We need a national strategy to support and encourage innovation and entrepreneurship. This position paper outlines several dimensions of such a strategy, but does not (nor could it) describe all the details. These details need to be shaped by engaging all Canadians in a dialogue.
We recognize that there is a considerable amount of expertise (in how to encourage entrepreneurship and innovation) that already exists. We need to shape the details of our proposed national strategy by engaging with the stake-holders, community leaders, innovators, researchers and experts in innovation and entrepreneurship. An important dimension of this new national strategy is that it should be a coordinated approach, where information is easily obtained, and duplication of services is avoided.
A new national strategy should not be narrowly focused on science and technology. Nor should it have a narrow definition of “entrepreneur” and “capital accumulation”. It should also promote “social entrepreneurs” who create “social capital”. This strategy should contain a national network of mentorship schemes, where seasoned entrepreneurs provide advice and invest their own capital in business ventures that have high probability of success.
This strategy should ensure that the government does not compete with independent venture capital funds by reorganizing regional development agencies and the Business Development Bank of Canada to focus on developing and financing private sector venture capital funds along with labour-sponsored funds and community economic development investment funds where the funds themselves chose the companies in which to invest.
The national strategy should reach down into the education system, into the schools and universities. If we can generate world-class hockey players by the age of 20, we should be able to do the same for businessmen and women by the time they reach 25.
We want to build a better Canada. To do so, we need to harness the expertise, talents and abilities of our people to improve existing social and economic conditions.
Across Canada, there are particular challenges to enhancing productivity and innovation, and to ameliorating the “poverty of opportunity” that exists for too many of our people. To address these long-standing issues, new forms of collaboration, involving many different partners from many different sectors of society, are needed.
We can only make a difference if our energy, enthusiasm, and expertise is deeply engaged. We need to find new ways to create new opportunities for ourselves and for others.
It is not sufficient to merely lower taxes to create an environment where businesses can flourish and entrepreneurship is encouraged. We must have more tools in our toolbox than that. Lowering taxes does not – by itself – produce the entrepreneurial environment required to generate the gains in innovation, productivity, jobs, and wealth creation that are required.
I believe in a strong role for government to promote and support business and entrepreneurship.
Currently, Canada is a below average performer in its capacity to innovate. In June 2011, the Conference Board of Canada looked at the link between advanced skills and innovation performance in a group of 17 advanced countries. Canada ranked 14th out of 17, and received a “D” grade.
Countries with the highest overall scores not only spend more on science and technology but also have successfully developed national strategies around innovation and entrepreneurship. That is what Canada needs.
Current efforts to stimulate innovation and entrepreneurship suffer from several problems. For example, these efforts are carried on by many different organisations, with both Federal and Provincial levels of government running many different programs. Currently the federal government alone spends over $10 billion and forgoes nearly $4 billion annually (in research tax breaks) to subsidize science and technology – but the money is funnelled through myriad agencies and granting councils.
What needed is bringing all of these programs under one umbrella. We need a coordinated approach, not a huge orchestra without a conductor. We need to avoid wasteful duplication of services. We need one portal, one website, with many different “doors” depending on (a) the nature of the entity seeking assistance (business, academic, community, HGOs), and (b) the type of assistance required.
Secondly, there is too narrow a focus on science and technology and too narrow a vision of what it means to be an “entrepreneur”. We need to broaden our vision to encompass “social entrepreneurs”.
Social entrepreneurs identify a social issue and use business and management methods to organize, create and manage a project to achieve social change that addresses that issue. Social entrepreneurs focus on creating social capital (cooperation between social groups) and advancing social and environmental goals. They do more than just design products or a solution to make a profit. Social innovations are ideas that meet social needs and help to strengthen society.
By broadening our focus beyond science and technology, and by broadening our definition of entrepreneurship, we aim to promote the values of innovation and entrepreneurship.
A third problem with many national programs is lack of mentorship. This lack is being addressed in some jurisdictions on a small scale. New Brunswick, for example, has established a Network (called the First Angel Network) that links innovators with experienced entrepreneurs and high net worth individuals, who not only mentor new innovators but also invest their own money in the new start up companies.
The success of such Networks suggests that any national program must be carefully designed to ensure that government does not compete with independent venture capital funds. Rather, regional development agencies and the Business Development Bank of Canada should focus on developing and financing private sector venture capital funds along with labour-sponsored funds and community economic development investment funds where the funds themselves chose the companies in which to invest.
There are other initiatives underway throughout Canada – but they are not coordinated nor well advertised. It takes someone with a research degree to even find out about them! In the coordinated approach which we recommend, mentorship programs and Angel networks would be one “doorway” on a single all embracing umbrella agency that seekers of assistance can easily find.
An initiative worth noting is being undertaken by the Deshpande Foundation. It aims to establish networks housed in universities across the country to promote innovation and entrepreneurship. These networks aim to link innovators to seasoned entrepreneurs (called Catalysts) to help them nurture their ideas and take them successfully to market. The cornerstone of these Networks is a Grant Process that allows for innovators to test their early stage ideas and to prove their concepts – a sort of Dragon’s Den.
The Deshpande Foundation also has expertise in fostering “social entrepreneurs”. In Hubli India they have provided the physical infrastructure and the grants to encourage non-profit organizations to come up with innovative, entrepreneurial solutions that address local community issues. It empowers the youth to become leaders within their communities and gives them an outlet for creative problem solving.
It is our position that there is much to learn from such initiatives, but that we should not be relying on foundations to establish what Canada needs. Such networks should exist in all the universities, social infrastructure programs should exist in all our major communities, and should be established as a priority.
We are not alone, nor the first, to recommend a national strategy. The Conference Board of Canada has made such a recommendation and our proposal has drawn on their work.
As far as aims are concerned, the three aims of our national strategy would be: (1) to promote the value of business, innovation and entrepreneurship across Canada; (2) to invest in Canadians to be better enable them to become entrepreneurs; and (3) to provide an environment that encourages venture capital. We expand on these aims below.
1. Promote values
I want to increase Canadians’ awareness of what it takes to build and sustain a positive business environment.
Engage Canadians in a conversation about the positive value of business, innovation, profit, wealth creation and entrepreneurship.
Work through business incubators to identify entrepreneurs currently in non-entrepreneurial positions and encourage them to start new ventures.
Help business owners make their businesses “investor ready” by significantly lowering the cost of consulting programs.
2. Invest in Canadians
The skills necessary to be successful in business have to be shared with Canadians. For young Canadians, we have to increase the opportunities to develop management know-how. If we can generate world-class hockey players by the age of 20, we should be able to do the same for businessmen and women by the time they reach 25.
While many co-operative programs exist in schools and universities, many of them are dormant. It is difficult to find businesses willing to take on interns. This problem could be circumvented by giving companies willing to participate refundable tax credits for every intern they take.
Furthermore, co-operative programs should be expanded to allow students to work for themselves.
Develop a youth mentorship program to encourage those young people naturally inclined towards business to develop their ability to become successful business people.
Work with the provinces to increase the level of business education and financial literacy in particular.
Better coordinate and reduce overlap between the business support services that currently exist.
Provide tax incentives for family members who invest in a loved one’s business.
3. Provide an environment
Any successful entrepreneurial venture needs to have access to financing. Government has a role to play in assisting in the creation of an environment that encourages venture financing, including the option for foreign investors to participate.
Engage the private sector, universities and the provinces to develop business incubators in every province. Business incubators are programs designed to accelerate the development of entrepreneurial companies through an array of business support resources and services. Bringing entrepreneurial companies in the same field together in the same location, like IT companies in Silicon Valley, also encourages synergies. Engaging the private sector, universities and the provinces would ensure that a national program has the flexibility to support business incubators in fields appropriate to local strengths and business environments.
Encourage foreign investors to participate as partners with domestic venture capital.
Ensure that government does not compete with independent venture capital funds by reorganizing regional development agencies and the Business Development Bank of Canada to focus on developing and financing venture capital funds like labour-sponsored funds and community economic development investment funds.
Any proposed initiative should carry a dollar costing to ensure that money is being spent in the best possible way. We are not yet in a position to provide such a costing.
Nevertheless, there are several reasons to believe that the cost of a national strategy to promote innovation and entrepreneurship would be mitigated by two important factors.
First, much money is already being spent, but in an uncoordinated way with many services duplicated.
Second, fostering innovation – when successful – brings returns much greater than the initial investment. As an example, the New Brunswick Innovation Foundation (NBIF) invested some $300,000 in a local start-up company called Radian6. Radian6 was recently bought out and NBIF sold its equity position for $9 ¼ million – money which we be reinvested in new startup companies.
A national strategy to promote innovation and entrepreneurship is a no-brainer. It’s a win-win situation for every Canadian. Let’s just get on and do it.