Neil Seeman is founder and CEO of the RIWI Corporation. He teaches about the Internet and health care at the University of Toronto, and is a senior fellow at Massey College.
As a new recession bites at Canada, let us please start taking innovation seriously.
Around the world, accidental entrepreneurs create hundreds of thousands of jobs and the necessary prosperity that fuels government coffers to pay for public health care and public education. But politicians of all stripes appear to love a different kind of entrepreneur – let's call them co-created entrepreneurs.
An accidental entrepreneur is someone who brings to bear a vision to change the world and possesses a rare combination of risk tolerance, charisma, empathy and demonstrable skills. My own anecdotal experience puts the average age of this special subset of entrepreneur at about 40, meaning that they have real-world experience and are motivated to solve real-world problems.
A "co-created" entrepreneur is someone, perhaps a taxpayer-funded post-doctoral student or academic, who is seduced into entrepreneurship by a government program, by a "centre of excellence funding grant" or by something entirely different – such as being unemployed. The great rolling global recession, about to hit Canada like a boxer's uppercut, will be a boon for start-ups. Some in the co-created group can enjoy great success, but any sober seed investor with experience would put all their chips on the accidental entrepreneur.
And yet, we are often told that risk must be underwritten by government or debt. A recent taxpayer-funded lottery commercial features a young gambler dreaming that she would start her own business if she won. Seriously? In Silicon Valley or Haifa or St. Louis (which is on overdrive with bootstrapped startups), that logic would seem bizarre.
Apple, Facebook, LinkedIn and Huffington Post – such companies always had the ambition to win market dominance in every region of the world, not just in Silicon Valley. By contrast, taxpayer-support programs for co-created entrepreneurs often have as one of their major goals an overtly political agenda – irrelevant to shareholders' interests – of "showcasing" the innovation brand of the host city or region.
For example, at the official 2005 opening of the Toronto-based MaRS Discovery District, Ontario economic development and trade minister Joe Cordiano said MaRS would "serve both as an international gateway to attract new investment to Ontario's innovation corridor, and as a provincial gateway to globally showcase Ontario's world-class research and commercialization infrastructure."
That policy response to Canada's "innovation deficit" will keep failing.
Everyone who has given cursory thought to nurturing entrepreneurialism in Canada – or letting it thrive without too much government muck – knows the faddish policy yarn:
Taxpayers will hire bureaucrats and taxpayer-funded business consultants and give money and advice to really clever people with PhDs and a business plan. Governments then ensure the money gets shepherded to politically fashionable businesses – like clean technology – and somehow expect Canada to upend Israel as Innovation Nation. We invest taxpayer-funded seed capital to support these startups.
Some venture capitalists advising these taxpayer-funded startups even take early equity in exchange for that sagacity. Often, the metric of success is whether the limited partners to the venture fund earn money, not whether they help the entrepreneurs reach tangible business milestones, such as revenues, to maximize the benefits to shareholders. Seldom are even the simplest evaluation measures – such as how many entrepreneurs apply for the seed capital "accelerator" fund – ever published.
Accelerators and government chest-thumping about entrepreneurship expend scarce tax dollars on public relations, notably fancy websites and social-media campaigns, to remind taxpayers how their money is being put to magnificent use in "innovation hubs." Venture fund advisers to these programs range from the well-intentioned and humble to the self-absorbed and media-obsessed. As a general rule of thumb, the more they are quoted in the mainstream media, the less value they add.
There is a saying in Ontario: "If you're looking for real money and real entrepreneurial advice, don't look south of Bloor Street." Many venture capital advisers to accelerators are not entrepreneurs and work well south of Bloor Street. Sadly, this process sets up non-entrepreneurs to fail.
Entrepreneurialism is about failure; ask any early-stage investor. But it's better to fail fast and, if you succeed, to scale quickly. And you are vastly more likely to succeed without top-down government support. It's not just me saying this – it's every objective economic analysis from every part of the world. If you asked entrepreneurs, they would tell you the same thing. Yet in Canada, few soi-disant taxpayer-funded experts talk to real entrepreneurs.
So what should we do?
Kill the incubators and accelerators
Josh Lerner, author of Boulevard of Broken Dreams: Why Public Efforts to Boost Entrepreneurship and Venture Capital Have Failed – and What to Do About It, has decimated the idea that there is any evidence to suggest direct government aid can help entrepreneurs. From Dubai to Jamaica to Taiwan to Singapore to the United States, the co-created entrepreneur model has flopped. You just don't find accidental entrepreneurs in government-funded policy slush.
Throw away the white papers
Many reports on entrepreneurialism are stacked with insights from professional executives, academics and venture capitalists – entrepreneurs themselves are conspicuously not leading the discussion. Publicly funded academics figure prominently.
All of this white-papering is well intentioned. But it cartoons innovation and assumes, wrongly, that entrepreneurialism needs to be "nurtured" with the help of public money and policy advisers. For the taxpayer's sake, let us please rid ourselves of this cognitive bias.
Learn to find accidental entrepreneurs
Most of them live elsewhere. Hundreds of thousands of our accidental entrepreneurs have left for Silicon Valley or Bangalore and will never come back. That is our "lost generation" of accidental entrepreneurs – government incubators won't lure them back.
Henry Fiorillo, long-time early-stage investor and founder of Research Management Group, says that "abundant common sense" is the most critical predictor of entrepreneurial success.
"Not all people who try to create a company are truly entrepreneurs. Most are unrealistic dreamers without a clear vision of how to actually create, organize or grow a venture," Mr. Fiorillo says.
"The 'common sense' entrepreneurs have dreams, but their dreams are well-contained and are focused on the right issues from the get go. They see a market need clearly and they pounce … many of the successful entrepreneurs I have met or been privileged to invest with are truly 'accidental entrepreneurs,' in that some change or changing life circumstance acted as a catalyst to realize the confirmation of idea meeting opportunity at precisely the right time. They don't plan, then it just combusts at the critical moment of opportunity and they seize the day."
Avoid preconceived notions
To know the DNA of accidental entrepreneurialism is to eschew the bunk fed to us from self-proclaimed experts. One of the most misguided pieces of advice from startup "experts" is that there is such a thing as a "natural entrepreneur" – someone with Bill Gates-like traits, whom you will instantly recognize.
Let me be clear: I am not an expert on accidental entrepreneurship – beware those who say they are. I have never seen any rigorous research on accidental entrepreneurs – the idea threatens the very existence of taxpayer-funded accelerators, incubators and MBA programs.
My duty is to make my shareholders extraordinarily rich, and to solve a problem I have been working on for more than 20 years. What I do know is that every accidental entrepreneur who has made a fortune has been told they would fail, and yet they persevered.
It wasn't until I started our company to learn that my father, a neuroscientist, was an accidental entrepreneur. It took him 12 years to identify the antipsychotic dopamine receptor. Now retired as the father of the "dopamine theory of psychosis," he was once ridiculed by government-granting agencies and by scientists at esteemed universities, due to his contrarian (and mostly privately funded) research approach.
He worked backward. "When the cause of an illness is not known," he told me once, "then one approach is to find out what medication alleviates the disease and find out exactly how the medication works. This is how the antipsychotic dopamine receptor was discovered." He has received roughly 35,000 citations to his work and is the only one of Canada's top-cited 20th century scientists who started a life-sciences company.
My father's father came from a small farming village in Poland, arriving in Halifax on a boat in 1925. He got on a train to Winnipeg, where he worked in a dry-cleaning shop, a furrier shop, a glove-making company and finally a small heating-oil delivery company. He saw opportunity and seized it.
I note all this because another of Canada's most well-respected seed investors advised me that the only single isolatable factor that shows positive co-linearity with entrepreneurial success is whether a parent was an entrepreneur. Parents nurture entrepreneurs and risk-taking; taxpayer-funded programs don't.