Industry Committee on June 16th, 2016

[The Chair, Liberal, Dan Ruimy]

Our apologies, everybody. We had votes in the House. We're always housecleaning.

Welcome to the 21st meeting of the Standing Committee on Industry, Science and Technology.

Today we have with us, from Futurpreneur Canada, Ms. Julia Deans, chief executive officer; from Startup Canada, Ms. Victoria Lennox, co-founder and chief executive officer; and finally, from Communitech, Ms. Avvey Peters, vice-president, external relations.

We're going to start. Normally we would have about 10 minutes per witness, but because we're a little behind, maybe you could keep it towards eight minutes. That would be great.

We're going to start with Ms. Deans.

[Julia Deans, Chief Executive Officer, Futurpreneur Canada]

Thank you very much, Mr. Chair, and all of you.

My name is Julia Deans. We were created in 1996 as the Canadian Youth Business Foundation, now Futurpreneur Canada. We're the only national non-profit organization that does the heavy lifting to give 18- to 39-year-olds the business coaching, collateral-free financing, mentors, networks, and the other key resources they need to launch and sustain successful businesses. We have a strong record of advancing economic growth. We've invested in 9,000 young entrepreneurs, who've created 36,000 jobs, over $224 million in tax revenue, and they have a better-than-average business survival rate. Last year alone, we helped launch over 1,000 new businesses, and demand for our offering continues to grow.

We're a leader in advancing youth entrepreneurship, and we help young Canadian entrepreneurs connect with the world through the G20 Young Entrepreneurs' Alliance, Global Entrepreneurship Week, and Youth Business International.

We have regional hubs in Toronto, Vancouver, and Montreal, and representatives in 12 other locations, and we work with 350 community partners across Canada. The federal government has been a partner of ours since 2002, and the federal funding we receive helps us leverage a great deal of other government and corporate funding.

We have access to more than 9,000 young entrepreneurs, and our goal is to help them grow through increased trade and innovation. We support businesses in virtually every sector, and I'm really thrilled to have a chance to discuss youth entrepreneurship in manufacturing today.

As you know, SMEs employ more than 60% of the people working in manufacturing, and in many smaller communities, from Newfoundland to Quebec, it's responsible for over 50% of total employment.

We're proud to have supported 182 young entrepreneurs who launched manufacturing businesses in the last five years, including 46 last year. They're making everything from machinery and equipment to food, apparel, fabricated metal, electronics, and complicated medical technologies. It's people like Erin and Joshua Bradshaw of Vital Manufacturing in Surrey, BC. They provide turnkey, innovative manufacturing solutions, and every product they make is designed and manufactured in Canada. They also source most of their components here. We also help Futurpreneurs Alexis Martel and Julien Couture, owners of Lunetterie Générale. They produce wooden glasses entirely in Asbestos, Quebec. Manufacturing is a very capital-intensive business. They needed over $1 million to launch, and we were the first to finance them. They're now distributing in 30 locations and will create seven jobs this year in Asbestos.

We loan young entrepreneurs up to $15,000, and, based on our record, BDC piggybacks another $30,000, so a young entrepreneur can get $45,000 without collateral. We also match them with a network of more than 2,700 volunteer networks across the country. This makes a big difference. Our young entrepreneurs become a preferred risk for banks and other funders. They have a better-than-average five-year survival rate, and 80% to 90% replay their loans.

Based on our experience in cross-country consultations, we see three opportunities for the government to champion and expand youth entrepreneurship in manufacturing. It won't surprise you then that our first recommendation is to support Futurpreneur Canada's proven start-up program with predictable long-term funding. Federal funding is one of the legs in our three-legged stool. With it we can leverage tremendous contributions from the corporate sector as well as other governments. Our new five-year strategy is to continue helping young people to launch, but to add more growth promotion and support from both us and other organizations that can help them.

Our second recommendation is to promote manufacturing entrepreneurship as a viable career path. Does this work? We recently targeted young entrepreneurs going into food processing, which has the second-highest sales of any manufacturing sector in Canada. Our three-year target was to help 13 new businesses launch. In just two years we've helped 26 young entrepreneurs launch food processing businesses. We did a targeted video and social media campaign featuring young entrepreneurs, like the Quebec-based founders of Bec Cola. They make organic maple syrup soda. They're already in markets, including Ontario and European countries, and they're now going to go into the U.S. and Japan. Two weeks ago they won our Beyond Borders Award. Young people are thinking about entrepreneurship more than ever, and we absolutely need to encourage them to bring their energy and ideas to manufacturing.

Manufacturing has the highest percentage of innovating firms, but it also has a lot of aging owners. We have to encourage young people to take over their businesses and make them better. What gives me hope is people like Alex Drysdale, of Stony Mountain, Manitoba. His company, Crik Nutrition, manufactures a cricket-based protein powder produced with a fraction of the space and emissions of animal-based blends. He's part of our spin master innovation fund that provides financing, mentoring, and networking with business leaders from across the country. Last year he was named one of the world's hottest 20 start-ups by CNBC.

Manufacturing accounts for 61% of our exports, and finding new markets is critical for an emerging manufacturer. This is why our third recommendation is that the federal government help young entrepreneurs grow their businesses within Canada and abroad. Promoting avenues to sell to government is a big example, and another is to support international market awareness and access.

If including young entrepreneurs in trade missions proves tricky, then other options exist. For example, Global Affairs offers information and strategic advice to the Canadian delegation we bring to the G20 Young Entrepreneurs' Alliance Summit each year. This year, the 35-member delegation heading to China includes manufacturing entrepreneurs like Adam Camenzuli from Bowmanville. His company, KARIBU Solar Power, designs, manufactures, and distributes a solar pay-as-you-go business in a box kit for Tanzania to make energy available for the price of kerosene.

If we want to create jobs, grow our economy, and strengthen our communities, we must continue to invest in youth entrepreneurship. We must help young people see manufacturing as a path of great promise, and we must help them grow and succeed once they choose that path.

We're pleased that we have partnered with the Government of Canada for some time, and we look forward to working together to help more young people launch and grow businesses across the country, both in manufacturing and across all sectors.

Thank you very much.

[The Chair, Liberal, Dan Ruimy]

That was was really under time.

[Julia Deans]

How long was it?

[The Chair, Liberal, Dan Ruimy]

Six minutes and 30 seconds. Very good. Thank you very much.

We are going to move to one of my favourites, Startup Canada, and Ms. Lennox.

[Victoria Lennox, Co-Founder and Chief Executive Officer, Startup Canada]

Goodness, that's a lot of pressure.

I'd like to thank the members of the standing committee for inviting me to appear as a witness for you today on recommendations for Canada's small, medium, and large manufacturers. My name is Victoria Lennox. I'm the co-founder and CEO of Startup Canada, a leading national social enterprise connecting and supporting entrepreneurs across Canada.

Our flagship program, Startup Communities, connects entrepreneurs to their local support partners and to education, mentorship, training, and finance opportunities, and provides advocacy nationally and internationally for Canada's entrepreneurship community. We have 25 Startup communities across Canada and 150,000 members across the country, a number that continues to scale as we expand this program to an additional 25 communities this year.

Of our members, 44% are start-up companies, 27% are growing companies, 15% are mature companies, and 13% are in the pre-incorporation stage. Fifty per cent of these companies sell globally, and 75% are optimistic about their yearly growth in the next three years. As we know, small businesses account for 93% of all manufacturing companies and 17,000 of those small businesses have just one to four employees. Generally, the Canadian business ecosystem is not receptive to risk. It's slow to innovate, and study after study shows that we lag behind competitors in many respects.

The manufacturing sector is no exception and is perhaps one of the greatest examples of this. According to KPMG's 2015 global outlook report, Canada trails the global average by 28% when it comes to the adoption of new manufacturing technologies, and 31% when it comes to R and D spending. The report calls Canadian manufacturers doers rather innovators due to our risk-averse culture.

Too often, Canadian economic policy levers tend to favour already-established companies while dismissing the actions of national leadership needed to grow young companies and support them to reach stages of high growth. Every large manufacturer was once a start-up company, and we need to take action to support manufacturers at every stage of growth. Manufacturers must innovate to succeed, and we must charge the national leadership with encouraging this innovation. The grassroots community is there. The government has to play a leadership role up front, and I believe that this consultation is an excellent step.

I therefore wish to put forward a few recommendations for discussion here today. The first one has to do with procurement. Procurement is one of the most powerful policy levers that the Government of Canada has in order to support and scale early-stage companies to become high-growth companies, particularly in the manufacturing sector. From unbundling large RFPs, to encouraging supplier diversity to include indigenous entrepreneurs and women, to investing in diversity through our procurement strategies by ensuring that large companies that receive bids have diverse boards and that they're investing in our small business community, and by playing with procurement sandboxes across the country, we have the opportunity to create a procurement framework across Canada that supports Canada's entrepreneurs to go global and to innovate.

The second recommendation that we have is to have a clear focus on attracting and retaining talent. We must ensure, as we bring in our entrepreneurs and students across Canada, that we expedite their permanent residency and that we aggressively review the temporary foreign worker program and express entry so that we can bring executives who have the experience in growing manufacturing sector companies in to actually do so.

Allen Lau, co-founder of Wattpad in Toronto, summarized it well on stage at a panel at Startup Canada Day on the Hill. He said that six to eight months is a non-starter in a competitive environment. People have 10 job offers per day, and two weeks is just too long. So we must really look at how we can support attracting and retaining talent, particularly for high-growth entrepreneurs in the manufacturing sector.

The third recommendation has to do with education. We encourage the Government of Canada to work with the provinces to update education policies to align with the rapidly changing demands of the 21st century workforce. We need support in the development of STEM amongst Canadian students, but also business skills including financial management and customer-facing skills. These are essential to the competitive viability of any company. While education is, of course, a provincially mandated policy, Startup Canada encourages the federal government to work in collaboration with the provinces and territories to educate students, teachers, and parents on the skills and their necessity in the workplace.

Of course, I wouldn't be an entrepreneur if I weren't to speak about funding. We need to leverage innovative financing models to increase investment in small business manufacturing. I note that the B.C. angel tax credit would be something to consider across Canada .

Lastly, we need to ensure that our entrepreneurs are thinking globally and growing globally. We need to incentivize small manufacturers to access international markets by connecting them to support and training, and training in their communities. In 2015, Startup Canada partnered with EDC to launch the Adam Chowaniec Memorial Fund for Global Entrepreneurship, which invests in high-impact initiatives that advance the prospects of globally oriented companies. In 2016 we launched the global podium initiative, a strategy to propel Canadian entrepreneurs and start-ups onto the global stage. We invite the Government of Canada to join these initiatives.

As the Government of Canada looks to improve the conditions for Canada's manufacturers to succeed and create jobs in communities across Canada, it must look at the strategies that will support start-ups and small business manufacturers not only to start up but to scale up and become job-creating anchors in Canada. Too often Canada's economic policy levers tend to favour already-established companies while dismissing the actions in national leadership needed to grow young companies and support them to reach high stages of growth. Every large manufacturer was once a start-up company, and we need to take the actions to support manufacturers at every stage of growth.

Thank you.

[The Chair, Liberal, Dan Ruimy]

You guys are super good. That was about six minutes again. Thank you very much.

Finally, we are going to go to Communitech, with Ms. Peters.

[Avvey Peters, Vice-President, External Relations, Communitech]

Good afternoon members of the committee. Thank you all for the invitation to appear before you today.

My name is Avvey Peters. I'm the vice-president of external relations for Communitech, located in the Waterloo region, Ontario.

We're an innovation hub with a mandate to help technology companies start, grow, and succeed. We serve more than 1,100 client companies in southwestern Ontario. We run an 80,000 square foot innovation centre, which is where we deliver programs for technology companies. We work with companies at every stage of growth and development, including early-stage start-ups, small and mid-sized companies, and large enterprises.

While I lead the external relations team at Communitech, I also have the privilege of leading a national effort to connect Waterloo region's tech ecosystem with 26 others across the country. It's called the Canadian Digital Media Network and it was founded thanks to an investment from the Government of Canada in 2009 when we launched it as a federal centre of excellence for commercialization and research.

Our network ties together innovation hubs from Whitehorse to Vancouver to St. John's. There are 27 innovation organizations. They're all dedicated to supporting the growth and success of Canada's technology companies.

Because the committee is focused today on Canada's manufacturing sector, I want to share some examples not only of how we see the manufacturing sector being disrupted today, but also how we're seeing technology firms helping large manufacturing enterprises, in particular, to navigate those forces of disruption.

We all know that manufacturing is critical to the health and growth of Canada's economy. We also know that the life expectancy of big companies is dropping quickly as ever more disruptive technologies and processes emerge. In the 1920s, a company on the S&P 500 Index could expect to be in business for about 65 years. Today, that number is closer to 15 years. I would suggest that manufacturing companies shouldn't worry about being disrupted in the near future; the fact is that many are already being disrupted and may not know it.

Students and new graduates at the University of Waterloo's Velocity incubator are creating more and more hardware-focused companies every year. They're pushing the edges of material science, 3D printing, and business model development on a daily basis. However, therein lies the opportunity, at that intersection between technology and manufacturing. Our job is to help firms leverage that opportunity and manage rapid change.

At Communitech we've spent the last three years trying to understand the needs and challenges of large enterprises and helping those large enterprises connect with and benefit from tech firms and the innovation ecosystem. We call this our corporate innovation model. We use it to lead large enterprises through the uncomfortable process of getting comfortable with risk.

Take General Motors of Canada as an example. GM is one of the oldest car manufacturers on earth. It was founded in 1908 when there were fewer than 8,000 cars in the United States. A historic company like GM isn't always known for being forward looking. However, GM Canada understands that for it to thrive in a fast-paced world powered by technology, disrupting its own business model before someone else does is the best path to success.

Last year, GM joined Communitech's corporate innovation program and opened its 2908 lab at Communitech lab. Communitech is working with GM Canada to support its ability to hire top talent, refresh its employer brand, strengthen the company's innovation culture, and test new products, services, and business models. The 2908 lab is a place for GM to envision the future of its business, and in 1,000 years from it's 1908 inception they plan to be solving problems in a world that's radically different from the one we have today.

GM Canada's CEO calls his lab the place to knock down old approaches, experiment, find new partners, and boldly go where future mobility is headed. Only last week, GM announced its intention to create 750 new jobs in Oshawa to help chart its future direction. The GM Canada CEO, Stephen Carlisle, calls the lab a big part of that overall puzzle that they're trying to solve.

What are the lab's priorities?

They're exploring and experimenting with advanced smart-phone applications, autonomous driving technology, and new sharing services and approaches. They're starting to think of themselves as a personal transportation company. They're using a multi-modal approach that deploys other modes of transportation in addition to the automobile, like e-bikes, public transit, and ride-sharing that keep people moving efficiently through the world.

GM is one of 12 large enterprises that Communitech supports through its corporate innovation model. While the model is relatively new—just three years old—here's what we've learnt.

Large companies and the people who run them aren't typically rewarded for taking risks. They need a little help to do that. There are simple and productive ways that big companies can engage with smaller and more agile firms, things like innovation contests, strategic partnerships, and problem-solving sessions convened by a neutral, trusted partner. Perhaps most importantly, there's a real value exchange at play in this model. Start-ups and mid-sized technology companies provide value to large firms like GM through new technology, talented team members, and a culture of experimentation and risk. Large enterprises like GM provide understanding of and access to global markets, which many small companies really struggle to gain. These partnerships can help to accelerate small Canadian companies on their path to export globally.

The question I will leave you with is this: what can government do to facilitate a better connection between Canada's manufacturing firms and the technology sector? I have three suggestions for you.

First, recognize that there is a promising model of corporate innovation that's already being explored by Canadian manufacturing companies, and I would invite each of you and your colleagues to come to tour the Communitech hub, talk with the folks at the GM lab and the other labs, and learn more about this corporate innovation model.

Second, I would urge you to support the ecosystem, as it helps manufacturing companies that are in transition. Organizations like ours, Canada's existing incubators and accelerators, are all working to convene and encourage interactions between start-ups, SMEs, and some larger firms. These interactions lead to really important partnerships. You can leverage the existing assets, like our national network, to replicate and deepen corporate innovation activities in regions across the country. We've already begun to share this model with our colleagues across the network.

Finally, I would urge you to lead by example. Government, by its nature, is a large enterprise, and the Government of Canada can engage itself in corporate innovation and become a case example for other large companies that are seeking to be more innovative. As Victoria mentioned, procurement's a powerful lever with which to do that.

I thank you for the invitation to come to speak with you this afternoon. I look forward to the discussion.

[The Chair, Liberal, Dan Ruimy]

Thank you very much. Again, well done in seven minutes. I'm impressed.

We're going to jump right into it with Mr. Longfield. You have seven minutes.

[Lloyd Longfield, Liberal, Guelph, ON]

Thanks to you folks for coming. I see a lot of the future of Canada sitting in front of us here.

It's great to see Avvey on a different side of the table from me. We've worked together on the innovation network in Ontario a lot. I want to just start with that, if I could.

You mentioned that you're tying in with 26 digital centres across Canada, and I wonder whether that model could be used in leveraging other sectors like manufacturing. Is there any kind of tie you've seen between what you're doing digitally and what could be done to support manufacturing across Canada?

[Avvey Peters]

Absolutely. I think networks are powerful things. Canada is a large country but also a small country in a sense. We're very spread out, and so each of our organizations follows the network model. We are in regional ecosystems from Vancouver to St. John's. In the case of our 27 centres on our network, most are focused on supporting the start-up and small to mid-sized enterprises in their regions.

They're also really powerful catalysts for entrepreneurial activity, not just in the technology sector but also as the folks who are building great partnerships. Many of our partners are starting to explore this kind of corporate innovation model where they can connect with manufacturing firms. I know that Venn innovation in Moncton is one example. Invest Ottawa is another.

[Lloyd Longfield, Liberal, Guelph, ON]

I will ask you—not right now, but you could give it to the clerk—to provide a high level of where you could see some centres. If we were to tie a network together, where could we start?

[Avvey Peters]

Yes.

[Lloyd Longfield, Liberal, Guelph, ON]

Over to Futurpreneurs, I'm almost talking to you guys at the same time because you are already working nationally in a network that's very effective. One part of our federal budget, page 110, that we've been referring to a lot in this manufacturing study talks about a more innovative Canada. It summarizes in tabular form the innovation agenda that we're trying to put forward or to put some action around.

In looking at generate creative and entrepreneurial citizens, which both of you are involved in doing, could each one of you comment on the use of mentors and people who might have exited, or are in the process of exiting, the workforce? Is there a role we can play through Employment and Social Development Canada? I don't want you to tell us how to do the government business, but is there a role that government could play in expanding your use of mentorship?

[Julia Deans]

I am happy to kick it off and then turn it over.

We know that businesses that are mentored survive at twice the rate of businesses that are not mentored. Mentoring is absolutely incredible. We make it a core part of our offering. You don't get your loan until you have met with your mentor and kicked that off. You have a mentor for two years, because it is often in the second year that things start to go south. Our mentors are amazing. I would have any one of them as my own mentor.

We know it is very powerful. I think that, for sure, getting the message out to large employers with networks that this is an opportunity and that everybody should be stepping forward to mentor, whether it is with us or through other organizations, is something that any responsible employer can do.

For us, about 70% of our mentors are entrepreneurs themselves, but there are often people who need skills that anybody would have. We have increasingly entrepreneurial organizations anyway. I think mentoring is probably the key to life in lots of things, but particularly for young entrepreneurs.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.

Victoria, how do you see mentors?

[Victoria Lennox]

Just to build on that, I absolutely agree with everything Julia is saying.

Mentors are the glue of Canada's entrepreneurship community. They move fluidly between organizations and start-ups. They are investors. They give back. One of the mantras of the start-up community is “Give, give, get, give”. You pay it forward, and you support others with no expectation of any return. That benefits you in the long run. That is part of the mantra of the start-up community, as well as at I See You, Communitech, and everywhere else.

We also see a lot of entrepreneurs-in-residence. While entrepreneurs-in-residence are actually entrepreneurs, it can be very transformative. We are seeing the rise of coaches across Canada. Just as you would go to a personal trainer, coaches help you get your business right. We are seeing a lot of that.

In terms of the exciting point around the creative economy, we loved that at Startup Canada. We jumped up and down when we saw that announcement yesterday, because it is about culture and it brings in a conversation around social impact. A lot of the new manufacturing companies are starting to create a social impact, starting to engage those....

We have leveraged specialist mentors through our programs. We do the start-up finance boot camps across Canada, and 4,000 entrepreneurs go through them every year. Our mentors are certified professional accountants. They are not entrepreneurs, because we are focusing on finance there.

Mentorship is critical, especially if we think about women entrepreneurs and engaging those communities where we want to create increased inclusivity.

[Lloyd Longfield, Liberal, Guelph, ON]

Super.

We have limited time. I just have a minute and 20 seconds left.

The use of SMEs to help, not only to mentor but to provide business opportunities.... On General Motors and large companies, I hear what you are saying there, Avvey, but in trying to get SMEs aware of the innovation network and using the network have you seen any success that could help our report, or any challenges that we should be looking at?

[Julia Deans]

I think you have an opportunity to stitch things together. I suspect we would all agree that the stitching is a bit loose right now, but the opportunity is there, and we all have something to offer in doing that.

[Lloyd Longfield, Liberal, Guelph, ON]

You could help us stitch. You have the needle.

[Julia Deans]

Exactly. You have the thread.

[Victoria Lennox]

It is stitching, and it is the microphone. It is communicating everything that is available to the entrepreneurs so they can leverage it.

[Lloyd Longfield, Liberal, Guelph, ON]

For the last 30 seconds, it is over to you, Avvey.

[Avvey Peters]

Mentors save time. They save me from making the mistakes that somebody else could avoid. They are hugely important. The small and mid-sized enterprise companies do struggle a little, because their heads are down trying to build and scale their business, but increasingly I see the ecosystem starting to build supports to help those companies scale.

[Lloyd Longfield, Liberal, Guelph, ON]

Thank you.