Benjamin Bergen is executive director of the Council of Canadian Innovators.
Last fall, economist Robert Reich warned the U.S. public of the growing influence America's largest tech firms have on public-policy levers and the inherent risks of a well-funded lobby having the ear and attention of their government.
In an essay in the New York Times, he described how the big U.S. tech companies that own the intellectual property (IP) – the gold of the new economy – are effectively lobbying, lawmakers and members of the administration to create rules and regulations that enable them to "win the game" and by creating monopolies both domestically and internationally.
As a large net IP importer this concentration of power has significant consequences for Canada, especially given the "winner-take-all" nature of high tech.
Canadian tech faces a different challenge from our southern neighbours. Domestic firms are struggling to scale up globally and have not had the kind of strong relationship with government that is needed to build a dynamic environment for domestic tech companies to thrive.
It has been noted in this newspaper that Canada doesn't have a startup problem, but rather a scale-up problem. This is not just an obstacle for our technology sector but a warning sign for our continued future prosperity. It is essential that Canadian-based tech innovators are at the centre of the Trudeau government's "innovation agenda."
Companies attempting to scale up face different challenges than startups. Defending a profitable business model in a highly competitive environment is the top priority for scale-up CEOs. The ability to navigate complex "freedom to operate" issues such as technology standards, harmonization, regulatory environment and IP regimes is the difference between a $10-million company and $1-billion company.
A single decision in any one of these areas can mean a difference between a company peaking early or scaling into the billions of dollars of sales. That's because, as Mr. Reich notes, the market for ideas – where additional production costs range from low to zero – is decided by legislators, judges, regulators and agency heads.
Just a few weeks ago, Facebook's Mark Zuckerberg was in Germany on a four-day charm offensive meeting with Germany's legislators, including Chancellor Angela Merkel's chief of staff, who are trying to limit Facebook's freedom to operate. Uber is doing the same in Canada and elsewhere, as is Google in Brussels.
How do we take a Canadian technology company with $10-million in revenue to $100-million and then $1-billion and beyond in an environment where additional production cost is zero? It starts with building a sophisticated private-public partnership focused on Canadian scale ups, Canadian entrepreneurs and their products. This partnership can only be built by CEOs working with government. Canadian scale-ups are finally taking a page out of their U.S. counterparts' playbook and reaching out to decision-makers to identify and resolve issues that are central to their companies.
When CEOs have a direct line to public officials, they can work with them to remove roadblocks and advance the interests of scaling companies. When our public officials have direct and unfettered access to data from the front lines of Canadian industry, they can devise strategies that help – not hurt – Canadian high-growth companies.
This should be done in a respectful, transparent and accountable manner. And Canadians have a vested interest in the outcome of this agenda: The dividends of a successful company in Canada are received through the payment of corporate and personal income taxes, which in turn support important public priorities such as health care, education and critical infrastructure.
Building a sophisticated public-private partnership focused on scaling Canadian companies is easier said than done. Navigating the complexities is not easy, for the CEOs or for the public-sector leaders. Our public officials did not have the benefit of direct feedback from Canadian scaling up CEOs until this past December. We cannot expect our elected officials or civil senior servants to devise national and international prosperity strategies without collaboration with Canadian high-growth tech companies.
Scale-up CEOs also face challenges themselves: a report commissioned by the Centre for Digital Entrepreneurship and Economic Performance recently pointed out that Canadian tech ecosystem lacks a quality network of mentors who can help current CEOs manage freedom-to-operate issues, while providing advice on growth strategies. The number of Canadians who know how to navigate strategic regulations, harmonizing, technology standards, IP regimes and know-how to take a tech company from $10-million in sales to billions can be counted on one hand. Among them, most are currently outside Canada. That's a significant challenge facing Canadian innovators and our economy as a whole.
But there is reason for optimism. We have a new government determined to make innovation the centre of its economic platform. Our council's call to organize the most promising tech companies across the country and establish a dialogue with relevant public officials on how to achieve goals on both sides of the coin started with 18 companies and now includes 40.
An innovation agenda is a historic opportunity for Canadian entrepreneurs and Canadian policy-makers to come together and build a sophisticated partnership to create wealth from Canadian ideas for the benefit of all Canadians. Our country's scale-up CEOs are ready to do meet the public officials halfway and do their part in building a more prosperous country. We hope the government is ready, too.