in the range of six to twelve months.
I fully recognize that these folks have to do their due diligence, but if graduate or undergraduate students are looking to found a company, you need to have a timely decision in order to keep the individuals with that IP together to form the company. These are often very sharp people that have a lot of competitive job offers and if they're not making a living, waiting six to twelve months for a decision is not something that is really appropriate.
I think the only way you can get around this is what I'll call local funding, some combination of philanthropic money. There are some venture capitalists who are willing to invest in this type of activity, but this needs to be developed and controlled at the local level so that decisions are made very rapidly.
At Waterloo, we have a fund of about $2 million, based on philanthropic money. We allocate $25,000 a shot for young undergraduate and graduate students who want to move down this trail. We can turn that around in about three weeks. But the demand far outstrips the supply, when I look outside the university at the broader region in Waterloo.
Another point to mention is risk tolerance in the private sector around new products and innovation.
I'm not talking about risk tolerance with respect to investment. I'm talking about receptors for new technology and products either as a first customer, or as a licensee of IPs, that is, first customer start-up or licensee of IPs.
Compared to my experience in Europe and the United States, Canadian business tends to be very risk averse and often doesn't want to be the first to try the new product or innovation. I don't know how we solve that problem.
I would hate to tell you how many companies I have seen where their first sales are offshore and sales in Canada follow once they've demonstrated the approach. One of the approaches here is that government is a very significant purchasing agent within Canada. That may be an opportunity. There may be incentives to try new technology coming through tax incentives, or whatever.
Those are three observations. I don't pretend to have a solution. I would say these are observations from the trenches.