Earlier this month, OMERS Ventures CEO John Ruffolo, perhaps the single most influential voice on Canada’s venture capital scene, wrote a wide-ranging open letter floating the idea that what Canada’s innovation sector needs is a single voice to advocate on its behalf.
“Something has been gnawing at me for quite some time and it has really surfaced during this upcoming Federal election,” the letter begins, before continuing, “I believe, as many of you do, that the Innovation sector represents the Future for Canada. It will be the engine of growth, wealth, and employment for our great nation.”
He then says “it truly takes a community to build an industry” before acknowledging that, despite the improvement over the past seven years of developing an infrastructure for helping innovation-focused companies to develop, it is “the role of government that remains most unclear to me.”
“First of all, let us set aside partisan politics,” Ruffolo says, in an open gesture meant to clear any suspicious air that a tech sector manifesto might imply some kind of political endorsement.
While it’s a nice gesture, it’s mainly there to soften the blow that people in government, as Ruffolo then makes clear, “really do not know what the startup community wants in order to achieve the Innovation economy vision.”
He then asks, “should there be a voice from the Startup Community clearly laying out what they believe the role of government should be?”
Ruffolo’s editorial was penned a couple of days after an OMERS sponsored meeting at the Drake Hotel in Toronto, which featured ex-RIM co-CEO Jim Balsillie addressing representatives from several of Canada’s tech giants, including Shopify, Hootsuite, Vision Critical, D2L, Wattpad and Vidyard.
Balsillie’s message was clear. Either you start working actively with government now, or you will be crushed by global competitors who have far more influence over how the process for creating a dynamic innovation economy actually functions on a global stage.
He should know.
“The global market for ideas is created primarily in the United States by judges, legislators and agency heads.” – Jim Balsillie
This message comes as a bit of a shock for start-up CEOs whose main mantra that they learn in accelerators is “make something people want”.
Which is great, but it’s like teaching someone how to plant a crop without a follow-up lesson on how to harvest. Or how to store your crop. Or how to sell your crop in international markets.
“The global market for ideas is created primarily in the United States by judges, legislators and agency heads,” wrote Balsillie in a follow-up editorial for the Globe & Mail. “The rules for this market change are frequently based on aggressive lobbying by interested parties. Those parties are usually tech companies with broad swaths of intellectual property and strategies for capturing more wealth from them.”
He points out that technology companies in the United States not only unashamedly spend millions to lobby their own government, but also actively lobby the Canadian government regarding our Copyright Act, broadcasting, sales of their services to our SME market, as well as Internet advertising and data protection.
Apple’s budget for lobbying the U.S. government in 2014 was $4.1 million, according to Politico. Amazon spent $4.7 million, while Facebook spent $9.3 million and Google spent $17.4 million.
Balisillie’s larger point when it comes to the role of government in helping to build an innovation economy is that, for all the money and rhetoric that has been dumped in to programs meant to encourage growth in the sector, “this mix of policies has consistently delivered zero innovation output growth” over the past 30 years.
He says that the innovation economy and the tech sector need “an innovation lobby that’s exclusively devoted to helping Canadian companies scale up globally.”
John Ruffolo wonders in his open letter whether or not the start-up community needs “a single voice”. The question is rhetorical. Of course we need a voice. And that voice is Jim Balsillie.
The idea of it runs a little contrary to the strong libertarian streak that you find in talking to many start-up founders. One voice? A central organization to represent our interests? That’s not very laissez-faire.
As mothers who’ve been through it before will tell you, though, libertarianism is a very common phase that many young men go through. And while it is difficult to stand by and watch your son afflicted by the condition, it usually clears up nicely after his voice breaks.
Ruffolo’s editorial also, a little perversely, places the blame on “us”, the tech sector, for not doing enough to articulate our concerns to government.
Which is a little like blaming wheel makers for wasting valuable time having to invent the thing over and over again from scratch, instead of perhaps consulting someone who has gone through the process of inventing a wheel previously.
Jim Balsillie and Mike Lazaridis not only built a wheel, they also scaled their wheel, they sold the wheel internationally, and accepted the consequences when Apple eventually came out with their iWheel.
“What I’ve seen in Canada is not how other countries work that succeed in this. So how the U.S. works and Scandinavia and Germany and Japan and Korea is not how we do it in Canada.”
“For RIM to scale, we had to build an infrastructure outside of Canada,” said Balsillie on CBC Radio’s The House. “What I found was that we had to build that infrastructure, I had to build that infrastructure, as the commercial officer for RIM, to be able to grow our sales to $20 billion.”
Note the correction there, switching from “we” to “I”. Exactly the kind of un-Canadian, non-self effacing voice this potential lobby group needs.
He had to build that infrastructure, personally, from scratch. Because there was no infrastructure.
The implication is maddening. Does every single tech entrepreneur in Canada have to re-invent the wheel themselves every single time they come up with an idea for an app or product?
Is that how it’s done elsewhere? No, says Balsillie.
As he said on The House, “The first thing we have to do is go to these policy makers, go to the politicians, go to the traditional business organizations in this country and say, ‘We need you to update your understanding of how an innovation economy works,’ because what I’ve seen in Canada is not how other countries work that succeed in this. So how the U.S. works and Scandinavia and Germany and Japan and Korea is not how we do it in Canada.”
Perhaps more damning is Balsillie’s assertion that Canada is merely following U.S. rules imposed by American business interests and the American government, an approach we have lazily accepted for too long in other aspects of our economy and which Balsillie calls “economic colonialism”.
Those are fighting words, which again is exactly what any potential voice for an innovation sector needs to bring to the table.
“I mentor and work with a lot of entrepreneurs, and realized that their likelihood of building an infrastructure by themselves like we did at RIM, or I did at RIM, is not high,” said Balsillie. “And yet there’s not a supportive infrastructure, a complete infrastructure, in Canada. So, the way to really do it is not to ask everybody to build the infrastructure themselves, but to say that that should be part of a sophisticated innovation economy.”
And while Ruffolo asks for a non-partisan approach, you do actually have to get a little partisan at some point. What are the platforms of the potential leaders of the next government saying with regard to the innovation economy?
Hootsuite CEO and Ryan Holmes and Shopify CEO Tobias Lütke had an active exchange with NDP leader Thomas Mulcair a couple weeks ago, in which Mulcair personally clarified the NDP’s election pledge to tax CEO and executive stock option compensation, reassuring Lütke and Holmes that an exemption would be made for early stage companies and start-ups.
Outside of that, the only discussion of this subject in the election campaign has been absolutely vague and rhetorical.
Speaking of partisan, it should be noted that Balsillie himself has previously donated to the federal Conservatives, and also to the Ontario Liberal party previous to their victory in the last provincial election. So make of that what you will.
Oh, and one more thing, to paraphrase BlackBerry killer Steve Jobs.
There this other mantra that the start-up community loves. It’s the ethos of “failure”. Over and over again, you’ll hear people say that they’d rather work with someone who’s tried and failed half a dozen times trying to start a business than take advice from a book about entrepreneurship.
Can anyone think of one person on Canadian soil who has tried and failed as spectacularly as Jim Balsillie?
“He’s actually climbed the mountain,” said D2L CEO John Baker. “He’s built a $20-billion company.”
So it looks like Canada’s tech sector will be getting a new voice in the weeks after the next federal election. And with Mike Lazaridis off working in Quantum Valley, it looks like that voice will be Jim Balsillie.