For public policies that facilitate the development of startups

OTTAWA, October 23, 2024 — A delegation comprising a dozen organizations that support Quebec startups on a daily basis is visiting Ottawa as part of SME Week to deliver a clear message about the importance of public policies that facilitate the development of innovative young companies—commonly known as startups—an important subset of SMEs.

Even though the era of creating companies like Uber and Airbnb is over, an entrepreneurial approach focused on projects with high growth potential remains essential if we are to build an economy based on innovation—one capable of offering the world the fruits of the ideas, creativity, and determination of its brightest minds.

After all, innovative entrepreneurs are the driving force behind Canadian innovation, as they help translate the expertise of our brightest minds into potential businesses: those fresh out of business or engineering schools, those conducting in-depth research at universities, and even those who spot opportunities as their careers unfold.

We need public policies that support these three types of entrepreneurial profiles—and many more—based on three clear objectives:

1. encourage the emergence of more startups;
2. to provide better financial support to businesses that reach certain key milestones in their entrepreneurial journey;
3. to support organizations throughout Quebec that help these entrepreneurs make informed decisions to achieve their business goals.

• SMEs account for 99% of Quebec's businesses. They employ 3 million Quebecers and account for 50% of Quebec's GDP.
  • We estimate that, on average, there are between 2,000 and 3,000 active startups each year in Quebec.
• In the coming years, Quebec will experience a historic wave of business transfers and sales due to demographic trends, including an aging population.
  • Business takeovers can also serve as a driving force for new, innovative companies that will move just as quickly as startups just getting off the ground
• Entrepreneurial intentions and the rate of new business creation are lower in Quebec than in the rest of Canada.
  • According tothe Quebec Entrepreneurship Index, the rate of entrepreneurial intent among the Quebec population is estimated at 16.5%
• 57% of entrepreneurs and business leaders in Quebec have either experienced mental health issues themselves or know an entrepreneur who has experienced such issues that required time off work.

(Information partially sourced from the Federation of Quebec Chambers of Commerce)

Despite efforts by entrepreneurship offices and other related organizations to raise awareness of entrepreneurship at universities, companies spun off from scientific research remain few and far between. We need to support existing programs that play a key role in better linking university research to the creation of innovative startups—particularly in deep tech and social innovation—through government initiatives that facilitate the development of the entrepreneurial pipeline early on:

1. Provide greater support to organizations working to raise awareness of entrepreneurship, particularly among students with a scientific background and at regional universities, but also for research projects in the humanities that could lead to the creation of legal structures other than private companies.
2. Consider establishing a startup program for first-time entrepreneurs that, similar to the “RAP” program for first-time homebuyers, would allow entrepreneurs to withdraw funds from their RRSPs tax-free to finance the launch of their first business.
3. Review the management of intellectual property rights between universities and researchers to facilitate the commercialization of research outcomes
4. Coordinate efforts among members of various universities across Canada to review the funding available to promote scientific entrepreneurship and to explore ways to create a better interface between academia and industry.
5. Ensure the continuation of initiatives that promote business creation in communities, such as the Black Entrepreneurs of Canada program and the Initiative to Support Black Communities in Canada

In addition to initiatives to boost the launch of innovative startups, we must provide more adequate support to companies as they reach various key milestones in their growth, and ensure that entrepreneurs who take risks are supported in their endeavors. We need government action to address certain challenges related to access to financing, as well as the ability of these startups to secure their first public contracts, which will then enable them to secure further sales both locally and internationally:

1. Consider establishing a loan and grant fund for entrepreneurs to enable them to devote themselves fully to growing their businesses
2. Revise the research and development (R&D) tax credits to include a requirement that private companies reinvest a percentage of the amount allocated as a tax credit in Canadian startups , either in the form of investments (dilutive or non-dilutive) or co-development agreements.
3. Incorporate procurement criteria and ambitious goals into government procurement to promote the acquisition of local solutions, in accordance with international trade agreements.
4. Establish an interministerial committee to assess the origins of technological solutions across the various industrial production value chains and make recommendations on how to enable more local companies to play a key role in these value chains. 
5. Include objectives to support entrepreneurs from ethnoculturally diverse backgrounds in the government’s non-dilutive funding sources and funds of funds invested by the Government of Canada, such as the Venture Capital Catalyst Initiative.

The Government of Canada, primarily through federal economic development agencies, plays a key role in providing diverse and specialized support to entrepreneurs. We must review the support experience to ensure that it is ongoing, flexible, and aligned with the needs of businesses, and to ensure that it is of the same high quality regardless of the region of Canada where these businesses are incorporated.

1. Create a folder startup a document prepared exclusively by economic development agencies and held by the company’s founding team, which contains essential information about the company’s profile, effective as of its incorporation.
   1. This guide will be useful for both those who are called upon to work with the startup to accelerate its growth, as well as for those seeking to gain a better overall view of the ecosystem in order to tailor their interventions.
2. Build connections to ensure better access to the network of peripheral stakeholders (trade attaché offices, embassies, private companies, etc.) that can become partners of the startup as it grows.
3. At all times, respect the autonomy of the various organizations that support innovative companies in positioning their support services and adapting them to changing needs and market conditions.