Its innovation scene is starting to play more at the extremes. BC’s tech sector, with $14-billion in revenue and 100,000 employees, is the fastest-growing in Canada.
The city’s booming startup scene is ranked tops in Canada and 15th in the world. But it’s not growing enough world-scale companies, perhaps because too few are playing at the edges of innovation.
Diversity may change that. If we harness the twin powers of disruptive technology and diverse, inclusive thinking, we can help lead this century. And we can do it — we have to do it — through business, entrepreneurs, investors and risk-takers.
Below are some key takeaways:
We Need More Gazelles
Unfortunately, half of Canadian start-ups rarely amount to much and don’t make it past the five-year mark. Worse, of every 100 businesses in our country, only two ever get to be so-called gazelles — companies that after five years still generate an annualized growth rate of 20% or better.
They’re the 10x-ers.
What makes them gazelles?
We’ve been thinking a lot about that at RBC, talking to clients across the country, in all sorts of sectors. We think it comes down to three business factors — and one trait: capital, talent and markets.
The trait is courage, the willingness to look at what you’ve built and accept that it’s nowhere near enough. We need to think about 10x growth, not 10%.
Scale Factor #1: Capital
When it comes to capital, there’s no shortage of it in Canada. VC investment is booming again, averaging about $300-million a month. Governments are making billions more available through low-interest financing, grants and tax breaks.
What we’re missing is smart capital and patient capital — money that comes with experience and savvy, and is willing to stay with a business for 7-10 years rather than the 3-5 year window that many investors look for.
It’s why we call it smart capital, because it depends on people as much as money.
Capital Is Nothing Without the Second Factor: Talent
Talent is a big reason the federal government chose Vancouver as a finalist in the national supercluster competition, for a digital technology hub led by Telus, Microsoft and the Business Council, among others. However, top talent is in shorter supply than ever, especially the talent needed to turn a local success into a global player.
We need to rethink some basics.
First is compensation. It’s not just big-ticket, US dollar salaries; it’s the equity that high-growth talent often demands and yet our entrepreneurs are often not in a position to grant.
Second is location. We need to fight for these people, the way our sports teams compete for their superstars. We need to make ourselves a talent destination.
Third is taxes. The best in the world, when it comes to building companies, can live anywhere in the world. They’ve done the math; we should, too.
But it’s not just superstars that we need. A gap exists at the entry level, too, where emerging talent is not given enough of a chance.
It’s why we believe that work-integrated learning (WIL) is needed as a national imperative, to seize on co-op students, apprentices and interns as catalysts of innovation.We need business, big and small, to step up to make that happen.
Which Takes Me to the Third Factor: Markets
Currently, only 12% of our small businesses, and 28% of our medium-sized ones, ship things out of the country.
And here’s a shocker: More than a quarter of the non-exporters see no benefit in even trying. Export activity is actually declining as a percentage of GDP — falling from 46% in 2000 to 30% in 2012.
We need to drastically shift our attitude when it comes to reaching a global customer base.
Fortunately, on the immediate horizon lies Cascadia, the region of Washington, Oregon, and British Columbia, that’s home to 16-million people and US$660-billion in GDP.
BC needs to access markets like China and India, even virtually. Our competitors are, for sure. Last year, Washington state sold more to China than to all of Canada.
BC the Bold
We believe Canadian companies need capital, talent and markets to grow. But more than anything, we all need more ambition.
BC has the chance to build even more world-leading firms here and will secure the province’s path of economic growth for another generation.
And there are few places better positioned than BC to scale that lead. With access to growing markets, outstanding talent and patient capital, the province can get there.
It may not be easy, but as Jack Ma, a scale-up guru in his own right, says, “Today is difficult. Tomorrow is more difficult. The day-after-tomorrow is beautiful.”
This article is intended as general information only and is not to be relied upon as constituting legal, financial or other professional advice. A professional advisor should be consulted regarding your specific situation. Information presented is believed to be factual and up-to-date but we do not guarantee its accuracy and it should not be regarded as a complete analysis of the subjects discussed. All expressions of opinion reflect the judgment of the authors as of the date of publication and are subject to change. No endorsement of any third parties or their advice, opinions, information, products or services is expressly given or implied by Royal Bank of Canada or any of its affiliates.