Good morning, Mr. Chair.
I thank the committee members.
My remarks will be in English, but I will be happy to answer your questions in French afterwards.
I appreciate the opportunity to speak to you today about venture capital, commercialization and intellectual property.
It would be strange for me to sit before you today and not address the collapse of Silicon Valley Bank and its impact on Canada's innovation ecosystem. In the span of 72 hours, the financial institution that underpinned the growth of start-ups around the globe collapsed and disappeared. SVB had the mandate to take risks and provide friendly terms to disruptive industries and companies. While the U.S. decision to honour all deposits and the efforts of Canadian banks and smaller lenders to offer venture financing to Canadian innovation companies mitigated the short-term risks, the long-term availability of capital in Canada remains uncertain.
I would be more than pleased to speak to this during the Q and A session.
I'm here today to speak about IP and commercialization and their importance to the investors I represent and Canada's economic future.
According to the Canadian Intellectual Property Office, IP-backed companies are 1.6 times more likely to experience high growth, two times more likely to innovate, three times more likely to expand domestically and 4.3 times more likely to expand internationally. These companies operate in life sciences, medical devices, clean tech, ag tech, advanced manufacturing and more. They are VC-backed and have the potential to transform Canada's economic future. This is crucial for Canada's economic prosperity and creating great jobs for the next generation. If Canada is going to compete and win in the tough global economy, we must be among the most innovative on the planet and the smartest about getting these technologies to market.
In 2021, we hit a high-water mark with venture investing reaching $15 billion. In 2022, we did better than expected, with $10 billion invested across 706 deals. That's pretty good, but consider that in 2022, U.S. venture capital was $238 billion invested in 15,852 deals. Right now, 60% of Canadian venture capital comes from the United States. We want to ensure these dollars continue to flow to our market, but we also have to be mindful of the positions of Canadian companies on those capitalization tables. It's a juggling act, but IP puts us in a stronger position.
We need to do three things. We need to ensure that, while U.S. dollars ebb and flow in and out of Canadian start-ups, Canadian capital is there to seize the opportunities and benefit from the upside. We need to understand the value of the companies we are building, and protect and leverage those values. We also need to be smart about growing and protecting our assets.
Currently, Canada ranks high on innovation but low on IP creation. We remain a net exporter of IP. The federal government did well in 2018 with its IP strategy. The initiative has been successful in creating awareness and education in the importance of IP. Now we need to go deeper. We need to understand what the different verticals need and address the needs of those sectors. Since 2018, what has excited me the most is BDC's IP investment fund. It's the first of its kind in Canada—a sector-agnostic $160-million fund that offers debt, convertible notes and equity. We need to grow these types of investment funds in Canada. In essence, the fund values the IP and lends against it. BDC then takes a seat on the board and helps the company merge its IP strategy with its business plan.
As I sit before you today, Canada ranks as the second-largest tech hub globally, after Silicon Valley. This is due to the high availability of capital globally, poor immigration policies in the U.S. and opportunistic immigration policies in Canada. It's also due to great innovation flowing from our research centres and universities, and to cheaper skilled labour here.
While I'm proud that we're leading, I'm not satisfied about where we sit. Since 2015, the federal government has been a co-investor in the innovation ecosystem via the VCAP and VCCI programs. These programs return a benefit and profit to the Government of Canada, while stimulating VC investment.
Let's look at VCAP's performance. The government invested $340 million. The private sector leveraged that $340 million and raised $1.3 billion. VCAP chose 33 VC investors, which led to investments in 360 companies. These companies, in aggregate, raised $2.8 billion. The program returned every cent to the government and made 44 cents on every dollar of return. It's a prime example of public-private partnership.
I will end there, Mr. Chair.
I will be happy to entertain questions.