The federal government recently launched consultations to develop a Canada-wide innovation agenda. Each year, there are dozens of conferences, symposia, and surveys consulting our knowledge industries. The government wants to know how to translate our strengths in science and technology into jobs and economic prosperity. Time and time again, the answer comes back: Our entrepreneurs need money. Access to capital is the key.
Almost none of this discourse with industry, NGOs, academia, and government, has translated into meaningful innovation policy. We have seen federal and provincial programs to support early-stage enterprise, including the Scientific Research and Experimental Development Tax Incentive Program (SR&ED), the Industrial Research Assistance Program (IRAP), the Venture Capital Action Plan (VCAP), and the Investment Accelerator Fund (IAF). But what happens when the companies these programs serve grow and require capital beyond their scope?
We cannot expect taxpayers to fund private sector companies. But, equally so, we cannot spend billions of public dollars supporting scientific research and startups only to have them relocate to the US or other capital-favourable jurisdictions to fund their next stage of growth.
So, what’s the solution?
The answer is complex. There is no single, silver-bullet policy that will address this challenge. Instead, government must strategize a suite of policy options to encourage a diverse and deep pool of risk capital.
Public policy can be used to effectively incentivize investments in strategic sectors. We’ve done it before. Back in the 1950s, the Canadian government began a flow-through share program that incentivized investment in publicly-listed junior resource companies undertaking high-risk resource exploration and development. Fast forward to today and the TSX is the largest natural resource exchange in the world.
There are many other policy initiatives that could help boost access to capital, all of them already well-known: For example, an angel tax credit, modification of SR&ED eligibility for growing companies, modification of VCAP to encourage corporate venture capital and pension fund participants, and initiatives such as the Small Business Innovation Research (SBIR) program – just to name a few. All of these have been tabled with government in past and current consultations. All of these have proponents and opponents.
Therein lies the problem for policy makers: how to know which policies and programs constitute the correct approach. No one has definitive answers. The best we can do is identify gaps, apply solutions, monitor results, and adjust as we go. This can be a difficult approach for government, but it is necessary to meet the rapid pace of transition required in the knowledge economy.
The key here is action, rather than continuing consultation.
Innovation is unpredictable; it will not conform to the lines we dictate and it will not wait for us to align ourselves. To keep pace, government must work to create a more adaptable policy approach. In other words, we must learn to be innovative about innovation.
This will entail setting a clear vision for Canada’s innovation economy over the next 5-10 years, with a suite of strategic initiatives that will help to address the one challenge that is predictable: Growth capital. It is the only way Canada can remain competitive in the fast-changing global economy.
We have the science, the technology, and the talent. What we need now is a plan to get us there and the capital to fuel it.