Pathways Magazine leverages the collective wisdom of 4,200 angel investors that have invested $1.12 billion into 1500 companies. This podcast will take you on a journey into the depths of the innovation economy and bring you the knowledge you need to build, grow and scale at the intersection of innovation, capital and entrepreneurship. Subscribe to the magazine at www.pathways.news.
Why Canada needs a post-pandemic prosperity strategy
Benjamin Bergen is Executive Director of the Council of Canadian Innovators, a national business council led by the CEOs of Canada’s fastest growing technology firms.
It’s easy to be a pessimist these days. We have now been slogging through the turmoil, strain and heartache of a global pandemic for more than a year — long enough to grind anybody down. But by their very nature, innovators are optimists. We don’t accept the world as it is today. We insist that it can be better, and when we see problems, we work to make it better by building the solutions.
Innovators have helped carry us through COVID-19. E-commerce, cloud computing and an array of other technologies have saved countless lives by allowing us to continue working in our socially distanced reality. What’s more, innovative, cutting-edge techniques allowed us to develop vaccines at breakneck speed. As we look toward putting COVID-19 behind us, our world will only be more data-driven and technology-infused, and when the post-pandemic recovery comes, we can be sure that it will be led by innovative companies. There’s no guarantee, though, that Canada will enjoy the full benefit of this economic boom. If we aren’t engaged and proactive, Canada can’t expect to claim its share of the global knowledge economy. If we don’t put the right policies in place to support homegrown Canadian innovators, there is a very real possibility that Canada will be left buying technologies and services from the countries that get it right, and we will all be poorer for it.
A thriving innovation economy is an ecosystem, and everything is interconnected — high-growth scale-ups, emerging startups, established players, research institutions, venture capitalists, angel investors and public policy experts. A growing, prosperous ecosystem creates wealth in terms of equity and intangible assets, which get invested back into the ecosystem, driving the next generation of growth. This growth also creates public wealth in the form of taxes, which help pay for the social services we all value as Canadians.
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Season 2 Preview
Season 2 is packed with actionable content and intimate conversations.
For pure concentrated knowledge on mobilizing capital and scaling the next massive global success story, we will be interweaving content from a Practical Guide to Angel Investing and you will hear from over 100 prominent thought leaders at the intersection of entrepreneurship, capital and innovation, including:
Arlene Dickinson from CBC’s Dragon’s Den to help you descipher between good and bad angels, We have The Untold Story of SkipTheDishes with co-founder Chris Simair who's also building Harvest Builders and connected to NEO Financial which raised $50 million in financing from prominent angel investors across North AmericaWe have Charles Plant, founder of The Narwhal Project on how $27 billion was created by made in Vancouver success story Slack. Raine Maida, lead singer of Our Lady Peace, will be talking NFTs (non-fungible tokens), the new craze that's eclipsing bitcoin. John Ruffolo, Founder and Managing Partner of Maverix Private Equity shares his insights on raising a $500 million fund; and Raising Canada's Largest Venture Fund for BIPOC Founders is Sheldon James, CEO and managing partner at Bay Mills Investment Group after making headlines and being featured in Forbes on the amazing work underway. And many more, entrepreneurs, innovation leaders, angel investors, and venture capital fund managers
Absolutely Critical to Preserve Diversity of Tech Sector: Laura McGee, CEO and Founder of Diversio
“We crunched data a few weeks ago and the risk that the pandemic poses — in terms of erasing the gains that Canada has made on supporting diverse entrepreneurs — is significant and undeniable. The proportion of women-led business in a ‘do-nothing scenario’ will drop from 17% to 12%. Businesses everywhere are struggling and failing. According to our statistics, the diverse ones are going down quicker and more frequently. We all know diversity leads to better results so, in my view, it’s absolutely critical to preserve that diversity to the extent that we can in order to have a thriving economy that comes out of this.”
— Laura McGee
Small Business is 98% of Our Economy: Frances McRae, Assistant Deputy Minister of Small Business and Marketplace Services Innovation, Science and Economic Development
“You’ve heard the government say they are not afraid of adjusting the measures that have rolled out. Getting money out there as quickly as possible was important, but there would be adjustments. I think that’s what you’ve seen the government do the last number of weeks — they’re not afraid of saying they need to tweak, add more programs, expand eligibility and change program parameters.”
— Frances McRae
Government Should Leverage Angel Investors: Michael King, Finance Professor at the Gustavson School of Business, University of Victoria
“To get to the punchline, the government should set up a co-investment fund that matches angel investments dollar for dollar. It should adopt a national tax incentive scheme that already exists in British Columbia, Saskatchewan and Nova Scotia. And it should consider replacing the loans that are being made available through its support packages with convertible notes. The Canadian government should leverage angel investments to ensure that early-stage, high-growth companies are going to survive and thrive despite the pandemic.”
— Michael King, Finance Professor at the Gustavson School of Business, University of Victoria
Government Funding to Survive the Crisis: Opening Remarks by Claudio Rojas, CEO at NACO
The combined impact of the health pandemic and economic crisis hit hard and fast. This resulted in initial government relief taking what was described as a “people first” approach, with an emphasis on employees at risk of layoffs, and trying to minimize the impact on individuals. –– All of this was focused on helping to flatten the curve. And the curve is flattening.
As provinces begin to slowly open up, the longer-term economic realities are starting to take hold.
In a recent survey conducted by the Council of Canadian Innovators (CCI), 76% of respondents said that without capital and customers, their companies will continue to be reliant on government relief programs to sustain themselves and their workers.
Compounding this issue is the lack of available capital in both the current environment, which was already an issue in emerging ecosystems prior to the crisis.
In preparing NACO’s Canadian Angel Activity Report, to be released next month, our research indicates that angel investment activity continues to be distributed unevenly across Canada. Central Canada (Ontario and Quebec) account for 86% of investments compared with 13% in Western Canada and 1% in Atlantic Canada. Central Canada’s dominance is even greater in terms of the amount invested, accounting for 94% of the total.
Big cities do not have a monopoly on great founders or world-class companies.
When entrepreneurs in emerging ecosystems don’t have adequate access to local capital, as a nation – we miss the opportunity to produce more world-class companies like Skip the Dishes in Winnipeg, Slack in Vancouver, Solium in Calgary, and Verafin in St. John’s.
According to Entrevestor, most funding generated by Atlantic Canadian companies comes from outside the region.
St. John’s based Verafin - supported by local investor Mark Dobbin from Killick Capital and Toronto-based Information Venture Partners - speaks to the importance of national connectivity between regions - and the power of local capital within an integrated national funding continuum. The combined effect of local angel investors in St. John’s and venture capital from Southern Ontario, is Verafin – a company that has 300 employees in Canada, over $100 million in annual recurring revenue, and this past September announced the completion of a $515 million equity and debt recapitalization.
Verafin is a massive Canadian success story.
What does all this have to do with unlocking government funding to survive the crisis?
As has been discussed in past roundtables, the current focus of the policy response is emergency relief – with the view that later, weeks or months from now, the role of startups in the “economic recovery” will move into greater focus. However, if high growth companies don’t survive the crisis, there will be nothing to recover from. Startups in particular are at risk with a lack of financing options available to them.
That said recent announcements to extend relief to pre-revenue companies is promising. And we commend the government on their efforts. But the point still needs to be made –––
Without startups there are no scale-ups. Without angels, there is no funnel of high growth companies for venture capital.
In our last roundtable Janet Bannister, Managing Partner at Real Ventures, referred to the narrow focus on scale-ups in recent years, as equivalent to Canada producing a strong cohort of graduate students, and pulling back support for earlier education.
In the economic recovery following the crisis, we need an even stronger and more vibrant pipeline of startups than existed in the past, to produce a stronger and more robust wave of scale-ups and high growth companies to lead the economic recovery.
The stakes are high and Canada’s economic future hangs in the balance.