Well you’d had to have avoided both our national newspapers this morning to not notice that Canada is ‘mediocre’ at innovation….
The Canadian thing to do is stick up for our country. “We are so innovative,” etc… well the truth is Canada is innovative but Canadians rarely reap the benefits of innovation, so there is little incentive to be innovative. I personally believe our R&D is second to none, but there is a heck of alot less of it than in other countries on a strictly per-capita analysis.
The question of course is why?
I’m going to posit a really easy explanation.
While the Conference Board report noted that our government offers some of the best tax break and incentives in the world to do R&D here, the report only glanced at the point of R&D… to make money. Canada’s VC industry, you know the guys that actually take the R&D, commercialize it and help make them great companies, are gone.
Thats what Edgestone Capital Partners has found:
In 2001, at the height of the dot-com boom, this great land was home to 55 venture capital funds that were targeting technology companies – in other words, searching for the next Research In Motion. Those 55 Canadian fund managers had more than $4-billion to invest.
We all know what happened next. The tech bubble burst and a whole lot of venture capitalists went bust.
Last year, there were just 12 domestic funds working in this same space, and they had about $1.5-billion to invest, according to statistics gathered by Edgestone Capital Partners.
Without the dramatics, the study also showed that while the available capital went down the number of decent financing opportunities in IT and Software or ‘investable ideas’ deals remained steady at 150 each and every year…. I’m sure that for Biotech and other industries this was also the case.
Thus, good R&D never got commercialized by Canadian VC’s because they aren’t here. So why innovate? While I can point to bright spots here in Canada on the VC front the overall reality is still quite dark… perhaps the government should start concentrating on encouraging VC investment…
I’m not alone in this, What was the number one recommendation by the conference board?
1) Focus investments on commercialization.
Ian Graham
June 19, 2007
Hi Matt,
Interesting post and one that certainly hits close to home for me. I agree with the concept of your article but have a slightly different take on the innovation challenge. Personally I believe that Canadians rarely reap the benefits of innovation because of our failure to commercialize rather than our ability to innovate.
There is a great report by Joseph Rotman from the University of Toronto entitled “People and Excellence: The heart of successful commercialization”. The report details the challenges Canadians are facing with respect to commercialization and presents a number of recommendations on how to improve. Canada lags well behind the US in commercialisation. Some Statistics from the report:
- Canada productivity gain from 2001 – 2005 0.7% per year
- US productivity from 2001 – 2004 3.8% per year (from Federal Reserve Bank of San Francisco)
- US – Canada Wage gap in annual income is $8,200USD
Early in the report it describes two sides to the commercialization process; the supply side, and the demand side. The supply side in Canada is doing reasonably well; however, our ability to manage the demand side is problematic.
I think you hit the nail on the head with your last line of the post and quote from the conference board:
Canada needs to focus on commercialization.
Cheers,
Ian Graham