Canada has a thriving innovation ecosystem however one with many smaller firms which might be closely depending on overseas consumers to assist them flourish and maximize the worth of their intellectual property (IP), enterprise analysts say.
“We don’t have sufficient Canadian consumers inquisitive about our personal know-how,” mentioned Barry McKenna, creator of two experiences on Canadian IP revealed in June by the Innovation Financial system Council (IEC).
McKenna was talking in a video proven at an IEC roundtable of enterprise consultants and entrepreneurs discussing IP in Canada on June 3. The IEC is a coalition of tech-sector leaders aiming to form Canada’s industrial innovation coverage.
“Additionally we don’t have the businesses which might be on the prime of the chain specifically industries … in order that when a younger firm begins to develop they usually search for a associate, the associate isn’t down the road, it’s … fairly often in the US,” McKenna added.
Canada ought to be a vacation spot for innovation to develop and scale up, not only a supply of firms enticing to overseas consumers, he wrote within the IEC report titled “Beyond Patents: Canada’s Intellectual Property Puzzle.”
In contrast with different nations, Canada has all the time struggled with scaling up firms, and one of many primary challenges is an absence of latter-stage capital, says Krista Jones, who mentors high-growth startups as VP of enterprise providers on the MaRS Discovery District innovation hub in Toronto.
One other problem pertains to recruitment of tech expertise. “We additionally must grow to be a vacation spot for product folks—individuals who know learn how to construct category-leading merchandise—and to have the ability to anchor firms with that functionality,” she mentioned.
The Proper Match
There’s a constructive facet to overseas takeovers, as firms that discover the suitable purchaser can innovate extra, rent extra, and commercialize extra, McKenna mentioned.
George Tsintzouras, CEO and co-founder of Alert Labs, offered his firm to an American purchaser however retained a separate entity in Canada. His firm within the Waterloo area makes good constructing sensors to assist prospects higher handle water and power.
“Being half of a big U.S. firm on this case opened up large markets and alternatives for us, and I feel that’s one thing I don’t assume we speak sufficient about,” he mentioned on the roundtable.
Consultants interviewed by the IEC are usually not in favour of proscribing takeovers or patent gross sales to stop foreigners from buying Canadian IP.
“A free and open M&A [mergers and acquisitions] market is broadly seen as important to making a vibrant know-how ecosystem,” McKenna wrote in one other report for the IEC, titled “Ideas for Sale: Why IP is a Symptom, Not a Cause, of Canada’s Failure to Scale.”
However because the so-called forex of the information financial system, IP does current a thorny situation the place care have to be taken to keep away from having Canada’s comparatively open financial system being exploited by overseas nations or firms. On this situation, McKenna supplied a telling instance of how an acquisition might not be in Canada’s greatest curiosity—and the place restrictions are wanted.
“We’ve seen instances of considerations about Chinese language firms pouring cash into analysis at Canadian universities, after which principally taking no matter innovation comes out of that again to China,” he mentioned within the video, noting that “you draw the traces round issues which have nationwide safety implications.”
High quality Not Amount
A key takeaway from the roundtable was that it’s not about how a lot IP an organization has that influences its success, however what it does with that IP.
“I feel it’s extra necessary actually that firms, slightly than the nation, have good IP insurance policies, as a result of firms that know what they’ve by way of know-how that’s particular and distinctive and know what to do with it … are those that finally are going to achieve success,” McKenna mentioned within the video.
The “Past Patents” report famous that Canada’s most profitable tech firm, Shopify, has fewer than 10 patents.
The funds an organization has for its IP technique additionally issues. As bigger firms purchase smaller ones and acquire management of extra IP, they construct up a stronger core of IP that may bode nicely for his or her long-term prosperity, mentioned David Asgeirsson, supervisor of analysis partnerships and IP at Xanadu Quantum Applied sciences Inc.
Patents, a key a part of most IP methods, add worth that would show helpful in a future merger or authorized dispute, they usually present buyers and companions that an organization is aware of what it’s doing and has invented one thing novel, in response to the “Concepts for Sale” report.
However a key weak spot of firms is failing to establish and deal with delicate data, in response to worldwide legislation agency Norton Rose Fulbright within the “Past Patents” report.
Canada ranks poorly amongst its friends in patents filed and has misplaced loads of IP by takeovers, however the “Concepts for Sale” report means that the IP loss is, in some methods, an indication of a wholesome ecosystem that’s producing good concepts, gifted folks, and attracting overseas consumers.
It says there’s little proof of a hollowing out of Canada’s startup sector since simply one of many 400 Canadian enterprise capital-backed startups concerned in buyouts since 2017 has failed.
Nonetheless, Jones hopes Canada turns the tide of the movement of IP.
“Acquisitions are usually not dangerous. … That’s the pure place for sure IP to finish up, mixed collectively as a part of giant multinationals. What’s dangerous is that Canada isn’t the vacation spot,” she mentioned.
The federal government is energetic in Canada’s enterprise capital area, and BDC Capital, the funding arm of the Enterprise Growth Financial institution of Canada (BDC), on June 8 introduced the launch of a $300 million fund to assist late-stage progress firms.