Yung Wu is CEO of MaRS Discovery District
Entrepreneurs everywhere are scrambling for lifelines during this crisis. In recent days, we’ve heard appeals from aviation, energy, agriculture, small business – anyone with payroll to meet and a business they’ve poured blood and treasure into is trying desperately to save it.
In that sense, the innovators behind Canada’s startup companies are no different. What is different is that our public investment in them comes with an extraordinarily high return: Canada’s economic future.
Startup economics don’t leave much room for safety nets. Product development is expensive, fundraising is continuous and actual profit is often sacrificed in the name of customer acquisition and growth. These companies are rarely able to marshal the kind of cash a mature company might stash away to weather an economic storm. At the best of times, they need nurturing, so they need it more than ever now: Not just money, but time – time to make tough decisions, pivot and make good on their potential.
They’re startups now, but these companies want nothing more than to grow up into providers – big companies that change the world, become profitable and sustain good-paying jobs. Only a certain number will survive to do that, but nurturing increases the odds. If we stop helping them at this moment of crisis, our future economy will start from zero afterward.
And we’ve come too far to let that happen. Canadian tech entrepreneurs have made tremendous gains over the past 15 years, thanks to the support of all levels of government. Incubators, grant programs, investment funds, trade missions – all this nurturing has helped to build a vibrant ecosystem that’s driven huge growth in jobs, investment and economic activity.
Toronto alone added 10,000 new tech jobs last year, fuelled by a record $3.1-billion in venture capital. Across the country, more than 60,000 workers a year are joining the tech sector, drawn by work that pays 51 per cent more than the average private-sector wage.
And it doesn’t exist in a vacuum. Startups plug their innovations into a network of advanced industries that rely on advanced technology: energy, health, manufacturing. As a group, these industries drive 17 per cent of national GDP and 11 per cent of national employment. That’s a giant network of customers, clients and suppliers that stand to lose if the startup ecosystem fails.
I’ve been speaking directly with many Canadian startups in recent days. They’re doing all they can to stay afloat, to close deals, to keep as many people employed as possible. We can’t stop nurturing them, especially at a time of intense disruption. Governments at all levels need to do their part.
And while the federal government has generously offered to backstop 75 per cent of wages across the board, there’s still more to do specifically for the tech sector. That’s why, recently, more than 600 tech chief executives wrote to both the federal and Ontario governments advising them on the best ways to protect our tech sector during the COVID-19 pandemic and beyond.
In the short term, that means startups need swift measures that will buy them time to look at their balance sheets, evaluate their trajectories and make the best possible strategic decisions about the path forward. Here are a few such measures, gathered in consultation with the startups I’ve been speaking to:
- Federal agencies should be fast-tracking due-diligence procedures and accelerating application processes to get cash moving. For the right startups, they should be offering low-interest loans with deferred payments. Other funding programs should be expediting payments and eliminating what are known as “stacking limits,” which prevent startups from combining funding from a variety of sources.
- Governments should also be deferring the collection of employee income taxes, payroll taxes, corporate taxes and rents, to make sure everyone can pay their bills during a period when people and their businesses will face many challenges.
- Governments at all levels should be endeavouring to procure goods and services from domestic companies – enterprise technology providers, infrastructure companies, health tech firms. They should be asking other industries that receive stimulus money to do the same.
- The provinces should retain targeted innovation tax credits, such as the Ontario Innovation Tax Credit, while working with Ottawa to accelerate reimbursement through federal programs.
Look, if anyone knows about disruption, it’s startup companies. Like other industries that need help right now, they understand that even these emergency steps can’t save all startups or all jobs – the strongest will survive.
But the right measures can ensure that Canada’s most promising startups get nurtured through this crisis, and that they emerge from it with the resilience and financial capacity to lead the recovery. If we lose them, we lose our economic future.
CONTRIBUTED TO THE GLOBE AND MAIL
The Globe and Mail, April 1, 2020