For startups that sell to businesses, winning that first big customer can be a make-or-break deal. This anchor can give a startup credibility with other buyers, provide vital feedback on the real-world impact of the products or services, and, of course, be an important source of revenue.
In the Canadian technology sector, winning those big clients isn’t easy for startups—especially if they have untested technology or their leaders don’t have a lot of business experience. These traits tend to mean the startups need a lot of luck, hustle, and a pretty well-developed product before they can even think about approaching larger organizations.
In some areas, it can be even more difficult. Many entrepreneurs say the federal government is particularly hesitant to buy Canadian technology. Some even say it’s easier to sell Canadian-made technology to governments in Europe and the United States than it is to sell it to our own government.
Boosting Canadian technology sector investment
There’s a certain irony here. After all, the Canadian government has spent millions of dollars on a wide variety of programs aimed at helping startups, and both liberal and conservative governments have attempted to solve this problem. In 2010, Stephen Harper’s government launched the Build in Canada Innovation Program. Under the program, businesses can sell innovative products and services that haven’t quite hit the market to the federal government. Any company can apply, but the program is intended to give startups that key first customer. Since the BCIP launched, the federal government has awarded CAD$78 million in contracts under the its sponsorship.
While that might sound like a lot of money, it’s a tiny fraction of the roughly CAD$18 billion the federal government spends on procurement every year.
Now, the Liberal government appears to be making plans to expand the program. According to The Globe and Mail, the Innovation, Science, and Economic Development department wants to increase the amount of federal procurement dollars that can be used to make purchases through the BCIP by as much as CAD$300 million a year.
Right now the program allows companies to sell products that are almost ready for commercialization to the government. To sell through the program, a business has to have an almost-finished product that matches the government’s current needs, or one that can be adapted to those needs.
Meanwhile, in the United States Federal Government’s Small Business Innovation Research program, the government steps in earlier, partnering with startups at the R&D phase and working with them to develop technology to address specific needs.
Bringing the country up to speed
Private-sector companies in Canada are starting to catch on. In Montreal, the Chamber of Commerce has created InnoBahn—a program that helps larger businesses identify startups that can help them solve specific business problems. For startups, this could give them that important anchor client, while big businesses get access to the startup’s talent and ability to innovate.
Other companies have started innovation hubs, as RBC Royal Bank explained, where they work directly with startups, opening the space for these types of collaborations. These programs could help address one of the biggest problems facing the Canadian technology sector: the “commercialization gap,” also knows as the “innovation gap.”
It works like this: There are a lot of smart people in Canada and there’s a lot of research done here, but when we compare ourselves to similar countries on a wide variety of metrics for measuring the creation and growth of innovative companies, we lag behind. Helping startups move from innovation to commercialization—with the help of a big client who’s actually using the technology—might put us ahead.
With the federal government gearing up to spend more on startups and venture-capital investments reaching a 10-year high in 2016, this year could be a very good one for the Canadian technology sector.