Evidence of meeting #29 for International Trade in the 41st Parliament, 2nd Session. (The original version is on Parliament’s site, as are the minutes.) The winning word was companies.
A recording is available from Parliament.
NDP
Marc-André Morin NDP Laurentides—Labelle, QC
I am going to try to summarize.
Mr. Gupta, you said that small businesses have trouble getting financing. My impression is that big business has access to finance markets and international financing, where huge amounts of capital move around. Businesses of that size can protect themselves from currency fluctuations and longer-term risk.
In your view, how can we make up for that disadvantage so that smaller businesses can achieve some success too?
President and Chief Executive Officer, Information Technology Association of Canada
That's a very good question. Let me frame the problem to exactly where we see the problem in our sector.
If you take a company at a start-up level, what I call the incubation level, there is really no funding problem. Friends and family can fund them to get the product to pre-commercialization or maybe up to the first customer, so there is no funding gap there.
Once the company has the product on the market and it now needs to scale, meaning it needs larger financing, until they are cashflow positive no Canadian bank will write a cheque. They cannot get any funding, unless they have a foreign business supported by EDC as a guarantee. The whole funding model in Canada suffers there. The VCs in the Canadian market are in complete chaos. I think the recent announcement around the $400 million that came from the government is very good news and is creating a fund of funds, but it still hasn't been doled out, and that's where the gap is. These companies are trying to scale while they're cashflow negative, and nobody in Canada gives them money. There's no family money anymore, and they need more money.
Conservative
Conservative
Devinder Shory Conservative Calgary Northeast, AB
As usual, Mr. Chair, you will cut me off quickly.
Thanks to the witnesses.
Mr. Gupta, your sector is dominated by small businesses, and you talked about funding issues, but are there any other barriers that would prevent small and medium businesses from taking full advantage of new and emerging markets for Canadian goods?
How do you feel about a new approach in economic diplomacy and the GMAP possibly removing some of the barriers for those companies to establish themselves in those markets?
I'd also like you to comment on whether the GMAP complements the work you already do with your member companies.
President and Chief Executive Officer, Information Technology Association of Canada
Those are long questions, and I'll try to cover them all off very quickly.
The GMAP, the document we have seen, I will call the framework. It has the right framework with the elements that we from the ICT sector support. Now the executional side becomes very important. Do we have the resources on the ground? We have trade commissioners in multiple countries. I think government can benchmark which ones are working better, and create some best practices. I would not say how we should use one versus the other, but I think it's something the government can do: find out which ones are working well, and model some of the other ones on them. Some are very successful. I think the whole trade commissioner side needs to be addressed.
On the financing side, I think beyond what the government has done, it needs to encourage or create policies whereby investment will continue to happen post-incubation. I don't think there is any policy in place today that encourages further investment for people who take that risk. Nobody's putting money into the companies at that level, when they're cashflow negative. They're truly struggling. Maybe have something where foreign direct investment could also come in.
From the ICT sector, I think those are the same three that always come up, and it's been consistent over the last few years.
Conservative
The Chair Conservative Rob Merrifield
Thank you very much.
Thank you, Professor Head, for taking the time with us from Vancouver.
Professor, Sauder School of Business, Strategy and Business Economics Division, HSBC Professorship of Asian Commerce, University of British Columbia, As an Individual
It's been my pleasure.
Conservative
The Chair Conservative Rob Merrifield
Thank you, Mr. Gupta and Dr. Wright, for spending this time with the committee.
That takes us to the end of our meeting, and with that we will adjourn.