Industry Committee on June 16th, 2016

[Chandra Arya, Liberal, Nepean, ON]

Victoria, I think the first public event I attended as a member was one by Startup Canada. I remember meeting an entrepreneur who asked me a question, and I also bumped into her again later. She was having problems with financing.

Julia, yesterday I heard very good things from a young entrepreneur about the support he got from your organization.

However, I am quite surprised because I don't know how many of you are actually dealing with manufacturing start-ups.

I'll come to BDC. Manufacturing start-ups are usually capital intensive. They require a huge amount of capital. We heard several witnesses on this. One was from Winnipeg, who was involved with additive manufacturing, in 3D printing for very advanced...dealing with aerospace. He was so critical of BDC not funding his requirements. We also heard from an electrical vehicle manufacturer from Vancouver.

I have just a quick question. How many manufacturing start-ups have you dealt with?

[Avvey Peters]

For hardware-focused, device-enabled, manufacturing-focused start-ups, I would say they are probably 15% to 20% of our client base.

[Chandra Arya, Liberal, Nepean, ON]

Good.

Julia, I know that your limit is around $45,000 to $50,000 maximum per venture, if I'm not wrong. Typically, what percentage of your clients or companies you help are in manufacturing?

[Julia Deans]

There have been close to 200 in the last five years.

You're challenging my math.

[Chandra Arya, Liberal, Nepean, ON]

That's okay.

[Julia Deans]

It's 200 over.... It's about 5% to 10%.

[Chandra Arya, Liberal, Nepean, ON]

The point I'm trying to make is that BDC has an unsecured loan portfolio alone of around $2 billion, and it has hundreds of millions of dollars available in this venture capital group investing in equity. However, this big organization has lent only $23 million in the last year to about 200 manufacturing start-ups, which is tiny compared to the capital-intensive nature of these small manufacturers.

[Julia Deans]

Can I just say that sometimes people are ready to go at a bigger amount and they fund them directly. They wouldn't have to come through our program, so I just don't—

[Chandra Arya, Liberal, Nepean, ON]

So you don't actually have personal experience with manufacturing companies that require, say, $1 million or $2 million, and their experience with BDC.

[Victoria Lennox]

No, they would go directly to their banks or to a bigger.... I didn't want to be unclear, excuse me.

[Chandra Arya, Liberal, Nepean, ON]

Trust me, no bank would like to fund a new manufacturing set-up.

To come back to one of the recommendations Victoria made about attracting and retaining talent, the president and CEO of Invest Ottawa has stated that there is 0% unemployment in the high-tech sector and that if you find any unemployed engineers, there is only one question you need to ask him: what additional skills did you gain during the last five years? He says that the answer will usually be “none” if the person is unemployed.

Where do you think we are lacking? Some people say that the entire ecosystem or entire structure of manufacturing is strained and that companies don't want to invest in taking in people and training them on the job. They want people who are ready and who can come and start being productive from day one. What is your experience in that respect?

Both of you can answer.

[Victoria Lennox]

We're fortunate in Ottawa, but not every community is so fortunate. Especially in Atlantic Canada and the north to a certain extent, the kids are just not staying, so that's depleting their economies, which means that we can't maximize opportunities to grow our country.

The area that I want to see has already been mentioned. It's sales and marketing, which is absolutely critical if we're—

[Chandra Arya, Liberal, Nepean, ON]

Thanks.

I have very limited time, but Avvey and Julia, would you pitch in on the talent side as well?

[Avvey Peters]

I think your assessment is absolutely right. The talent market is really tight in the technology industry all across the country, not just here in Ottawa. I think this is where we need to start creating more of that workforce-ready talent, by working with the universities and colleges to make sure they are producing the kinds of skills that companies need.

Also, we need to import that talent from other parts of the world.

[Chandra Arya, Liberal, Nepean, ON]

Julia.

[Julia Deans]

The only thing I would add is that there's also an issue with people recognizing when they need talent. We're talking of people who know, but not all of them do, and we have to help them recognize when they need talent, when they're ready to take it to the next level.

[Chandra Arya, Liberal, Nepean, ON]

Yes.

[The Chair, Liberal, Dan Ruimy]

Thank you very much.

Mr. Lobb, for five minutes.

[Ben Lobb, Conservative, Huron—Bruce, ON]

To Avvey, a number of years ago I worked at Desire2Learn. That Lang Tannery building was just a jiu-jitsu studio when I was working in Kitchener, so it's come a long way in eight years.

This study is mainly about innovation and manufacturing. I know that you know that, but you did mention that 15% or 20% of the people you deal with are in some form of manufacturing. The one example I'm thinking about that came through your Communitech office was a robotic arm. Do you know about that one, where you can control things on your arm?

[Avvey Peters]

Yes, the Myo armband by Thalmic Labs.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I wanted you to talk about an example like that and how a concept like that can work its way through and, where a government, for example, could help that individual either speed that up into commercialization or provide the person with needed assistance.

[Avvey Peters]

Thalmic Labs is a great example of that kind of wearable device, or smart manufacturing, or advanced manufacturing type of start-up. They came through a program at the University of Waterloo called Velocity, which is focused on helping students and new grads start their companies. Velocity has a couple of different streams of programming. They have a set of companies that are software and apps development focused, but a growing number of companies that they're seeing now are hardware and device-enabled companies like Thalmic—but Thalmic is one of the earliest.

I know they've grown from a founding team of three or four new grads. There are about 80 or 90 people now producing these devices in Waterloo region. The big challenge they face, which goes to some of the discussion we've already had, has really been around getting that technical talent, that highly specialized device-enabled kind of talent.

One of the interesting things that we're seeing, though, among some of those smaller hardware companies is that they're starting to band together. There's a project at the very early stages that was started by Kurtis McBride, the CEO of Miovision Technologies. They make traffic monitoring cameras and gear for automobile intersections. They're going to start a version of the Lang Tannery for hardware-based device-enabled companies to take advantage of the notion of co-location, the coaching, and the putting of resources right next to the companies. It gives them a place where they can manufacture stuff, where they don't have to bear the cost of their own production. They can share production and testing facilities.

[Ben Lobb, Conservative, Huron—Bruce, ON]

Not to be critical of the universities, but my observation is that the University of Waterloo is probably the best, or one of the best universities, and everything happening there wouldn't happen without them—which is not to knock Wilfrid Laurier and Conestoga College because they're certainly doing their part as well. But my point is that those three institutions can't produce enough people to fuel that region.

Again, I don't want you to feel as if you're criticizing other universities, but do you feel as though they're producing enough graduates in those needed fields at this point in time, to keep things moving so that we don't have to recruit people from San Francisco, Palo Alto, and all of those areas?

[Avvey Peters]

I think by and large our client companies would say that they're not producing enough. The quality of the grads they do produce is certainly very good, but to be a systems design engineering student at the University of Waterloo, you need to have an entrance average of well over 93% or 94%. For those students who have 90% to 93%, there's another great set of talent that perhaps we could be trying to train to join some of these companies. There simply isn't enough.

[Ben Lobb, Conservative, Huron—Bruce, ON]

I agree. Unfortunately, my 73% average never cut it for systems design engineers. Maybe in another lifetime it will work out.

That's probably enough for today. Thank you for the answers.

The only thing I will close with is the question of access to capital. We've talked a lot about BDC, and I think it's almost a shame that we've written off the big banks for providing capital to business. They love to loan money to people who want to buy a house in a subdivision, but they really don't want to loan money to business unless you've already made it. I can speak from experience on that one.

With regard to BDC, I think that in the business community they feel like it's the lender of last resort, that if all has gone wrong you go to BDC, because there are not too many options then. If we have things like Communitech working, and the universities working, it doesn't work out so well if nobody can get access to significant capital. I think that's something else to consider.