Alpha Exchange White Paper says Canada needs to pick up the pace.
June 15, 2012
by PLANT STAFF
KITCHENER, Ont.: Canada may be well-connected to the internet economy, but the tech “ecosystem” gets a grade of C for being a bit short on management start-up talent and poor availability of funding, says an Alpha Exchange white paper.
The Alpha Exchange, part of Alpha Group, an organization set up by nine leading Canadian financial institutions, says Canada’s technology sector has underperformed since the internet bubble burst 12 years ago, and the “internet economy” as a percentage of GDP is below the G20 average and falling.
Based on academic research and interviews with 22 thought leaders in the Canadian technology sector, Alpha Exchange gauged six characteristics: technical expertise, public support, regulation, finance expertise, management expertise and funding. It concluded that despite Canada’s strong technology talent, history of public sector investment and generally supportive regulatory environment, it’s shallow on start-up management talent and mentors, and funding availability is poor nets the Canadian technology ecosystem a lackluster grade of C.
The white paper notes part of decline in growth is related to a decline capital for early stage companies. Total venture capital invested dropped from a high of $5.9 billion in 2000 to just $1.1 billion in 2010.
“There have been numerous causes including a flight to lower risk investments, poor historical returns and a fundamental lack of trading liquidity in this sector in Canada leading to an absence of investors who are willing to fund larger, later-stage firms,” it reports.
Enabling Canada’s Technology Future offers five initiatives to kick-start the tech sector minimal or no public money:
• Connecting start-ups to talent and investors
• Supporting crowd funding
• Developing an institutionalized pre-IPO capital market
• Establishing an exchange focused on the technology sector
• Supporting an “angel investor” tax-credit.
“These initiatives need to take place along with a redoubled focus on the host of other factors that create an environment for success for Canada’s technology companies,” says Jos Schmitt, Alpha Exchange CEO. “With the right choices, we can prevent the impending decline in Canada’s global technology relevance, and support the development of an economy of the future.”
Download Enabling Canada’s Technology Future.