International Trade Committee on Oct. 9th, 2024

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

Thank you, Madam Chair.

Witnesses, whoever would like to answer, please go ahead. Don't be shy, raise your hand. Feel free.

At the last meeting, witnesses suggested that the government introduce a tax incentive to encourage larger companies to buy from companies with women managers or owners. That's how it's done in the United States, based on a quota. It could be complicated to implement, but it is not impossible. Do you think that's a good idea, a good way to help women entrepreneurs?

[The Chair, Liberal, Judy Sgro]

Ms Campbell raised her hand.

[Karen Campbell]

Okay, I'll take a try on this one.

Sure, I think tax incentives are a great idea. I think that anything that can be done to support women-led businesses and businesses led by gender-diverse people, particularly those from equity-deserving groups, to be able to secure government contracts would be very beneficial, as well as anything that can be done in looking at procurement policies, and also some kind of program that can support those businesses to be ready to bid on those types of contracts.

In the work that we were able to do with the investment readiness program funding through ESDC, we were supporting women and gender-diverse entrepreneurs to be ready to secure investments through the social finance fund. Something similar around procurement would be quite strong, I think.

That's sort of a sideways way of answering your question. It's not exactly about tax incentives, but I think that's also a way forward.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

How much time do I have left, Madam Chair?

[The Chair, Liberal, Judy Sgro]

You have 28 seconds.

[Simon-Pierre Savard-Tremblay, Bloc, Saint-Hyacinthe—Bagot, QC]

I don't really have time for another question. Is there anyone else who would like to add anything?

[The Chair, Liberal, Judy Sgro]

Ms. Reimer-Epp, do you want to give a brief answer to that?

[Heidi Reimer-Epp]

In brief, for any of our customers who have procurement requirements that allocate a certain percentage to women-owned and diversity-owned businesses, we have benefited from those types of programs. That has been to our advantage.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Cannings, you have two and a half minutes.

[Richard Cannings, NDP, South Okanagan—West Kootenay, BC]

Thank you.

I'm going to turn to Ms. Hamidu.

I'm going to continue with this theme that women in general are working in smaller companies, are self-employed and scale up at different times, etc. You mentioned co-operatives and collectives as models of enterprises that women more often use. I just met with a group that represents co-operatives in Canada. They brought up some of the issues that they have, because that's a model of business that I guess is uncommon enough in Canada. Because of how they're funded, co-operatives don't fit into a lot of the government's attempts at promoting enterprise and business.

Do you have any comments on how we could support co-operatives and collectives in this country?

[Khadija Hamidu]

Yes, I do, absolutely. Thank you for the question.

Co-operatives and collectives led by women have become a very important model of business that prioritizes social, economic and gender equity as a whole. The operative and democratic principles that are growing as a whole in the structures foster economic empowerment, community resilience and overall solidarity among women.

I think that when we are looking at continuing to grow these and we look at the programs that have already been created and the business models that have already been created as a whole and go back to the larger issue of the lack of funding between programs, the continuation of these programs that grow these collectives and co-operations is key.

In looking at all these models and the fact that we need to support women in these models, we definitely should be looking further into this issue. Once again, I always strongly go back to—and this is based on the programming that we've created at the YWCA—the growth of the women in entrepreneurship programs.

Within these models, no matter what the collectives or the co-operatives are, the investment by our government to continue these programs is key, and not just from a year standpoint but from a cumulative one. We've seen that the data has increased, and we know that the investment is there. What does that look like from a longer standpoint?

When we're looking at these models and the economic growth of women, it's really about what this investment will look like from a longevity standpoint.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

We'll go on to Mr. Williams for five minutes, please.

[Ryan Williams, Conservative, Bay of Quinte, ON]

Thank you, Madam Chair.

Ms. Vega, you gave some stats at the beginning about the challenge to female-founded companies in getting venture capital funding.

We know that the big gaps that exist between Canada and the U.S. are pretty stark. I think that in 2023, Canada raised $6 billion in venture capital funding, while the U.S. raised $200 billion.

What are we seeing in differences in that stat you gave for Canada? I think you said it was 4% of companies with at least one female founder. What are the numbers in the U.S.?

[Adriana Vega]

The last statistic I have is global, and it was 2%. Canada was relatively okay. I would venture to guess that it's probably lower than in the U.S.

The positive development is that this year that figure has gone up to 12%. It tells you something about these trends having an impact. It's having investors sitting at the table, making those decisions and eliminating those biases.

I do think that these numbers are going to ebb and flow, but seeing that 12% in just half of 2024 is very encouraging.

[Ryan Williams, Conservative, Bay of Quinte, ON]

That's good.

The number I've seen from the U.S. is about $33 billion. I think 21% is the number I've seen for female-founded VCs.

A lot of the reason for that is they have some different programs that are built by venture capitalists themselves that do invest into those start-ups, and not only in the first round, but in the second or third rounds, which is really important.

What are specific steps we can take in Canada to first get more venture capital as a whole, and then to keep increasing those numbers?

[Adriana Vega]

How long do I have?

A good way to think about it is as a supply chain. It takes time for it to go from a fundraise, and then you go to your limited partners, which is your investor base. You pitch them a concept—your hypothesis for your fund. Your hypothesis can be pre-seed companies, women-led companies or LGBTQ+ companies. Once you establish that thesis, you allocate that fund and then you reap the rewards. You start exiting those investments. That whole process in Canada can take up to 15 years. It takes a very long time for you to establish that track record.

We have four funds in Canada that are solely focused on women-founded enterprises. Those are all emerging funds. They're all only at their first or second fundraise. It's going to take time for us to see the results—for them to establish that hypothesis and say, “Hello, institutional investor; this is why it makes sense on a market base for you to come and invest in this asset class and particularly in this cohort of enterprises.”

If we reconvene in four years' time or 10 years' time, I do think that those metrics will look very different. Again, taking a step back and looking at the history of our sector, it's really just a decade old. We're making progress. Is it fast enough? Probably not. We would all like to see this happen faster, but it is happening.

[Ryan Williams, Conservative, Bay of Quinte, ON]

One troubling stat we've seen is that there is still only $6 billion in venture capital, but a lot more in the U.S. A lot of Canadian firms are finding that American firms are investing in them. They are the VCs that are investing.

Can you comment on where we're seeing American VCs investing in Canadian companies? Are we seeing those Canadian companies, if they've gotten a certain percentage, leave Canada?

[Adriana Vega]

I think companies start getting flight risk flashing lights at around the third fundraise.

American capital is very dominant in Canada. I think in some statistics, you can see that in certain rounds, up to 75¢ for every dollar invested here is American capital. It's very dominant.

Obviously, we're sitting right next to the biggest market on earth in terms of dollar availability. Also, it's a very competitive environment within the U.S. itself. You have multiple jurisdictions deploying capital, and many different taxation regimes.

I feel like it's kind of a blessing and a curse, in the sense that while we have access to a lot of this capital, it also puts us in a very tricky situation, in that a lot of these companies are going to be incentivized to leave, so—

[Ryan Williams, Conservative, Bay of Quinte, ON]

I'm sorry; I just have 20 seconds.

The Canadian entrepreneurs and businesses that have to rely on U.S. investors also risk losing their Canadian-controlled private corporation status. What are the consequences of losing that status?

[Adriana Vega]

I think the consequences are that they lose out on access to certain programs in Canada. I think overall the economy loses out because we're losing IP, we're losing talent and we're losing the ability to grow these companies domestically into multinationals.

Canada should be looking at its competitiveness from a tax lens for sure. I would be remiss not to mention that capital gains is, of course, the wrong way to go about it.

[The Chair, Liberal, Judy Sgro]

Thank you very much.

Mr. Arya, go ahead for five minutes, please.

[Chandra Arya, Liberal, Nepean, ON]

Thank you, Chair.

I'm glad to see the Canadian Venture Capital and Private Equity Association is part of this very important study. Before joining politics, for three years I was a member of CVCA when I was working for a defence technology company. At the same time, I was also on the board of Invest Ottawa, the organization that has been promoting technology companies in Ottawa's technology sector.

I was just going through the Invest Ottawa team today. I'm so glad to find that about 70% of the current team there are women and that they're led by Sonya Shorey as the president and CEO. That is a great leap forward. Even on the board of Invest Ottawa, close to 50% are women.

However, we have to see the same thing among the entrepreneurs too, so I'm glad to see CVCA's three pillars—education, a diverse talent pipeline and research on DEI, which is very important. I was a member of the industry committee here in 2016-2017. During part of our study, when I looked at women's participation in the top management of corporate sectors in Canada, the statistic at the time said that 36% were women, which is a good thing, but we should go to more than 50%. When we drilled down, among that 36%, only 1% were women of visible minorities. I'm glad that when we say “women entrepreneurship”, it has to be inclusive of indigenous women, women with disabilities, visible minority women, etc.

Madam Chair, when I was listening to various witnesses today, I heard two things. One is that they need more funding. That is always a constant thing that I keep hearing. Whenever any witnesses come, any industry group comes, etc., they need more funding from the federal government. Instead of that, what if I suggest what a couple of witnesses mentioned? They suggested the IRAP program, which is a very good one for emerging technologies; the SR and ED program; and the women entrepreneurship fund, which funds women entrepreneurs across the sector, whether to start setting up a restaurant or a technology company.

I would like to ask Ms. Vega this: When focusing on promoting women entrepreneurs in the emerging sectors, in the new and advanced technology sector, is it better if we carve out a portion of the existing funding programs—like IRAP, SR and ED, etc.—for women entrepreneurs, or give women entrepreneurs slightly extra incentives compared to the male entrepreneurs? Is it a good thing, instead of setting up another fund to support women entrepreneurs in the technology sector?

[Adriana Vega]

It's related to your earlier question. Is it an incentive that you need to carve out specifically for women entrepreneurs? I think there's value in that, just as there is in tax incentives. At the end of the day, different policy tools achieve different things. I think ultimately, on big-picture things, we do think there are a couple of things.

One, we should perhaps be a little bit more ambitious, because government can do lots of things: They can de-risk and they can incentivize and they can attract private sector capital. However, government alone can't do it all. I think that's one thought.

The second thought is that market dynamics are so important. Even for an entrepreneur, once you get funding from private entities, that just serves as a bit of a presentation card right down the line that is saying that you have achieved this level of success in fundraising from all these different sources of capital, including government, but also elsewhere.

I think that as we design policy, it has to be cohesive—

[Chandra Arya, Liberal, Nepean, ON]

I'm sorry, but I have to cut you off because I want to ask the same questions to Ms. Heidi Reimer-Epp.

[The Chair, Liberal, Judy Sgro]

You have 30 seconds remaining.