Science and Research Committee on Oct. 27th, 2025

[The Chair, Liberal, Salma Zahid]

Good morning, everybody.

I call this meeting to order. Welcome to meeting number 11 of the Standing Committee on Science and Research.

Pursuant to a motion, the committee is meeting to study private sector investment in research and development in Canada.

I would like to make a few comments for the benefit of the witnesses and the members. Please wait until I recognize you by name before speaking. For those participating by video conference, click on the microphone icon to activate your mic. Please mute yourself when you are not speaking. For those on Zoom, at the bottom of your screen you can select the appropriate channel for interpretation: floor, English or French. For those in the room, you can use the earpiece and select the desired channel. All comments should be addressed through the chair.

With that, I welcome our three witnesses for the first panel. We are joined by Ryan Williams, fellow, Balsillie School of International Affairs; Grace Lee Reynolds, chief executive officer, MaRS Discovery District, by video conference; and Bruce Johnson, executive vice-president, Martinrea innovation development, Martinrea International Inc.

Welcome to all. You each have five minutes for your opening remarks. Then we will go to the rounds of questioning with our members of Parliament.

With that, Mr. Williams, you have five minutes for your opening remarks, please.

[Ryan Williams, Fellow, Balsillie School of International Affairs, As an Individual]

Thank you, Chair.

I’m here today with a clear proposal. Canada must double business R and D investment by 2030, and here’s how we can do it. Mind you, this is in order, and it has to be in this order or it doesn’t work: assert our sovereignty, establish venture capital and be relentlessly competitive.

Canada’s digital economy is exploding. AI start-ups, fintech, e-commerce, data centres and cloud services now drive over $100 billion a year—bigger than agriculture and bigger than forestry—but here’s the problem: We have almost no protection for it—no unified law, no shield—and we increasingly and recklessly give away our ideas, our IP and our digital sovereignty.

We spend over $10 billion a year in public research funding, yet only 12% of patents in Canada come from Canadians. Over 87% of our innovation is foreign-owned. Worse, only about 5% of patents generated at Canadian universities ever become licensed, meaning roughly 95% of publicly funded research lies dormant in the valley of death. That translates to a loss of roughly 2.7% of GDP, about $75 billion annually and $5 billion in tax revenue.

In quarter one, 2025, U.S. start-ups raised $91.5 billion U.S. in venture funding. Canadian start-ups raised only $920 million U.S., a 100-fold gap, but guess what? Only 20% of that funding was Canadian. You guessed it: U.S. VC firms funded 80% of our Canadian start-ups.

Why does that matter? Well, roughly 0.2% of start-ups in the U.S. are VC-backed, but the VC-backed firms have gone on to constitute about 42% of all U.S. IPOs and 62% of public R and D spending through private firms.

That is why we need to get our sovereignty right. Since 2016, Ottawa, for instance, has invested over $4.4 billion in AI and digital research, yet roughly 75% of the resulting patents and IP is owned abroad, mostly by U.S. and Chinese companies. That means $3.3 billion of taxpayer-funded innovation is fuelling foreign economies, not Canada’s. When multiplied by IP's economic effect, that’s $15 billion to $30 billion in lost output every year. We are literally funding the future for someone else, and we need to get back the control of it.

Meanwhile, 80% of Canada’s digital data is owned and hosted on U.S.-controlled servers. Under the U.S. CLOUD Act, American authorities can compel access to Canadian data stored on U.S. infrastructure—and this is infrastructure located in Toronto and Montreal, by the way—with no equivalent Canadian blocking statute. If Canada continues to rely on U.S. servers, U.S. venture funding and U.S. ownership of our innovations, we will enter every future trade agreement as a price-taker, not a partner. Increasingly, the next NAFTA will be about AI, data and digital sovereignty, and right now we’re negotiating from weakness.

Meanwhile, our peers treat innovation as a strategic resource. The U.S. uses the CHIPS act, DARPA and SBIR to keep IP at home. Israel’s Yozma fund co-invests public capital to anchor start-ups domestically.

This is not just about research. It's also about market structure. We don't have much competition in Canada. We have what's called a “monopoly problem”. Canada’s most concentrated sectors—in banking and in the digital economy—invest less than 0.5% of the revenue in R and D, compared to 2% when there's more competition in the U.S. When markets are closed, innovation dies. Competition itself is an innovation policy.

My three core recommendations are as follows.

Number one, enact a Canadian innovation and data sovereignty act. Protect Canadian IP and data like we protect critical minerals and energy. Require every publicly funded research project to include a Canadian commercialization plan. Require Canadian data residency for sensitive industries to counter the U.S. CLOUD Act and make sure that right now, when Canadian privacy and data are held on U.S. servers in Canada, they don't fall under U.S. courts and U.S. jurisdiction. Implement export controls for AI, quantum, biotech and defence tech.

Number two, establish a $100-billion sovereign innovation fund, a co-investment vehicle matching private VC fifty-fifty through repayable loans, not grants. Take small 1% to 2% equity shares in IP-heavy Canadian firms so taxpayers share the upside. Step in when foreign buyers try to remove critical Canadian IP, giving founders a Canadian alternative to selling out.

Number three, break up monopolies and incentivize competitive R and D. Rewrite the Competition Act to make innovation and R and D explicit priorities and enforce market share caps and require divestitures when there's data, when it's less than 40%. Ban killer acquisitions that eliminate Canadian start-ups. Too many of our Canadian start-ups get bought up by American VCs.

Canada has already proven it can defend sovereignty when it matters. As Jim Balsillie warned, you can’t commercialize what you don’t own, and Canada doesn’t own much. It’s time to act with the same resolve to ensure that when something is invented in Canada, it’s also owned in Canada.

Thank you.

[The Chair, Liberal, Salma Zahid]

Thank you.

We will now proceed to Ms. Reynolds. She is joining us by video conference.

Ms. Reynolds, you have five minutes for your opening remarks. Please go ahead.

[Grace Lee Reynolds, Chief Executive Officer, MaRS Discovery District]

Good morning, Chair and members of the committee.

Thank you for inviting me to speak on this critical issue today.

Canada has no shortage of ideas or talent. The challenge we face is ensuring that discoveries make their way into markets quickly and at scale.

The data is sobering. Canada has fallen to 18th in the OECD's productivity rankings, behind Norway, the U.S., France, the U.K. and Australia. We spend just 2% of GDP on R and D, while Sweden spends 4% and South Korea, 5%. The OECD data is clear. We need well-targeted R and D support and a stronger emphasis on the commercialization of innovation.

Here's what's concerning: Half of Canadian founders who raise more than $1 million do so in the U.S. Those who go south raise nearly twice as much as their peers who stay in Canada. We're losing not only capital but often also the future anchor firms that drive R and D and create high-quality jobs.

After a decade at MaRS and years working at the intersection of research, entrepreneurship and industry, I've seen first-hand that this isn't about a lack of talent or breakthrough science. It's about system design. The good news is that the design can be changed, and I'll touch on three areas where we believe that targeted action could make a real difference.

First, let's fix the capital problem. We need to attract more domestic investment into our scaling firms. The Canadian investment sector has been cautious at early stages, especially when technologies are unproven. That can change if early-stage ventures can be de-risked through business mentorship, talent development and, crucially, access to customers, particularly in regulated industries.

The government can play an important role here. When the government acts as a first customer through strategic procurement, it validates technology, and it de-risks it for private investors. We have tools like Innovative Solutions Canada, but using them at a greater scale would strengthen our domestic investment base.

Second, let's accelerate university-industry collaboration. Our universities produce world-class research, but translating that excellence into commercial outcomes remains difficult. We can expand programs, like those at Mitacs and NSERC, that create direct partnerships between researchers and industry.

Equally important is simplifying how intellectual property moves from lab to market. Making technology transfer offices accessible and involving industry partners earlier would help ensure that more research is guided towards market needs from the start. While universities drive discovery, commercialization often requires complementary infrastructure—organizations that can connect ventures with capital customers and talent. Strengthening this ecosystem around our research institutions would make it easier for Canadian ideas to become Canadian companies.

Third, let's retain value in Canada. We fund early-stage research, but we lose momentum when companies need to scale. For our IP developed with public funding, especially in high growth areas like AI, clean tech and energy, and life sciences, we need strategies to ensure that more of that value and job creation stays here in Canada. Again, strategic procurement by government and established corporations can be a powerful lever in this effort. When government or corporations buy Canadian innovation, it sends a powerful signal to global markets.

As you can see, resolving the gap around R and D commercialization is multi-faceted. It requires clear policy direction, a shift in risk appetite, efficient capital deployment and also effective use of tax systems. With ISED, provinces, regional development agencies and superclusters all holding a piece of this mandate, what we need is strategic coordination across the system.

Budget 2022 proposed a new innovation agency, but its status is unclear. However, whether through a new agency or better coordination of existing ones, what matters is speed, risk tolerance and action, connecting researchers, capital and customers.

In closing, MaRS has spent 25 years as a hub connecting entrepreneurs, researchers, customers and capital. The entrepreneurs we work with consistently tell us that they need capital that matches the scale of their ambition, access to customers who will take a chance on Canadian innovation, and IP frameworks that protect their inventions while enabling commercialization.

The good news is that we already have so many of the pieces. We have world-class research. We have entrepreneurial talent. The urgent challenge is to use these tools differently, with greater speed, with coordination, with more risk tolerance and with a focus on outcomes, especially in light of our shifting global markets.

If we can get this right, we won't just fund innovation; we'll build companies, industry and jobs that define Canada's future.

[The Chair, Liberal, Salma Zahid]

I'm sorry for interrupting, Ms. Reynolds. Can you quickly wind it up in the next 10 seconds?

[Grace Lee Reynolds]

I am done.

Thank you.

[The Chair, Liberal, Salma Zahid]

Thank you.

We will now go to Mr. Johnson.

You have five minutes for your opening remarks. Please go ahead.

[Bruce Johnson, Executive Vice-President, Martinrea Innovation Development, Martinrea International Inc.]

I'm Bruce Johnson and I'm with Martinrea International.

We are a Canadian-based manufacturer and supplier to the automotive and industrial markets. We currently employ more than 19,000 talented and motivated people. We operate in 57 locations in 10 countries. Martinrea's vision is to make lives better by being the best supplier we can be of the products we make and the services we provide.

Who am I? I'm a proud Canadian, with 42 years in the automotive manufacturing business based in Canada. I'm in my 19th year at Martinrea, and I'm currently responsible for Martinrea innovation development, which is an innovation incubator and developer. We support innovation within Martinrea and invest in innovative companies that are developing innovative technologies.

One of those investments was Effenco. I'll refer to Effenco in my examples today. Effenco is a Quebec-based company that develops electrification solutions for large vocational trucks. Martinrea innovation development purchased the assets out of bankruptcy three years ago, and we have now created a growing and operating business with continued engineering and development in Quebec and manufacturing in Ontario.

I have a general perspective on innovation. At Martinrea, our view is that innovation requires that three things be accomplished. First, we must establish proof of concept. Second, we have to industrialize the product. Third, we have to commercialize the product.

Internally, Martinrea is a successful innovator. We draw on our skills and experience to drive innovation. Externally, Martinrea has worked extensively with early- to mid-stage companies and small to medium-sized enterprises. These companies, with help, can typically achieve proof of concept. Where they struggle most is with industrialization and commercialization. Both of these are key to building a business.

It's a tough thing to build a business. There's a very strong case that can be made that Canadian companies, when working in collaboration with a combination of other companies, educational institutions, innovation hubs and governments, will significantly de-risk projects and increase the quality of outcomes. Both private and public resources are better placed with strong teams that can play to their partners' strengths. Martinrea works closely with a number of educational institutions, agencies and initiatives, such as NRCan, NGen, OVIN, IVI, MaRS and others. We recommend applying resources to the teams that are most likely to win. That is the best direction.

Capital intensity is a barrier to R and D projects. The development of a zero-emissions system like Effenco requires substantial upfront investment commitment. In the case of Effenco, it was more than $17 million, with a long development cycle of four to five years. This extended timeline and capital intensity make it challenging to attract private investment due to a delayed return on investment and inherent technical risks.

What we recommend is a dual approach to de-risk innovation investment and accelerate commercialization. Combine strong public grant support with enhanced tax-based incentives, including a repayable tax credit, regardless of short-term financial performance, to improve short-term liquidity. Strengthening public-private coinvestment through entities like BDC allows governments to fund and match private capital based on clear and clearly established milestones.

Another barrier is grant availability and processing time. Again, I'll use the example of Effenco. Accessing government funding for R and D is important, but it is often constrained by grant availability and processing timelines. These programs are typically highly competitive, with strict eligibility criteria and long review cycles that can delay project milestones.

We recommend facilitating private and public sector partnerships. Introduce rolling intake for high-impact projects and emerging industries and technologies. Advocate for grant partnerships with universities and public research institutes as part of the grant evaluation criteria. Create dedicated funding streams within existing programs to support capital-intensive technology development. Adapt eligibility criteria for small and medium-sized enterprises and large corporations, ensuring rapid access to capital and alignment with development and commercialization cycles.

Another barrier is ownership and control of intellectual property. Effenco can be used as an example. During collaboration discussions, concerns emerged regarding the potential deployment of jointly developed IP by public research institutes and universities in unrelated projects with other organizations. Such deployment risks undermine the proprietary nature of the Effenco technology, compromising Canadian innovation and competitive advantage.

We recommend standardizing an IP protection framework for publicly funded programs that prioritizes the protection of Canadian innovation and commercial interests. Also consider IP mitigation plans as part of grant applications.

Finally, Canada has much to celebrate with respect to the high quality of our talent. We believe that these recommendations will help further unlock that talent. We believe that resources are best placed with teams that exhibit a strong mix of capabilities through proof of concept, industrialization and commercialization.

Thank you.

[The Chair, Liberal, Salma Zahid]

Thanks to all of the witnesses for their opening testimonies.

Now we will proceed to the first round of questioning, and we will start with MP Baldinelli for six minutes.

Please go ahead.

[Tony Baldinelli, Conservative, Niagara Falls—Niagara-on-the-Lake, ON]

Thank you, Madam Chair.

Thank you to the witnesses for being with us today.

I'm going to begin by going to Mr. Williams.

It's good to see you. I know this area has been a passion of yours, and we've spoken many times about it. You've even been a member of this very committee and have raised the issues we're studying today, so thank you for that.

In some of your other writings on this issue, you've indicated that Canada faces an innovation paradox. We excel at generating ideas but fail to own or commercialize them.

Ms. Reynolds, you said that Canada has no shortage of talent or ideas, yet we're spending over $10 billion in public research funding and the economic outcomes increasingly are benefiting others. You showed that only 12% of patents filed in Canada come from Canadians; over 87% of innovation is foreign owned.

I wrote these comments down. You said, “We are literally funding the future for someone else.”

If Canada is losing about $75 billion a year in GDP to foreign IP ownership, what concrete steps can the government take right now to stop that loss?

[Ryan Williams]

Thank you.

Through you, Madam Chair, it's a pleasure to be back here at committee. In some ways it has changed, and in some ways it hasn't changed.

You're absolutely right. When we studied the first instance of IP commercialization, we identified that a lot of our IP gets siphoned out of Canada, and that's a major problem. Not only is it costing jobs and costing our GDP but it's stopping us from utilizing the talents we have in Canada.

Number one among those is that we have some great, world-class institutions here. There's U15 Canada; you're going to have Robert Asselin come and present at the next panel. We have unbelievable universities that do unbelievable research. The problem is we give it all away.

The first step we have to take is to establish sovereignty in Canada and protect the IP that's generated in Canada and ensure that when we spend money—especially that $10 billion a year on research—it doesn't go to foreign nations. We don't allow that with critical minerals and we certainly don't allow that with our energy sector, so why are we allowing it with our data sector?

This has to be done in order. Before we establish VC funding and before we tackle competition, which I'm always in favour of, number one is to establish our sovereignty. We do that by doing two things.

One is establishing an act to ensure that, when we're spending money on IP, every attempt possible is made to commercialize that IP here in Canada. The second, which is the biggest one I brought up, is related to the U.S. CLOUD Act. Not a lot of Canadians or parliamentarians know that 80% of the data that Canadians utilize—health data, financial data, data in terms of speaking to ChatGPT every day—is held on servers in Canada but is owned by the Americans. They have jurisdiction over that data. In other words, Canadians can be tried in U.S. courts over data held on a server in Toronto because it's owned by a U.S. cloud, and that's a problem we have to solve right away.

In the 1960s, the U.S. had the Helms-Burton Act. The U.S. was, at that time, trying to make sure that Canada wasn't allowed to invest in Cuba. We had the Foreign Extraterritorial Measures Act that countered the U.S. act so that when, for instance, there were companies investing in Cuba, they weren't held under U.S. law.

We have to do the same and either update the Foreign Extraterritorial Measures Act or come up with our own legislation that guarantees that Canadian data on U.S. servers doesn't fall under U.S. jurisdiction or under their court system, as is happening right now.

[Tony Baldinelli, Conservative, Niagara Falls—Niagara-on-the-Lake, ON]

Thank you for that.

What countries are doing it right, then? From retaining IP and protecting data to scaling innovation, what can Canada learn from some of these countries?

I believe, Ms. Reynolds, you mentioned Sweden and what they're providing in investment dollars in comparison to Canada. Canada is ranking, I think, as low as 18th in the OECD.

What are some of the other countries doing, and what can we utilize or replicate?

[Ryan Williams]

The U.S. certainly is leading the pack. They're leading the world with some of their biggest companies in innovation, but they're using the CHIPS act—that's the newest act—to establish primarily their sovereignty when it comes to chips to try to pull some of the microprocessor and chip technology away from Taiwan.

Secondly, they have DARPA. I know that our industry minister in the past has tried to bring forth a CARPA to counter that, but what it comes down to is procurement so that the Canadian government is dedicated to helping companies with their research but is then committed to buying that technology off the shelf from those companies. We're not doing that. The U.S. has done it for over 30 years with DARPA.

The third thing they're doing in the U.S. is the SBIR, or small business innovation research, program. They invest primarily in small businesses and their research and, again, commit to commercializing or buying their products once they've reached a certain level. We're not doing any of those things here in Canada.

[Tony Baldinelli, Conservative, Niagara Falls—Niagara-on-the-Lake, ON]

Thank you.

Ms. Reynolds, you had talked earlier, on your third point, about retaining value in Canada, about a strategy to make it stay here, and about our investments and the need for strategic coordination across all levels.

Is the system too bureaucratic right now? Are there too many rules in place and too many players involved? How can we simplify that ecosystem to get that value-added system created in Canada?

[Grace Lee Reynolds]

That's a really fantastic question. I think it's an important starting point.

To all of your points, is it too bureaucratic? Yes, there are probably lots of elements of that. Are there too many players? There are a lot of players involved—

[The Chair, Liberal, Salma Zahid]

I'm sorry for interrupting. Your time is up.

[Tony Baldinelli, Conservative, Niagara Falls—Niagara-on-the-Lake, ON]

If Ms. Reynolds could provide a written response, that would be great.

[The Chair, Liberal, Salma Zahid]

Maybe you can ask her in the second round. Thank you.

We will now proceed to MP Noormohamed.

MP Noormohamed, you will have six minutes. Please go ahead.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Thank you, Madam Chair.

Thank you to our witnesses.

Ryan, it's great to see you in committee and actually very much in your element. It was really wonderful to hear your testimony, but it was also sobering, on a number of fronts.

You and I have talked about this before. One thing that I wanted to lean in on is the complexity of raising capital for early stage in this country and, ironically, as you grow, the complexity of raising larger rounds of capital.

I was really intrigued by this idea of a sovereign innovation fund. I've been talking a lot about a sovereign wealth fund that focused on innovation for quite some time. One thing that I'd love your thoughts on is this. A lot of programs, right now and historically across governments, are what governments call “investments”, when in fact they're not equity positions.

With this new approach that you're suggesting, do you think it is time for government now, through a government fund—even if it's arm's length, which it should be—to take equity positions in some of these new Canadian innovative companies?

[Ryan Williams]

It's nice to see you again, as well, through the chair.

Yes, 100%, if this is taxpayer funding, and these are public dollars. Like I mentioned earlier, if we gave $4.4 billion to AI technology, of which 75% is foreign owned, we were giving that money, effectively, to foreign corporations and foreign countries. We want to be investing in Canadian companies. In that, if we're spending public dollars, we should be making sure that the government also has a stake.

That does two things. Number one, it is unique. Even Israel's Yozma fund does not take equity, but it makes sure it protects the dollars.

My idea on this is that it follows venture capital private investment. The government would not put money in unless we already had private investment, so that would be fifty-fifty into companies. It protects those private investors, who are already taking an equity share, and it also protects the taxpayer. What that really does, at the end of the day, is hopefully raise more money.

There are going to be start-ups that fail. This is how the ecosystem works. Those companies that do well, though, will return an investment to the taxpayer. That allows perpetuity, and we have more money that goes into Canadian start-ups, and away we go.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

On that, obviously there are examples like Norges and Temasek that, through their sovereign wealth funds, are taking positions in tech companies. It's not like we'd be the only ones doing this, which I think should make things easier in what has historically been a risk-averse investment environment in Canada.

One of the challenges has been getting those early-stage investors in Canada to invest. Ironically, it seems very easy for us to invest when it comes to mining and to take a flier on resource development.

I'm going first to you, Ryan, and then to Ms. Reynolds, if you would, please.

This isn't just about government. What do we need to do as a country to unlock the way in which VCs in this country start to see investments in Canada? We know that valuations in Canada tend to be lower than in the U.S. There are better deals to be had right now in Canada. How do we get the VC environment here to actually start playing more aggressively in the Canadian sandbox?

[Ryan Williams]

I think there are two ways. Number one, we have to ensure that IP wants to stay in Canada. That's why we made the sovereign changes. The sovereignty has to be number one. If we don't make it attractive, if we don't set rules that IP has to stay in Canada, it's just going to go.

When we look at other nations, especially the Americans, they have lower tax rates. They shouldn't have lower capital gains. Many companies are going to Texas or Florida because they're seeing zero state taxes there.

There's a saying that capital goes where capital grows. We have to make sure that we are relentlessly competitive and that we have the attractiveness in tax policies and government policies for the investors, so when they're investing money in Canada, it's just as competitive as it is in the U.S.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Great.

Ms. Reynolds, I'd ask you the same question.

[Grace Lee Reynolds]

Thank you.

I could probably offer an example of that. It's difficult indeed for those in private or even venture capital who want to invest at an earlier stage take that initial risk. We have a program that's been running in partnership with the Ontario government since about 2008. It's called the MaRS investment accelerator fund. Its very role is actually to be an intervention to help fund that first cheque for emerging technologies. The success of the fund is not really measured through, say, the return directly, although it has been quite successful. It operates independent of government as a venture fund that's kind of under our oversight. However, the main victory is actually around the follow-on investment that it can attract over the years. It's been able over these years to attract a more than 2.7 times investment in follow-on criteria.

Really, if you think about that as a mechanism or as an intervention to be able to help those early-stage companies with that very first opportunity, that is a good example. We wish there were more examples of an investment accelerator fund.

I would just add that in this particular case, it was focused on the software sector, so those early cheques were easier, ranging anywhere from $500,000 to $1.5 million. But if we're really talking about deeper commercialization, that type of early-stage risk investment needs to be of a higher cheque size. Looking at an early-stage biotech company, you'd need $2 billion to $10 billion.

So it is an area, then, where I would say there's a great opportunity for the government to be able to help with that early-stage risk.

[Taleeb Noormohamed, Liberal, Vancouver Granville, BC]

Great. Thank you.

Well, thank you to all of you.