canus
Business Management

Canada Tech Bemoans Lack of VCs and Leaders

There's no shortage of innovation in Canada, but that creativity can go nowhere without confidence – and confidence is possibly the Canadian tech sector’s rarest commodity. But there are ways to turn this to your advantage, as we shall see.

There are plenty of graduates of Canada’s many fine universities with get up and go. But they all seem to have got up and gone, mostly to the US. Canada is losing talented entrepreneurs, programmers and developers to the US tech hubs: around 350,000 live and work in Silicon Valley alone, according to Canadian startup accelerator Business Instincts

Canada has its hidden advantages, but much of its young talent is demotivated by the lack of private venture funding. There is government funding available (of around $500,000 Canadian (US$480,000)) up for grabs for any inventor prepared to jump through civil-service hoops. But venture capital isn’t the whole story anyway, according to some entrepreneurs.

“This is a good place to be a startup,” says Vancouver-based Nathaniel Payne, director of research analytics at Overinteractive Media, which aims to use analytics to help media companies make more intelligent media buying decisions. “The problem is raising money. Investors here are much more conservative.”

Canada lags behind the US in its use of business analytics, some argue, so there’s enormous potential, but here the lack of a VC culture has a knock-on effect. Canadians are less confident about changing the way they do business and prefer to take a lead from their neighbours, say many entrepreneurs interviewed here.

“In the US, analytics is a weapon that companies use,” says Payne. The problem that Canadian industries have – even the media – is that the mindset of the end-users is less adventurous.

“Sometimes we want to do something with the data piece but we can see people in meetings who don’t have a handle on it or the background to digest it. So we know they’ll torpedo our ideas.”

Often, new ideas are not accepted if they are homegrown and there is a tacit acceptance that innovation and leadership must come from the US.

Even industries where Canada has a massive home advantage fail to capitalise.

Dustin Sporat made his name as a professional ice hockey player in the (North American) National Hockey League. In Canada, where ice hockey is considered the national sport, one might expect a ready-made market for Sporat’s company, Schnarped, to tap into the fanatical fan base. Its flagship product Fist Pump is a mobile phone app that allows fans and players to connect with each other. Instead of physically fist pumping (as players do with each other after scoring or taking out an opponent) the fans can carry out a cyber equivalent via their iPhone or Android device. There’s massive enthusiasm for the app, but the commercial possibilities haven’t been exploited yet, because Sporat has found it difficult to get support.

“There is no money for venture capital. And even if you did get it, you then need to convince people you can get from step one to step two to step three,” says Sporat.

Sporat says he unwittingly discovered a more supportive community when he enrolled to study for an MBA when he hung up his hockey stick and went back to university in Vancouver.

“The lack of senior executives in the area is possibly more of a handicap,” says Scott Morrison, chief technology officer at Vancouver-based API gateway software vendor Layer 7, which was recently snapped up by CA Technologies after 11 years of progressive growth.

“Vancouver has three good universities and tons of talent, but it punches below its weight because it hasn’t got the depth of experience and management you might find in, say, the Bay Area [of California],” says Morrison.

Morrison had a track record as a senior architect at IBM, then involvement in startup Infowave. Morrison says some intellectual capital is rarer then venture funding.

“If you want strong senior management, you have to recruit them from elsewhere, because there aren’t enough people with the depth of experience here,” says Morrison. Layer 7 had to recruit one vice president from Atlanta and another from the Bay Area. Luckily, senior managers can be persuaded to make the two- hour plane commute from the US. But being in close proximity to Seattle and California means most of the young talent created by Vancouver’s three universities heads the other way.

They may be missing a trick though. The advantage that Canadian startups have is they aren’t in an over saturated market. Their rivals in Silicon Valley are a bit like wannabe actors in Hollywood. Every waiter and taxi driver in California seems to have a dotcom startup deal, or so they’d have you believe. It’s hard to draw attention to yourself in these circumstances.

“They are innumerable and all vying for a finite amount of media and investor attention,” argues Cameron Chell CEO of Business Instincts.

Investors in Canada’s tech talent could profit from channeling the energy of startups, by inviting them to solve their own challenges. Software giant SAP is a case in point, with its Startup Focus programme that invites new companies to pitch their business ideas to industry experts, peers and SAP venture capitalists. The programme has a very tight focus – the innovation must be designed to make use of SAP’s HANA technology, but it’s probably all the more effective for that. Many inventors suffer from a lack of focus and an uncertain commercial outcome, but being instructed to find new ways to exploit HANA’s capacity for massive, high-speed processing of terabytes of data can only help to concentrate the minds of Canada’s inventors.

HANA’s ability to crunch Big Data in-memory reduced a three-day data processing task to 20 minutes, for Germany’s Charité cancer hospital. That means cancer patients can be matched to the right treatment in a fraction of the time it previously took to assemble and analyse petabytes of the world’s historical information about DNA sequencing, clinical trials, patient profiles and every other piece of cancer-related information known to mankind.

The challenge for SAP’s nursery of inventors is to use that processing power in other useful ways. There are plenty of cash-rich, time-poor industries – oil, gas, pharmaceuticals – with vast seams on untapped potential that needs to be discovered in their googols of data. SAP’s Canadian innovators certainly have their work cut out for them.

The beauty of being involved with a giant like SAP is that it whisks you through all the difficult stages that defeat many technically skilled startups, according to Kirsten Sutton, MD of SAP Labs in Canada.

“Once we have taken a startup through a boot camp, we offer mentoring and development,” says Sutton. The marketing muscle and guidance that a company like SAP can provide is worth many times more than the unfocused stimulation that comes from an orthodox VC injection, Sutton argues.

Sometimes, the most liberating experience for a creative mind is a very tight brief. In which case, who knows, the discipline of having limited venture capital could be the greatest ally to Canadian innovation yet.

 

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology.

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Nick Booth

Nick Booth worked in IT in the UK’s National Health Service, financial services and The Met Police, witnessing at first hand the disruptive effects of new technology. As a journalist and analyst, his mission is to stop history repeating itself.

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