On July 9th, the Globe and Mail ran a feature article that has since stirred a level of debate in the Canadian tech community not seen for some time.
The piece, by Sean Silcoff and Iain Marlow, called Canada’s Vanishing Tech Sector, said the “air is coming out of Canada’s high tech sector,” pointed out that tech accounts for just 1.6% of the TSX index, which is down from 41% in 2000. The article goes on to mention that the amount of foreign takeovers is on the rise, and tech financings are down. “Without big companies at the top of the high-tech food chain – and increasingly, with mid-market companies vanishing as well” offer the authors “…it’s like cutting off oxygen to the rest of the sector.”
Silcoff and Marlow believe Canada is suffering from a lack of risk capital to support the industry here. They say tech startups in Canada raise only a third as much money as their US peers and are often forced by more conservative investors to sell much earlier.
The Globe and Mail article, which has already garnered hundreds of comments, has prompted responses from three prominent voices in the Canadian tech scene, Mark Evans, a tech consultant and journalist who, coincidentally, writes a regular column for the Globe and Mail, John Ruffolo, the CEO of Ontario pension fund OMERS Ventures, and Mark McQueen, the CEO of Wellington Financial.
____________________________________
This story is brought to you by Zecotek Photonics (TSXV:ZMS). As of November 16, 2011, Zecotek owned title to or controlled more than 55 patents and applications. Click here to learn more.
____________________________________
Evans says is if the Globe and Mail had asked him to write about Canada’s tech sector, he would have taken the opposite tack of the July 9th Globe piece.
In an article posted on his blog called “Canada’s Tech Sector is Thriving, Not Vanishing” Evans says “I’m excited and optimistic about Canada’s high-tech sector, and the amount of activity happening. Sure, it would be great to have large, multi-billion dollar companies trading on the TSX, and a venture capital sector oozing with capital the fact they don’t exist shouldn’t be the evidence that Canada’s high-tech sector is struggling to survive.”
Evans says taking the value of tech companies listed on the TSX is an iffy way to asses the overall health of Canada’s tech industry. Instead, he says, a different capital marketplace has formed in which many of the best companies never go public. He also says a new generation of VCs, accelerators and incubators has emerged in Canada, and that access to strategic risk capital has vastly improved. Wellington CEO McQueen: “Investors will eventually come around, once they hear more about the wins in the space, and less about the circular handwringing that gets most of the ink.”
Mark McQueen says the Globe and Mail article lacks context and historical perspective. “Five years ago,” he says “Canada attracted $2.1 billion of venture capital; that’s far more than in any given year during the early 90s, for example.” McQueen says the innovation ecosystem is thriving in Canada. “Investors will eventually come around, once they hear more about the wins in the space,” he says “…and less about the circular handwringing that gets most of the ink.”
Ruffolo agrees. In his article, called “Stop the Whining and GO! GO! GO!” he says the access to early stage venture capital has been transformed in Canada, particularly in the past three years.
“Canada has witnessed a great influx of early stage capital” he says, “Angels, super-angels, incubators, accelerators, community associations, and micro-VC’s have all filled a desperately needed gap left behind by the loss of traditional institutional venture capital. While these capital sources haven’t quite filled the gap left by institutional venture capital, they play a critical role in the financing ecosystem for Canadian technology companies.”
Ruffolo believes those predicting an “innovation armageddon” in Canada are Pollyannas. He says that after being involved in the tech sector here for two decades he has seen the highs and lows and that what is happening now is part of “the normal cycle of replenishment”. The OMERS CEO points to a number of advantages Canada has developed over time that are paying off now, including a depth of engineering talent, a strong connection to Silicon Valley, strong universities and colleges, and domain expertise in mobility and software, two of the hottest spaces in all of technology today.
“Is it just me or are Canadians too modest and self-deprecating despite much evidence to the contrary? asks Ruffolo, adding “We have much to be proud of and it is just getting better!”
____________________________________
______________________________________
Comment
One thought on “Is Canada’s Tech Sector Vanishing, or Just Changing?”
Leave a Reply
You must be logged in to post a comment.
I don’t know about the tech sector per se, but when I talk to HR people in more traditional industries that use technology, they’re overwhelmed with job applications from qualified IT and engineering talent. We’re talking about 50-100 qualified resumes per position, sometimes minimally advertised. So many resumes that large amounts of very high quality talent are being left unemployed. Its not uncommon to see resumes with gaps of many years. And lots of people just giving up on the field altogether. In-house R&D seems to have shrunk significantly as well at the more traditional firms.