- Entrepreneurs and startups in Canada must start setting their sights on international markets instead of playing it safe.
- Canadian firms struggle to compete for talent and as such must come up with creative solutions to set themselves apart from other companies.
- The government can help spearhead the charge to promote Canadian startups globally.
There needs to be an overall mindset change that sees Canadians become aggressive at promoting our achievements and capabilities. Global awareness of Canada’s greatness can help our startups become better at commercializing on an international level.
Hello, I am Abdullah Snobar, Executive Director for the DMZ and the CEO of DMZ Ventures. The DMZ is a tech incubator headquartered in Downtown Toronto.
How would you characterize the Canadian innovation ecosystem, and its strengths and weaknesses?
First of all, thank you. I am happy to talk about the Canadian innovation ecosystem and about the strengths, weaknesses and opportunities that exist today.
Canada has seen exponential growth in the number of startups, venture capital investors and global tech giants here. This is a positive sign. Ten years ago, we were in the beginning phases of building up this innovation nation, but today, we are seeing exponential growth.
“The Canadian talent pool is growing faster than that of any other tech market across North America.“
In terms of yearly venture capital records, we have more than doubled it from 2020 to 2021, which is incredible. The Canadian talent pool is growing faster than that of any other tech market across North America. I recently just sat for a copy with an American venture capital investor based in San Francisco, and she said without a doubt that the Canadian talent pool is one of the best in the world, if not the best. It is just incredibly difficult to be able to lock in Canadian talent because they are in high demand.
The number of science, technology, engineering and math (STEM) graduates in the country has grown exponentially. We are now becoming more globally recognized for our immigration programs which help attract highly talented individuals to make Canada home and work within the startup and innovation space.
“The majority of VC dollars go towards later and growth-stage companies, making it hard for high potential, early-stage companies to mature.”
One weakness that we at the DMZ have noticed is that funding for early-stage startups and support for seed financing is lacking. This is an area which can see some improvement. The majority of VC dollars go towards later and growth-stage companies, making it hard for high potential, early-stage companies to mature. This means Canada may end up missing out on startups that have the potential to become the next big business in the country and become a global operation.
Another area of concern is talent. Canada has positioned itself as probably the best hub in the world for talent. Engineers and developers coming out of the space here are becoming sought after quite quickly, but there is also the crunch that comes with that. Across industries in Canada, we are feeling a talent crunch as everyone is looking to hire engineers, developers and data scientists. Many firms end up losing out. The post-pandemic world is going to pose new challenges as no one needs to be physically anywhere anymore. We are shifting into a virtual labour marketplace where I can be a Canadian working for a Seattle firm but still living in Toronto. This kind of arrangement allows workers to make a competitive salary and as such has dramatically changed the landscape.
This is good for talent but difficult for the small businesses trying to hire talent. Startups are definitely at a disadvantage. Part of the nature of the beast is that earlier-stage startups just have smaller budgets for salaries. They typically provide more equity but not as much job security. Startups need to stand out from larger enterprise players that can afford more expensive salaries in order to acquire talent.
What can be done to drive more innovation and commercialization in Canada?
That’s a great question, Tim. Let us talk about some of the high-level factors around making Canada more successful in commercializing innovation.
Canadian companies and organizations need to get better at collaborating with one another to ensure that innovations can be brought to market. There needs to be more teamwork within the startup ecosystem, among incubators, accelerator programs, governments and universities. These kinds of collaborations ensure that our businesses have the right tools to create their intellectual property (IP). There are great programs coming out. The Government of Ontario recently launched a program called Intellectual Property Ontario, which is meant to help businesses commercialize their ideas and products to maximize IP potential and increase global competitiveness. With more collaboration and organizations working in tandem with each other and with more synergy, the potential for these kinds of programs will dramatically increase.
“Canada needs to capitalize on expertise that can set us apart from the rest of the world.”
We also need to look at Canada’s emerging technologies. What are we good at? What are we strong at? When we figure that out, we need to double down on it. Canada needs to capitalize on expertise that can set us apart from the rest of the world. This includes things like artificial intelligence (AI), quantum computing, robotics and even blockchain. We have had immense disruption and there is a lot of potentials. On top of that, we are at the forefront of research. In terms of AI and quantum computing, what Vector Institute is doing here in Toronto has become quite world-renowned, and we need to push these kinds of achievements more. We need to celebrate these things.
Millions of dollars have been invested to ensure that Canada is a leader in many technologies and we need to make sure that our investments are protected. Preventing IP leakage is essential to the future of the country’s economy. These are areas that we should focus more attention on.
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What are the challenges Canadian companies face locally and when expanding globally?
Canadian startups face many challenges when trying to build themselves up for both local and global markets. The biggest issue is customer acquisition potential.
A lot of startups come to the space and are able to build a great product. They are able to understand the problem and market size, and they have a great team. However, they need to actually be able to acquire customers to get the business on its feet. Customer acquisition is a really big challenge and without new customers, startups cannot grow. Entrepreneurs need to work aggressively to implement a customer-centric philosophy in their businesses. They need to get creative and understand how to build better partnerships, pilot strategies and sales strategies.
“Compared to our American counterparts, Canadian entrepreneurs have to wait longer for funding and sometimes receive less money.“
Following customer acquisition, access to capital is also a big challenge. This is still a serious problem for entrepreneurs. Even though we did well in 2021 relative to every other year, compared to our American counterparts, Canadian entrepreneurs have to wait longer for funding and sometimes receive less money. This slows their growth trajectory.
The third challenge is access to tech talent. This has become one of the most important things to talk about globally. I spend so much time talking to founders trying to understand how we can get around this shortage of talent, in particular tech talent. We need to figure out how startups can position themselves as more competitive when they are recruiting individuals. With things like the shift to remote work, the competition for talent has gone global and startups cannot compete with corporate salaries.
“Only about 12% of Canadian SMEs export their products or services globally.“
The last challenge relates to international market challenges. Founders are sometimes reluctant to look beyond their current borders or even the continent they are in. Only about 12% of Canadian SMEs export their products or services globally. Twelve percent is insanely small. Imagine what the missed opportunities are there.
Canadian startups need to think more internationally in order to succeed. Our market in comparison to other countries is very small. Canada is not a place to start, grow and scale. It is a place to start, grow, understand how to pivot, adapt and then build for international markets. We need to shift our mindsets towards international operations.
Who and what would you pitch to improve Canada’s innovation and entrepreneurship ecosystem?
That is a hard one. I could pitch a lot of people but I would pick the government and policymakers. In order to be the best at what we do, we need to have the right mindset. We need to be great. This is one of the key DMZ values that we stand by every day. Canadian businesses need to build a winning mindset that has the potential to make Canada a leader in the innovation economy. We are doing incredible things, so we should talk about it more. Let us make this mindset mainstream so that it is understood by Canadians across the entire nation. We need this mindset to be part of our DNA.
“The Canadian government needs to assert its position on the innovation stage as a global leader. Now is not the time to be humble.”
The Canadian government needs to assert its position on the innovation stage as a global leader. Now is not the time to be humble. Now is the time to be out there, aggressive and proud.
When we are on the international stage, people like the Prime Minister (PM) can do a better job promoting Canada. Politicians should be intentional in having a delegation of startups that are high potential join them. What the PM can do in terms of opening up doors, startups can never do on their own. They are ready to do that and engage with the right customers and governments globally. The difference in the timeframe for how long startups can make their own connections as compared to how long it will take our PM or government to do the same is staggering.
When we start positioning ourselves globally, we can no longer go to things like the Dubai Expo and show up but not show out. We need to change that narrative and dynamic. If we are going to be somewhere, we need to be there 100% and be great.The final thing I would point out is that we need better processing times for programs like the Canadian Global Talent Stream and the Start-up Visa Program. Those are incredible programs but they are often delayed. People who are looking to come to Canada are being held back. They are not actually able to bring their talent here as fast as we want them to.