What Canada’s Tech Gurus Want From Trudeau’s ‘Innovation’ BudgetBy
Focus on international students to fix talent shortage
Require government to spend part of their budget domestically
Innovation is set to be a key theme of Canada’s budget this week as Justin Trudeau’s Liberal government tries to spur the world’s 11th largest economy away from its commodity roots toward technology and higher-value services.
Last year’s budget set aside C$800 million ($600 million) over four years for innovation. This budget won’t include any significant additions to that but will begin to identify where that money’s going to be spent, people familiar with the matter said. The government plans to launch a competition to pick about half a dozen research clusters that will receive the funds.
Canada’s tech community has been vocal since Trudeau’s election about the need for changes in how the government deals with fast-growing companies. It all started during the election campaign, when tech CEOs and investors lashed out at the Liberals’ plan to increase a tax on stock options, which are often used to reward early startup employees. Trudeau quickly axed the increase from his platform.
Technology and industry minister Navdeep Bains has met with tech leaders multiple times and Trudeau has posed for photo shoots in the offices of Shopify Inc. and Alphabet Inc.’s Google. A fast-track program to cut visa wait times for key technology workers to two weeks was announced in response to what the industry said was its most pressing problem -- luring high-skilled executives from Silicon Valley or further abroad before other countries can snatch them up. That’s supposed to launch in June.
But there’s still more that can be done, the industry argues. Here are some key ideas from players in the space.
The Startup CEO
Huda Idrees, founder and CEO of medical records startup Dot Health
Idea: Keep the talent you have.
Idrees came to Canada from Saudi Arabia as an international student and says she’s seen as many as 75 percent of her fellow engineering students, especially international ones, leave for the U.S. That’s in large part because of how long it takes to transition from a student visa to a permanent resident, she said. Idrees was working at tech companies before she graduated, already paying taxes, but those years didn’t count towards her application for permanent residency, she said.
“Canada just really misses out on really great Canadian-educated talent that comes here,” she said by phone. “We don’t do enough to keep them here.”
The Veteran CEO
Annette Verschuren, CEO of energy storage company NRStor Inc., former CEO of Home Depot Canada Inc.
Idea: Make some procurement Canadian.
U.S. government agencies are often required to spend a portion of their budgets on smaller domestic companies. That’s a policy Canada should import, Verschuren said. Even if the government starts with directing 10 percent of infrastructure spending to Canadian firms coming up with new clean technologies that would be a good start, she said.
“The Americans use their policy as tools to drive their industries,” she said in an interview at Bloomberg’s Toronto office. “We don’t.”
The Venture Capitalist
Boris Wertz, CEO of Version One Ventures, a Vancouver-based firm that’s invested in Canadian online menswear seller Frank & Oak and Wattpad, the world’s largest community of amateur writers.
Idea: Keep what we have.
Wertz wants the government to build on two key programs that already exist. The Venture Capital Action Plan matches government and private money and distributes it to "funds of funds" -- investment firms that then push the money out to smaller and more focused venture capital firms who decide on their own where to put the money. There’s some concern in the industry that the program, which was started by the previous government, might be cut. Even if that doesn’t happen it will require new money from the government to add to the C$340 million it’s already invested in the plan, with funds going to companies like wearable electronics maker Thalmic Labs Inc. and e-commerce company Shopify Inc.
"My biggest hope is to see a continuation of VCAP -- I think the program is off to a good start and it would be a shame if it wasn’t continued," Wertz said.
His other key ask is for the government to keep funding tax credits for companies that hire tech-focused workers in Canada under the Scientific Research and Experiment Development program, better known as SRED.
The Policy Guy
Ben Bergen, executive director of the Canadian Council of Innovators.
Idea: Show me the money.
Trudeau’s fast-track visa program was a solid move, said Bergen, who runs a lobby group for fast-growing tech companies, but he wants the government to put money behind its commitment.
“We’re really looking for the funding component for that,” he said in an interview. Bergen wants to see the government re-allocate resources or find new money to hire the immigration officers needed to speed up the process.
Another place where the government needs to bolster its commitment is a program called the Accelerated Growth Service, a sort of concierge that helps small companies access government services from export advice to financing. Dedicated funding for the service is needed, Bergen said.
Wait and See
Perhaps Canada’s technology and start-up industry doesn’t need more government help. The country’s tech scene is booming. Venture capital investment in startups is still growing even as it drops in the U.S. and other countries, according to research firm CB Insights. Investors poured $1.7 billion into tech firms in 2016. The last few months have seen a number of major acquisitions of Canadian tech companies, including PayPal Holdings Inc.’s buyout of Vancouver-based TIO Networks Corp. for $233 million and Airbnb Inc.’s roughly $300 million purchase of Montreal’s Luxury Retreats.
The tech sector has some asks, but it’s cognizant the government can only do so much, with the threat of increased trade tariffs from U.S. President Donald Trump and the loss of tax revenue from oil production, said Mike Woollatt, who runs the Canadian Venture Capital Association and worked for former finance minister Ralph Goodale.
“I’m sure the government would love to do more,” he said. “We’re being practical. Everyone can see what the fiscal situation is.”
— With assistance by Josh Wingrove