Industry Committee on Nov. 20th, 2014

[The Chair, Conservative, David Sweet]

Monsieur Côté, from the NDP.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Thank you, Mr. Chair.

Mr. Lavoie, you talked about the difficulties some private companies could have in securing financing and the fact that the BDC and EDC could in part remedy that. Four years ago, Mr. Laurin talked about the same difficulties when he discussed the automotive product supply chain, among other things.

Of course, I can't help but think about other government decisions that could complicate matters. One of the things I am thinking of is the federal government's abandonment of the credit for labour-sponsored funds. Those funds, which are very important in Quebec, were rather effective, especially in terms of long-term support. However, long-term support for company activities is probably the most difficult approach.

The BDC will be able to invest in venture capital funds internationally, but that will absolutely not make up for the loss we may have to contend with.

Given the government's other plans, do you think the BDC's new plan would have been a worthwhile addition when it came to maintaining the credit for labour-sponsored funds? Do you think it will be possible to replace what we are losing in the short term?

[Martin Lavoie]

That's a good question.

We will have to see with time. I think you are right to say that labour-sponsored funds really are long-term initiatives. They are worthwhile for small and medium-sized companies that want to develop without constantly having to fear being dropped by investors. The BDC has some of that mentality, as well. In a situation where those investments are going through organizations like Futurpreneur, we will see whether this can replace the previous system. Be that as it may, I think that labour-sponsored funds are still present and active, even though the federal tax credit has disappeared. They continue to play that role.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Indeed.

Mr. Hodgson, when we talk about company development, we talk about financial capital, but human capital also needs to be considered. The Conference Board of Canada was wondering whether young Canadians may be the first generation to be less well-off than their parents' generation. Among other things, you were talking about revenue and social benefits. In that respect, young people could be poorer than their parents or grandparents.

Labour-sponsored funds were a very worthwhile option in terms of savings. In the Beauport-Limoilou riding, for instance, between 8,000 and 10,000 investors were participating in labour-sponsored funds.

What do you think about the risks associated with a potential drought and about the fact that there may not be a way to replace labour-sponsored funds, if only through amendments proposed under the Business Development Bank of Canada Act?

[Glen Hodgson]

I resist the tendency to respond to a question where I don't really have expert knowledge. It's not a topic that I've really studied in detail. Perhaps it's something we could come back to at a future date, but I don't really have a substantive answer to provide you.

I suspect that Martin knows more than I do on this topic, not that I'm trying to pass the ball to you.

[Martin Lavoie]

I wouldn't play on the same line with you in hockey, that's for sure.

How much did the amendments to the Business Development Bank of Canada Act aim to offset the loss of the tax credit? I agree with you when it comes to savings. I think that many Quebeckers use that fund. That being said, I don't think this was the primary goal of the amendments.

I think we should keep in mind that any potential holes in the financing from the labour-sponsored fund could be plugged by the BDC. Our association is definitely going to keep an eye on that.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Very well.

It was a pleasure.

[The Chair, Conservative, David Sweet]

Now we move on to our final MP.

Mr. Wallace, five minutes.

[Mike Wallace, Conservative, Burlington, ON]

Thank you, Mr. Chair.

It's my pleasure to be back at the industry committee. It's been a few years since I've been here. I was here for a meeting a few weeks ago.

Let me start with Ms. Deans, just for me to understand the organization. I know it's been around a little bit, I've been to a release where I think you honoured a few entrepreneurs. What's the mix in terms of industry? In my view we have four areas: retail, manufacturing, development, software development or apps, and services. Can you give me any concept of what young people are doing in terms of that kind of mix?

[Julia Deans]

Our businesses look like Canadian business and 98% of Canadian business is small business. They're restaurants, retailers, IT companies. They're inventing new ways to do hip replacement surgery; they are doing everything you can imagine. About 10% of our clients are technology-focused companies. The rest are using a lot of technology. Even if you're making toys, you're using technology. But about 10% are tech businesses and the rest look very much like Canadian business.

[Mike Wallace, Conservative, Burlington, ON]

Are they all start-ups? I have an entrepreneur, for example, in my riding I know fairly well. He's in his early thirties, he's doing okay and he's actually in markets around the world and so on. It's not a start-up since he's already been in business for five or six years, but do you still offer services to people who have already started?

[Julia Deans]

A lot of our services are available for free and they're online. Our financing is for companies that are within one year of starting, so either they're one year off starting or within a year. We've also developed a stand-alone mentoring program because we had people who would apply for our financing just to get the mentoring and then repay the loans, which is a very expensive way to give somebody a mentor. Our mentoring is available more broadly than that as well.

[Mike Wallace, Conservative, Burlington, ON]

Okay.

Look, I'll be perfectly frank with you, I have a daughter, she's 23 and she's graduated with a bachelor of commerce degree. She's got a TFSA, an RRSP, and she's got a credit rating she's developed already. She's a smart girl, much smarter than her father, and I'm hoping that someday she will be an entrepreneur on her own. She's working her way trying to figure out...and getting experience in different areas and so on. I think she got some of that from her education at the University of Ottawa, where she went.

Does the organization have a role or responsibility or a vision on financial literacy and entrepreneurship? There are some programs in Canada now, and I know in the United States, where you can get a degree in entrepreneurship. What's your role in terms of getting young people to understand what the opportunity is to be an entrepreneur?

[Julia Deans]

Given that we've been around for almost 20 years I think we have a big role and a responsibility.

Last year we did a series of round tables right across Canada on how to expand youth entrepreneurship. Half of the round tables were young entrepreneurs. We had educators, business, government there to find out what do we all need to do to expand youth entrepreneurship. A lot of it was around confidence; we need our young people to think about how they can be entrepreneurs and to develop those skills. They're going to have to create their own opportunities for the rest of their lives. It was around competence, and the financial literacy skills was obviously a big one. It was around capital and we heard over and over again that programs like ours are desperately needed right across the country. And it was around connections and networks. But for your 23-year-old, my 22-year-old, the message is you need to have financial literacy skills and you need to know that you've got to be able to create your own opportunities.

[Mike Wallace, Conservative, Burlington, ON]

Mr. Lavoie, I have one question for you.

Around here, over the years I've experienced that some of us don't have a clear understanding of what BDC's actual mandate is, which is to make money and have a return to the taxpayer, and that they are not the bank of last resort. And that's based on legislation not on vision. Would you say your membership has the same view of BDC or do you think there is still an issue with education within your own organization, with your members on what the actual role of BDC is?

[Martin Lavoie]

It depends on what kind of financing they're looking for. When a company's experiencing very fast growth.... For example, one of our members in Peterborough experienced a growth of 300% in a year and a half. They got new contracts with large multinationals—they were just elected, actually, with Irving Shipbuilding, as part of the shipbuilding, so for them it's huge. That kind of order makes them explode their sales. They need to finance that growth. When that comes, I think BDC becomes a bit of a last resort. The banks look at what you've done last year to kind of establish how much and what terms. BDC will look at what you want to do.

But maybe for start-ups, they become more of an alternative to a bank. A bank could help a start-up, but it's just that BDC, for example, will make sure that you provide a financial statement every year. They will want to make sure that you reinvest all your money within your business, that you don't go and make other acquisitions. The bank won't ask you to do all these things, right?

BDC's mandate is also to help you succeed. You can't really turn around, take the money and go to the casino, right? If you do that with the bank's money but at the end of the day you pay back your loan, they won't ask you what you've done with it, right?

[Mike Wallace, Conservative, Burlington, ON]

Thank you very much.

[The Chair, Conservative, David Sweet]

Thank you, Mr. Wallace.

I appreciate all the testimony from the witnesses.

Ms. Deans, how do you recruit the mentors?

[Julia Deans]

We recruit them at events. I have staff across the country. We recruit them through our community partners. In the province of Quebec, we partner with the Fondation, and they help us on the mentoring side. Then we also work with organizations like chambers of commerce or big corporates, and they'll help recruit within their ranks.

[The Chair, Conservative, David Sweet]

One more thing, how many hours, let's say per month, would one of these mentors invest in a futurpreneur, in a young person starting their own business?

[Julia Deans]

It's somewhere between three and five hours on average. We find that the real need is between 15 and 18 months. That's when things start to get hard.

[The Chair, Conservative, David Sweet]

I think just from what my colleagues have heard today in regards to Futurpreneur, please pass on our deep gratitude to all of your mentors and an official commendation from the Standing Committee on Industry, Science and Technology for what they invest for absolutely nothing. I understand what you said, that they get a moral reward out of it. But, you know, they're obviously helping build not only the economy, but the character of young people, too, when they teach them how to reasonably take risk and learn all these things. Please pass on our commendation to them.

Thank you very much to all of our witnesses.

We're going to suspend right now, and then go into our business session in camera.

[Raymond Côté, NDP, Beauport—Limoilou, QC]

Mr. Chair, will we vote before the break on the motion to invite Minister Moore to talk about supplementary estimates?

[The Chair, Conservative, David Sweet]

That's what we're going to do next, yes.

We're suspended.

[Proceedings continue in camera]