Industry Committee on May 3rd, 2016

[Majid Jowhari, Liberal, Richmond Hill, ON]

In this case, the concentration of entrepreneurs in that riding was less than in the riding you moved it to.

[Paul Buron]

Yes.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay.

I still have 30 seconds...? I'll keep that and bank it.

[The Chair, Liberal, Dan Ruimy]

No banking allowed.

[Majid Jowhari, Liberal, Richmond Hill, ON]

Okay. I'll give you 30 seconds then.

[The Chair, Liberal, Dan Ruimy]

Can I be generous and give them to Mr. Masse?

[Majid Jowhari, Liberal, Richmond Hill, ON]

Absolutely.

[The Chair, Liberal, Dan Ruimy]

Mr. Masse, you have two minutes and 45 seconds.

[Brian Masse, NDP, Windsor West, ON]

Thank you, Mr. Chair.

Thank you to my colleagues.

I am interested in following up with BDC.

With regard to your clients that make it through the development stage and then work toward exporting—which is good, we were mostly built on exporting—do we have any statistics in terms of what happens to them as they grow larger? We know what happens to the failures. They just fail, or maybe they turn into something else if they were experienced.

Do they remain Canadian? Are they bought out? Are they sold out, and to whom? What's the net benefit for Canada and for Canadians for fronting the risk? I understand there's a give and take in this. I'm interested in that because I do get asked that from time to time.

[Michael Denham]

I can't do it justice now, but there is some research we've done on this topic on mid-sized firms, which are companies that are in the 100 to 499 employee zone. What has happened over time, especially in manufacturing, is a number of Canadian companies in that size segment have shrunk dramatically. The research lays out some of the root causes and reasons for that.

It's an issue for the country. Disproportionately, innovation, R and D, exports, etc., come from companies that size. It's something we're focused on, and we can go through the number of initiatives we've put in place to help reverse that trend and help companies not just scale up, but scale up and stay Canadian.

[Brian Masse, NDP, Windsor West, ON]

Is that something you'll be able to provide by the end of our study, which is going to carry over to the fall? It would be critical. What we're looking for are answers for these types of questions and how we prevent that from happening. Maybe there's some of it you can't prevent, and maybe there's some of it we could, but from my perspective that would be interesting. One of the reasons we're committed to the study is to solve those problems. It might be a different role of assistance for BDC. It might be looking at those suggestions internally, but also it might be external to some of the other supports we have out there that aren't reaching their full potential through the BDC clients.

[Michael Denham]

We're happy to share the research. We just updated the data, and once that's complete we'll share that with the committee as well.

[Brian Masse, NDP, Windsor West, ON]

That's terrific. Thank you for that.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

[Brian Masse, NDP, Windsor West, ON]

I'm done...?

[The Chair, Liberal, Dan Ruimy]

You're done.

[Brian Masse, NDP, Windsor West, ON]

Thank you to my colleagues because we wouldn't have had that chance.

[The Chair, Liberal, Dan Ruimy]

Where we stand is that we have enough time for a round of seven minutes each with a couple of minutes left to spare.

Mr. Baylis, you have seven minutes.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

Thank you.

My first question is for BDC. Your mandate is to fill out and complete services from the chartered banks and not to compete with them. In terms of the new economy.... Let's say I show up as a manufacturer, I understand that you'll take a bigger risk, but to lend money to a manufacturer, I don't want to say it's easy, but it's more standard. What machine are you buying? What is this and that? Maybe they're a little more shaky and the banks aren't going to take them, so you take them.

What are you looking at for the new economy? There's such a challenge. A guy shows up, and he has the new Facebook, and we say, “Well, forget about it. There's nothing here.” Are you doing anything along that line to even attempt to deal with it, and if so, what is it?

[Michael Denham]

You look at start-ups and knowledge-based industries that don't have the assets for security. You look at the StatsCan data I was citing before. They have a big issue around loans not getting approved, so you're focused on the right issue.

We have some lending algorithms that allow us to lend to these companies in a way that doesn't require an asset as a security. We could lend based on projected cash flows. We could lend based on the size of the loan, or on the personal credit rating of the individual involved.

We recognize that's a key segment underserved by the commercial banks, and we need to play a role to make sure these folks get access. We have different lending tools in place to allow us to do that.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

How are you doing with that so far? Those have to be shaky, risky things. First of all, what do you do? Do you assess the entrepreneur? What are you doing there?

[Paul Buron]

As Michael just said, we gather some data, we assess the risk, and we do lend money. We follow these smaller loans on a separate portfolio. We follow the portfolio to make sure we meet our objectives.

So far this is more risky, and we know it. The results are according to our expectations.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

I would like to have some drill-down on how it is going so far for these loans without any capital assets to protect them. It would lead into my next question going to Jérôme, which is VC money, because I guess you would tell them, “Go see Jérôme.” Is that right? “We're not going to lend you the money, but he'll give it to you.”

You mentioned that it's the biggest fund in Canada, the BDC fund.

[Jérôme Nycz]

We've the most active VC investment in Canada. We finance directly companies and technology firms through three internal funds: one in IT, one in life sciences, and one in industry, energy, and clean tech. We have three internal teams doing direct investment.

We're also an investor in funds. We support 56 private sector independent funds throughout Canada from coast to coast. Some of them are smaller funds like Version One in B.C., and some of them are a bit larger funds like Georgian Partners in which the ambition is to have a $250-million to $300-million fund. It's a broad spectrum investment indirectly.

We also support the smaller initiatives through our contributions in the accelerator programs. We support 13 accelerators across Canada. We support them in being able to help them set up a direct accelerator, but also the graduate of the accelerator will provide a $150,000 convertible note for an IT company, $250,000 for energy 6r clean tech, and $500,000 for life science companies.

We cover the broad spectrum of the offering in several sectors either directly or indirectly through the fund. We try to address—I know it was mentioned before—some emerging sectors like ag tech, and clean tech, and so forth.

[Frank Baylis, Liberal, Pierrefonds—Dollard, QC]

In that light, as well, could I see statistics, specifically on your three core areas? You said you have med tech, IT, and clean tech. You have a large pool of money. What portion is targeted for those?