Science and Research Committee on March 7th, 2023

[Louis-Félix Binette]

The accelerated growth service, through Innovation, Science and Economic Development Canada, ISED, is one thing that comes to mind. The idea behind the service is to help entrepreneurs by bringing a number of government stakeholders with supports to the table, instead of making entrepreneurs seek out each of those stakeholders separately. They just have to knock on ISED's door. That's the first phase.

I think the second phase would be to invest as much as possible in existing front-line resources on the ground. That's where you can get the different levels of government to work together. Think of business accelerators and incubators, as well as university accelerators. It's really important to invest in front-line resources, give entrepreneurs full flexibility to access programming very quickly, and reduce the red tape for entrepreneurs when dealing with those organizations. Keep in mind that entrepreneurs put a lot of time and energy into answering to authorities at each level of government for each of the programs they participate in. A start‑up shouldn't have to hire experts in administrative management.

[The Vice-Chair, Conservative, Corey Tochor]

I'm going to have to cut you off there on this round. I'm sure there will be other MPs who will have some questions you can expand on.

Now we're moving to the Bloc member of Parliament, Maxime Blanchette-Joncas, for six minutes.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Chair.

Thank you to our witnesses for taking part in this important study.

My first questions are for Mr. Binette, from Mouvement des accélérateurs d'innovation du Québec.

Mr. Binette, you couldn't have been clearer in your opening remarks. You raised some very important points. Obviously, we have a choice, so we need to decide whether we want to be net consumers or net exporters. I think that lays it out clear as day.

You just recommended some solutions, including establishing front-line resources and reducing red tape. You mentioned federal organizations such as Innovation Canada. Organizations that provide venture capital come to mind, like the Business Development Bank of Canada. Do you think that's a tangible and easy-to-access solution?

I realize that venture capital isn't available to everyone, and it's not something that's easy to access.

Can you tell me how we can bring venture capital into this? Also, how can we develop IP and make it more accessible, as well as protect it?

[Louis-Félix Binette]

That's a very good question. It's quite complex.

A start‑up is created to bring something innovative to the market. That's different from a small or medium-sized business that is looking to innovate or change how it does things.

The approach is what needs changing, whether we are talking about the Business Development Bank of Canada or another organization. We need to accept the fact that we don't support a set of companies in a distinct way. Instead, we support a pool of companies in a geographic- and sector-specific way, in the hope that some of those companies will succeed.

The approach to risk is different. We don't measure the individual risk of each company. We take a pool of companies and hope that some of them will be successful. For an investment fund, sometimes it's enough for one company to succeed in order to replenish the entire fund. That one transaction out of the 20, 30, 40 or 60 can be enough. According to the information, a company has a one in 250 chance of making it. We need to take a pool-based approach and accept that some companies won't make it.

The benefit of IP is that, when a company doesn't make it, that property remains. It can be reused and transferred to another company in that sector. It can be resold and enhanced in different ways. Let's not forget that entrepreneurs who didn't succeed are still entrepreneurs. They'll go on to start other companies.

That's why I think a pool-based approach is a good way to go.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you, Mr. Binette.

I gather that it's about sharing the risk within the pool, instead of concentrating or spreading it in a more tangible way.

Do you think the support available to start-ups has changed in recent years?

[Louis-Félix Binette]

Absolutely.

It's changed in two ways. First, we've seen a real increase and specialization in support mechanisms and organizations. They are helping start-ups in specific demographic situations and sectors. They build networks and capacity to address the needs of a certain category of start-ups. We are also seeing some accelerators and incubators really take off. Two accelerators in Quebec, McGill University's X‑1 Accelerator and École de technologie supérieure's Centech, were recently ranked among the top 10 university accelerators and incubators in the world by UBI Global.

We are really seeing players that have created a critical mass, established a strong presence and built the support capacity to be considered among the best in the world. Obviously, a start‑up that receives incubator support from Centech or X‑1 Accelerator enjoys not just tremendous visibility, but also tremendous opportunity in terms of developing an international client base, accessing investment and so on. It's a huge advantage. That's a recent development in the ecosystem worth recognizing.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you.

Can you talk about the diversity of Quebec's start‑up ecosystem?

You brought up some models that work well. I know that the Quebec government had the Québec Research and Innovation Strategy 2017‑2022, which ended. The current strategy is the 2022‑2027 Québec Research and Innovation Investment Strategy, or QRIIS2 for short.

Do you have any real-life examples we could look to as models to help us develop a clearer plan? Mr. McLean talked about the obscurity of the current ecosystem, and rightfully so. There's an effort to bring it to the regional level and help companies, but that plan doesn't reflect the different realities across Canada.

[Louis-Félix Binette]

I think we are facing similar challenges. I mentioned the creation of Axelys, but there's still work to do. Creating the organization is only the beginning. We have to rethink the flow of IP, from the lab to the market, and encourage more researchers to become entrepreneurs and start their own companies.

The funding model for accelerators and incubators is being transformed. It's important to take less of a project-based approach, while giving organizations an opportunity to grow in the long term. There are still questions around performance criteria, which we would like to see for the benefit of accelerators and incubators and the support ecosystem as a whole. There are also questions about how to standardize those criteria across Canada and build a start‑up continuum.

I work in Quebec, but I would like to see those criteria in place across Canada. That way, we could look at the needs of a Quebec-based start‑up and determine that the best resource person to help that start‑up was in Alberta. Those connections need to be made as early as possible. We need to adopt a holistic view that takes into account the gamut of start-ups we have in Quebec. We have to be able to manage our start-ups. If, as a country, we can't learn to manage a start‑up pipeline, our chances of success are lower. After all, we can't improve what we can't measure.

[Maxime Blanchette-Joncas, Bloc, Rimouski-Neigette—Témiscouata—Les Basques, QC]

Thank you very much, Mr. Binette.

[The Vice-Chair, Conservative, Corey Tochor]

Thank you very much.

Now moving on to the five-minute round, we have....

I'm sorry. Finishing up the six-minute round, we have Mr. Cannings.

I almost slipped that one by you.

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

I may be tired today, but I was sharp enough to catch that. Thank you.

Thank you both for being here this morning. I was at a meeting last night with the Coalition for a Better Future. I think they're looking at 21 key performance indicators for the Canadian economy writ large. One of them is IP. They point out, as I think Mr. Williams did in a different way, how far behind we are. The United States is probably one of the leading countries in the world. I think they have $7,500 U.S. per worker of IP investment every year. In Canada, it's $2,300 or $2,400. The coalition has set a target. For 2030, we want to be up there with the U.S., in that ballpark.

I'm trying to get a sense of whether you think that's a totally unreachable goal or if that is something we can reach. What do we have to do to get there? It's a very high-level question to start with, and I'll try to drill down later.

[Mike McLean]

Companies are hungry to learn about this. We go out and talk to small and growing companies. They know they don't know. They want answers. They want help. We've gone from zero companies in our membership less than two years ago to over 190 companies engaged, and more are being added every week. Companies want to learn. They want to do better. They want to succeed. They just don't know the path there.

I think Canadian entrepreneurs will take us there. They just need to be given the tools to help them do so.

[Louis-Félix Binette]

I'd like to add something, if I may.

I think we've built a culture, especially in Quebec, where we tend to come up with solutions to our problems. I'm talking about immediate problems people face in a factory or the community. The fact of the matter is this: we still haven't understood that the solution to our problem can also help people with the same problem in other parts of the world. If we follow the right steps, and that includes protecting IP, we can make those solutions available. We don't have that reflex. Thinking big is a mentality that needs to be nurtured. If we can fix the problem at home, we can fix that problem anywhere.

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

Mr. McLean, you mentioned some of the government programs. I think IRAP has an IP assist program. Maybe you could expand on that and compare it to what's available in the United States.

Does the United States just have a different culture about venture capital, or are there also American government programs that help companies?

[Mike McLean]

There are very limited government programs in the United States, because they're not needed. The expertise on building IP positions, on utilizing IP positions to help grow companies and on driving new revenue into companies using intellectual property is all there. It's in the ecosystem. They practise it every day, so they do not need to drive systemic change into what they're doing, because it already exists. We're trying to change something that is a problem, and we need significant resources deployed in order to do that.

The IRAP IP assist is a great program that's providing funding to entrepreneurs to talk to specialists and experts about strategy and to pursue the activities that come out of those strategies. That's been a great tool. We work a lot with our members who are using that tool.

The ElevateIP program that is being launched now, which MAIN is going to be a part of, will drive IP education and funding out through five key accelerators across the country.

IAC has focused on clean-tech companies in our pilot. We currently have a proposal in to expand our program and give it a longer-term future.

There are a number of good efforts under way that are small, and they need to be ramped up.

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

Monsieur Binette, you mentioned the need for help at the very early stages. You talked about, for instance, a university researcher who has an idea.

When should we be providing that assistance? Is that assistance only available now when you have formed a company and when you've attracted some investment? How can we get involved early on?

I hear of university professors I know who come up with ideas and immediately, that IP goes somewhere else.

[Louis-Félix Binette]

The incubation assistance is there, but there are still a lot of obstacles that researchers have to go over to launch a company. If you look at AI and software, it's often easier for a Ph.D. to just get out of the university system and rewrite an algorithm than to try to take the algorithm they've developed in their Ph.D. out of the university. It's workable, but it's a workaround.

To answer the first part of your question, which I think is important, it's an emulation game. Growing a company to a billion-dollar valuation is not something you learn in a program at school or in an incubator. You make it, you learn how to do it and then you help others make it. That is why an ecosystem....

We mentioned the U.S., but they have a size and a cash advantage. However, look at what happened in France recently, or Sweden or Israel, which may be comparable nations to Canada. It's an emulation game, so the more velocity there is and the more entrepreneurs there are who have grown a company based on IP assets, the more they will grow other companies and the more their employees will—

[The Vice-Chair, Conservative, Corey Tochor]

Thank you so much. We're out of time now.

Officially moving into the five-minute rounds, we have Dan Mazier for five minutes.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Thank you, Chair.

When I was on the environment committee, studying the development of clean technology, we heard a lot about the “valley of death”, which is a period between development and commercialization. Why does the valley of death exist and how can we support Canadian industry through it?

I guess that can go to Mr. McLean and then Mr. Binette.

[Mike McLean]

The valley of death is probably outside of my expertise as an IP practitioner in the start-up ecosystem.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Okay.

[Louis-Félix Binette]

The valley of death, as I mentioned in my intro remarks, is the period in which you will invest a lot of money developing a technology without the assurance that it will sell. The valley of death extends to the early commercialization period, because when you have a highly technological, highly innovative solution, there is a fair chance that your first clients will get a prototype-level solution and it will probably cost you three or four times, 10 times or 100 times more to produce that first prototype than you can actually get from the sale.

The more you sell, the more your balance sheet goes into the red. That's the valley of death.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

How can Canada support industry through that valley?

[Louis-Félix Binette]

The principle of acceleration is that we need to get the start-ups to experience all the roadblocks and mistakes that they might experience in the market as quickly as possible, so that they spend less time and money in that valley of death and can start delivering to clients rapidly—but not too quickly because there's a risk to that too.

[Dan Mazier, Conservative, Dauphin—Swan River—Neepawa, MB]

Okay. Thank you.

The government launched a program that facilitates and centralizes funding for clean-tech projects called the clean growth hub. I asked the government what percentage of projects reached commercialization after they received government funding. I was advised that “the Hub does not collect information on the number of projects that reach commercialization stage after receiving government funding”.

The government isn't measuring the commercialization results of research and development funding. How are we able to know how we are doing on this front?