A 4-POINT PLAN FOR GROWTH: Scaling up BC’s … · A 4-Point Plan for Growth: Scaling up BC’s...

A4-POINTPLANFORGROWTH:ScalingupBC’sTechnologyEcosystemOctober2016

A4-PointPlanforGrowth:ScalingupBC’sTechnologyEcosystem,October2016

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TABLEOFCONTENTS Introduction..................................................................................................................................................3

A4-PointPlanforGrowth.............................................................................................................................4

PriorityAsks.............................................................................................................................................4

SummaryofRecommendations..............................................................................................................5

1.Talent:InvestinWorld-ClassTalent.........................................................................................................6

Background..............................................................................................................................................6

Recommendations...................................................................................................................................7

2.Scaleup:EncourageGrowthandGlobalCompetitiveness.....................................................................12

Background............................................................................................................................................12

Recommendations.................................................................................................................................13

3.Markets:ExpandAccesstoProcurementandGlobalMarkets...............................................................15

Background............................................................................................................................................15


4.Capital:ExpandAccesstoGlobalCapital................................................................................................18

Background............................................................................................................................................18


Conclusion..................................................................................................................................................20

Acknowledgements....................................................................................................................................21

AboutBCTechAssociation.........................................................................................................................22


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INTRODUCTION Theimpactoftechnologyacrossallindustriesismorepronouncedthanever.Innovationacrossallsectorsisnolongeroptional–it’sapre-requisite.Thepaceofchangeisacceleratingandmostofthedisruptioniscomingfromnewentrants–youngcompaniesnotafraidtochallengethestatusquo.British Columbia has always provided a fertile environment for startups. Rooted in a rich history ofexplorers and new frontiers, British Columbia is a hub for startupswith a nation-leading 3.7% of theworkingpopulationbeingpartofastartup.1

The 2016 BC Technology Report Card reinforced this notion, highlighting the consistent, sustainedperformanceoftheBCtechsector–whichhasgrownby91%in15yearsandcontinuestooutpacethegrowthintheoverallBCeconomybynearlytwotoone.2TheBCtechindustryisacornerstoneoftheprovincialeconomy,accountingfor:

- $26billioninrevenue–growinginexcessof6%peryear- $15billioninGDP–3rdlargestcontributortotheprovincialeconomy- 92,700employees–morethanallofBCresourcesindustriescombined- $8billioninwages–withjobsearning76%morethantheBCaverage

Overthepastdecade,thegovernmenthascreatedastrongfoundationfortechnologyandinnovationthroughnationalprogramsliketheScientificResearchandExperimentalDevelopment(SR&ED)taxcreditprogram, theNationalResearchCouncil’s IndustrialResearchAssistanceProgram (NRC-IRAP),VentureCapital Action Plan (VCAP), Sustainable Technology Development Canada (SDTC),Western InnovationInitiative(WINN),CanadianAcceleratorandIncubatorProgram(CAIP)andsupportprogramsthroughtheresearchcouncils(NRC,NSERC),MiTACS,BDC,EDCandtheTradeCommissionerServices.Provincially,the government has supported programs like the Small Business Venture Capital Program (SBVCA),InteractiveDigitalMediaTaxCredit,provincialSR&EDandthelaunchofthenew#BCTECHStrategythatincludesanew$100millionBCTECHFund.

Theresulthasbeenavibrantandgrowingsectorcomprisedof9,500+diversecompaniesacrossthesub-sectors of Information and Communications Technology (ICT), Interactive and Digital Media (IDM),Cleantech,LifesciencesandEngineering/ITServices.Thesectoremploys92,700+people-morethanallofBC’straditionalresources(forestry,mining,oil&gasandutilitiessectors)combined-andemploymentisexpectedtogrowsubstantiallyinthecomingyears.Onacomparativebasis,theBCtechsectorgrewfasterthanthatofvirtuallyeveryotherprovinceinCanada.

DespitethepositivegrowthtrendinCanada,thecompetitiveframeworkfortheBCtechindustryisnotnational–it’sglobal.Citiesandregionsallovertheworldarelookingtocapitalizeonthetechnologyshift–andonacomparativebasis,theBCTechsectorisgrowingataslowerpacethanmanyotherjurisdictionsandleftasis,thereisariskthatBCwilllosemomentumwhileothercentresmakeacceleratedprogress.

Inthe2015StartupCompassreport,Vancouverfell9placesfrom#9to#18inaglobalrankingofthetopstartupecosystems.Someofthekeyfactorspointedtochallengesrelatedtoaccesstocapital,accesstomarketsandthecomparativelylowerperformanceofcompaniesoverall.Acloserreviewofthereport 1 CIBCWorldMarkets,2012,p3 22016BCTechnologyReportCard,p13


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alsoshowedthatVancouverfelltenplacesfromfourthto14thinthemeasureofglobaltechtalent.Talenthasbecomethenewbattlegroundasleadingjurisdictionsincreaseinvestmentsintechgradsandadoptstreamlinedimmigrationprogramstoattractthebesttalentfromaroundtheworld.

ThecomparisonofleadingtechhubsillustratesaPowerLaweffect–oneinwhichthetopjurisdictionstake a disproportionate share of the market opportunity. Silicon Valley is already evidence of thisphenomenonandthepre-requisitetobeaplayeristoundertakestrategicpoliciesandinvestmentsthatwillacceleratethegrowthofthelocalecosystemtoforgeastrongeroutcome.

A4-POINTPLANFORGROWTHThis paper refreshes our previously published 4-PointPlanforGrowth–apolicyframeworkthatwefirstwrotein 2012. This update outlines 16 actions across fourpillars that we believe will strengthen the BC techecosystem,improveaccesstocapital,expandaccesstoprocurementandglobalmarkets, invest inworld-classtalentandencouragecompaniestoscaleuptobecomeglobally competitive. Successfully growing the strongbase of startups into global champions is essential toCanada's Innovation Agenda, global competitivenessandlong-termeconomicandsocialprosperity.

TOPPRIORITYASKS1.Investanincremental$100millioninpost-secondarytoexpandgraduatesoftechprograms2.SupportthehometeamandadoptprocurementprogramstobecomecustomersofBCtechcompanies.3.StreamlinetaxcreditprogramslikeSR&EDandtheangeltaxcredittobroadeneligibility.4.Improvetheimmigrationsystemtoattractthebesttalentfromaroundtheworld.

TALENT

SCALEUP

MARKETS

CAPITAL


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SUMMARYOFRECOMMENDATIONS

A4-POINTPLANFORGROWTH

TALENT:INVESTINDEVELOPINGANDATTRACTINGWORLD-CLASSTALENT1.Investanincremental$100MMinpost-secondarytoexpandgraduatesoftechprograms2.Enhancethecurriculumandexperientiallearninginpost-secondary3.InvestinK-12programstoteachtechnologyinthecurriculum4.ImprovetheimmigrationsystemforhighlyskilledandexperiencedtechtalentSCALEUP:ENCOURAGECOMPANIESTOGROWANDACHIEVEGLOBALCOMPETITIVENESS1.Streamlinethemultitudeoftaxprogramstoencouragecompaniestogrowandinvestinjobs2.ConsolidateprovincialtaxprogramswithasingleR&DLabourTaxCredit3.EstablishaBCTechnologyCommercializationTaxCredit4.SimplifyandextendtheFederalSR&EDprogramMARKETS:EXPANDACCESSTOPROCUREMENTANDGLOBALMARKETS1.ExpandtheBuildinCanadaInnovationProgramtoBC2.IntroduceapilotprogramforSet-Asidesingovernmentprocurements3.Improveaccesstoexistinggovernmentprocurementprograms4.InvestinmarketdevelopmentprogramsthatexpandexportactivityCAPITAL:EXPANDACCESSTOGLOBALCAPITALTOGROWCOMPANIES1.Investinbuildingstrongprogramstoattractglobalcapital2.EnhanceandexpandtheAngelTaxCreditprogram3.Continuetosupportexistingventurecapitalprograms4.Expanddebtandlendingoptions


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1.INVESTINWORLD-CLASSTALENTBACKGROUNDTheworldwidecompetitionforthebesttalentisfierce.Inordertobecomeatopglobalinnovationhub,BCandCanadaneedstobuildonitsreputationasanopenandwelcomingdestinationtobecomegloballycompetitiveinattractingworld-classtalent.

AccesstotalenthasemergedasthegreatestchallengethatBCtechcompaniesfaceinexpandingtheirbusinesses. According to a 2015 report by the Information and Communications Technology Council(ICTC), over 182,000 critical ICT positionswill be left unfilled by 2019.3 Demand for tech jobs is onlyexpectedtoincreaseoverthenext12months,acrossalltechsubsectorsandregions.EmploymentinBC’stechnologysectorhasgrown29%since2004and32%from2010-2014,outpacingtherateofgrowthinbothOntarioandQuebec,andgrowingfasterthantheCanadianaverageby70percent.4WithinBC,techjobshavegrownbyanaverageof5.3%peryearoverthepast5years–afasterratethanBC'sjobgrowthoverall.5

Thestrongdemandfortalenthasalsohadinflationaryeffectsontechwages.Techsectorwageshavesteadilyincreasedfromanaveragesalaryof$64,000in2008toover$82,000in2014.BCtechwagesarenow76%higherthantheBCindustrialaverageandwagegrowthinrecentyearshasoutpacedthegrowthofavailable jobs.Thissuggestsagrowing imbalance in thedemandvs. thetalentand is reinforcedbyresearchconductedinBCTech's2016LabourMarketStudy.

Thisisnotanabstractproblem,butonethatwefacenow.Thisyearalone,BCtechcompanieswillbeseeking thousandsofnewemployees. Newcomputer-science,engineeringand technologygraduatesfromBC’spost-secondaryinstitutionssimplycannotmeetthedemandforthesewell-payingpositions.

BC tech companies also need highly skilled, experienced talent – those with experience in growingcompaniesfromstartupstoscale-upstolargeenterprises.Often,thishighlyskilledandexperiencedtalentisfoundoutsideofCanada,ofteninjurisdictionsthathavecultivatedsignificantsuccesses.Overthepastseveralyears,changestoforeigntalentandimmigrationhavemadeforacumbersome,lengthyandoftenopaque process. The opportunity cost is significant. In a 2015 BC Tech Association survey of techemployers,70per centof respondents indicated that current foreignworkerprogramsarenegativelyaffectingtheirbusiness,and70percentofrespondentsindicatedtheywouldmoveoperationsorhireelsewhereifunabletohiretherighttalent.

Aspartofthe#BCTECHStrategy,theprovincialgovernmenthasidentifiedtalentasacriticalissueandhasalready taken steps towards introducing technology into the K-12 curriculum and initiating a LabourMarketStudytoexaminethesupplyanddemanddynamicsforthetechsector.Theopportunityforactionisuponus–andfurtheringinvestmentsineducationandfixingtheimmigrationsystemwillensurethattheBCtechsectoriswellpositionedtocompeteforhumancapital. 3TheSmartEconomyReshapingCanada’sWorkforce,ICTC(2015)42016BCTechnologyReportCard,p235ICTC(May2016)


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1.Investanincremental$100MMinpost-secondarytoexpandgraduatesoftechprogramsDemandfortechnologygradshasbeenstrongthepastfewyears,withbetween5,000and10,000entry-leveltechpositionscreatedeachyear.Incontrast,thereareonly2,000to2,500techgraduatesfromBC’spost-secondaryinstitutionsprogramseachyear.Onacomparativebasis,BCtrailsotherprovinces,suchasOntario,QuebecandAlberta, inthenumberofdegreesgrantedpercapitaandintheproportionofpeople that choose to attain technical degrees. Furthermore, BC remainsbelow theOECDaverage ingrantingtechnicaldoctoraldegreespercapita.6Exacerbatingthisissueisthefactthatwomenrepresentfewerthan25%ofalltechgrads–anincreasinglyimportantfactoringrowingtheoveralltalentbase.7Thereisapressingneedformoregradsacrossdisciplinessuchasindustrialdesign,graphics,animation,mathematics,datascience,lifesciences,engineeringandparticularlycomputerscience/engineering.

62016BCTechnologyReportCard,p3272016BCTechLabourMarketStudy

RECOMMENDATIONSINVESTINDEVELOPINGANDATTRACTINGWORLD-CLASSTALENTCanadaneeds tocreateamoreconduciveenvironment toencourage,developandattract thebesttalent. To win the war on talent, we need to streamline immigration and invest in expanding andimprovingtheeducationsystemtonurtureahomegrowntechtalentpoolintheprovince.1.Investanincremental$100MMinpost-secondarytoexpandgraduatesoftechprograms2.Enhancethecurriculumandexperientiallearninginpost-secondary

a) Implementmandatoryco-opforalltechrelevantprogramsb) Increasethenumberofco-optermsc) Extendandexpandincentiveprogramsforsmalltechcompaniesd)Modernizepost-secondarycurriculumtoalignwithindustryrequirements

3.InvestinK-12programstoteachtechnologyinthecurriculum

a)InvestintrainingK-12teacherstoteachtechnologyinschoolsb)ExpandACE-ITprogramstoincludetechnologyc)Investincareereducationforjobopportunitiesintechnology

4.Improvetheimmigrationsystemforhighlyskilledandexperiencedtalent

a)InstituteaGlobalSkillsVisaprogramtoattractexperiencedseniortalentb)Implementatrustedemployerimmigrationprogramforexpeditedprocessingc)IncreasethefederalallocationfortheBCProvincialNomineeProgramd)EncourageexperiencedexpatriateCanadianstoreturntoCanada


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2.Enhancethecurriculumandexperientiallearninginpost-secondary.InCanadaandabroad,theUniversityofWaterlooenjoysareputationforeducatingthehighestqualitygraduates in its tech programs. The simple reason is its exceptional co-op initiative, which matchesstudentswithprofessionalinternshipsasacorepartoftheirdegrees.WhilemostofBC’spost-secondaryinstitutionsoffersomeformofco-op,thisisrarelymandatory,andinvestmentinco-opplacementslagsbehindcomparablespendinginotherprovinces.Experientialandintegratedlearningthroughco-opandworkplacementsarekeytoenhancingthequalityandjobreadinessofgraduatesenteringthetechsector.a)Implementmandatoryco-opforalltechrelevantprogramsInour2016LabourMarketStudy,employerscitedpracticalexperienceandinterpersonalskillsasatopneededskillsforjuniorlevelhiresandfeltthatoftenentry-levellevelhireslackthenecessaryskillsandpracticalapplicationexperiencestomeettheirneeds.Toremedythis,webelievealltech-relateddegreeprogramsshouldincludemandatoryco-opeducationandworkplacements.Werecommendthegovernmentinvestinimplementingandadequatelyresourcingmandatoryco-opatuniversitiesandcolleges.b)Increasethenumberofco-optermsA key competitive advantage of theWaterloo region's success is the University ofWaterloo's co-opprogram.Itprovidesstudentswiththeequivalentoftwofullyearsofhandsonexperiencewithemployersbeforegraduation.Inthe2016BCTechLabourMarketStudy,twothirdsofBCtechcompaniesindicatedthattheyhireco-ops.However,smallcompaniesarethirtypercentlesslikelytohireaco-opthanmediumandlarge-sizedcompanies commenting that the cost to recruit, train and support co-op placements tends to beprohibitive,particularlyforshort4-monthterms.WerecommendasimilarformattoWaterloo,inthatthenumberofco-optermsisincreasedto5-6termsoverthecourseofthedegree,startingfromthefirstyear,andtoencouragelonger8monthsoptions.c)Extendandexpandco-opincentiveprogramsforsmalltechcompaniesAsperthe2016BCTechLabourMarketStudy,onlyhalfofallsmalltechcompanieshavehiredaco-opstudent. Thesecompanies indicatedcostasabarrier,particularly in termsof traininganddevelopingtheseco-ops,whichoftentakesawayfromtheproductivityoftheirsmallerworkforce.ProgramsliketheIntegratedSkills Initiative (ISI)offeredthroughtheBC InnovationCouncilhavesupportedsmaller techcompaniesinplacingco-opsandinternsWerecommendexpandingtheISIprogramtoassistalargernumberofsmalltechcompaniestohireco-opstudentsduringtheirworkterms.


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d)Modernizepost-secondarycurriculumtoalignwithindustryrequirementsTechnologyadvancesatarapidpaceandinstitutionsneedtobeabletokeepup,inordertoequipnewgraduateswiththerightskillstobereadyforcareersintech.Co-opexperiencesplayanecessaryroleinallowing students to bring current insights and technical requirements back into the classroom.Professorsandteachingprofessionalswhoactivelywork inpartnershipwith industry, insuchareasastechnicaladvisoryboardsandjointresearchprojectsalsohavegreaterinsightsoncurriculumneeds.We recommend theestablishmentof aworking committeewith government, educationand industrystakeholderstoregularlydiscusscurrentandprojectedemployerrequirementsandadjustthecurriculumtoreflecttheseneeds.3.InvestinK-12programstoteachtechnologyinthecurriculuma)InvestintrainingK-12teacherstoteachtechnologyinschoolsTheprovince’sBCTECHStrategycommitstorevampingtheK-12curriculumtoincludeafocusonSTEMdisciplines and applied computational and design thinking. We recommend further investments inpreparingeducatorsandschools,partneringwithindustrytoleverageexpertstohelpbuildandupdatecurricula,executeontrainingteachersandstudentstocode;andinvestinginasustainabilitymodelthatensuresadhocinitiativesbecomeformalized,withacollaborativeanditerativefeedbackloop.b)ExpandACE-ITprogramtoincludetechnologyInorder toencourageandbetterpreparehighschoolstudents tochoosetechnologydegrees inpost-secondary, we recommend that high school apprenticeships like the Accelerated Credit Enrolment inIndustryTraining (ACE-IT) currentlyofferedvia the IndustryTrainingAuthority,beexpanded tooffermorevariedtechsector-specificprograms.ACE-ITcreditscanbeappliedtowardsbothhighschoolgraduationandpost-secondarycredentials.c)InvestincareereducationforjobopportunitiesintechnologyPrograms like the province’s “Find your Fit” program for trades and ICTC’s Focus on InformationTechnology(FIT)havebeensuccessfulincreatingawarenessforcareeropportunitiesinhighschools.Werecommendextendingthismodelofprogrammingaswellasbroadermarketingcampaignstopromotetheawarenessofcareeropportunitiesintechforyouth. 4.ImprovetheimmigrationsystemforhighlyskilledandexperiencedtalentMuchofSiliconValley’ssuccesshasbeenbuiltontheabilitytoattractthebesttalentfromaroundtheworld.Arecentreportputthenumberofimmigrantfoundersofbillion-dollarcompaniesat51percent,8

but theabilityof companies toattract technicalandbusiness talent fromaround theworld toSiliconValleyhashelpedtofuelitsgrowth.

8 http://nfap.com/wp-content/uploads/2016/03/Immigrants-and-Billion-Dollar-Startups.NFAP-Policy-Brief.March-2016.pdf


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a)InstituteaGlobalSkillsVisaprogramtoattractexperiencedseniortalentTocompetewiththeworld'smostinnovativeglobalcompanies,Canadamustleverageitscomparativeadvantageasadiverseandopencountryandbecomethedestinationchoiceforgloballymobileskilledtalent.However,ourcurrentimmigrationsystemisnotdesignedtofacilitatethisattheraterequired.Thechallenges of cumbersome, slow and out-dated processes continue to cause significant delays to thegrowthofhigh-potentialcompanies.AlongwithourcolleaguesatCommunitech,MaRS,ICTAssociationofManitobaandVenn,werecommendtheestablishmentofaGlobalSkillsVisathatwouldenableCanadiancompaniestorecruithigh-skillandexperiencedtalentinatimelymanner,helpingthemtoscalefaster,createmorelocaljobsandtransferknowledgeintotheCanadianeconomy.

TheGlobalSkillsVisashouldbedesignedasastreamlined,onlineprocessthatwouldprovideresponseswithin threeweeks. Theprogram should also allow for both temporary andpermanentpathways toCanadaandservetoreplacetheill-namedTemporaryForeignWorkerPrograminrelationtohighlyskilledandexperiencedtechtalent.

b)StreamlinetheTemporaryForeignWorkerprogramforindemandjobsintechForCanadiantechcompaniesthepathtorecruitingglobalworkersoftenstartswiththeTemporaryForeignWorker(TFW)program,howevertheill-namedandmisperceivedprogramisoftentooslowandcumbersometoenablecompaniestomaketimelyandcompetitiveofferstoin-demandworkers.TheLabourMarketImpactAssessment(LMIA)requirement,combinedwithaninflexible,opaqueapplicationprocess,meansthatcompanieswaitmonthsforanswers,withminimalindicationofhowtheprocessisproceeding.Inadditiontoseniortalent,werecommendstreamliningtheprogramtoimproveefficiencyandprocessingtimesforthemostindemandtech-relatedoccupationsbycreatingapreferredroutewithoutLMIAorrecruitmentrequirement.c)ImplementatrustedemployerimmigrationprogramforexpeditedprocessingWerecommendthegovernmentre-establishaTrustedEmployerProgramtoexpediteworkpermitsforBC'shigh-growthandtop-hiringemployers.Thiswouldincludeatransparentapplicationprocessforalleligiblecompaniestoparticipate,supportedbyenhancedconciergeservices.d)IncreasethefederalallocationfortheBCProvincialNomineeProgramTheProvincialNomineeProgram(PNP)facilitatesanexpeditedimmigrationprocessforcertaincategoriesofapplicants includingskilledworkers. BC’scurrentPNPprogramhasastatedprocessingtimeof4-6weeks.Howeverwiththeimpactofchangestothetemporaryforeignworkerandimmigrationprograms,the volume of PNP requests grew dramatically, causing the BC government to temporary suspendprocessingofPNPrequests.WerecommendthatthegovernmentincreaseBCPNPallocationsandensurethereisanallocationwithinPNPspecificallyfortechjobs.


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e)EncourageexperiencedexpatriateCanadianstoreturntoCanadaWithanestimated350,000Canadians living in theSiliconValley, there isanuntappedopportunity torecruitandrepatriateexperiencedtalentbacktoCanada.Manyoftheseindividualshaveplayedkeyrolesinhelpingtogrowandscalecompanies–askillsetsorelyneededinBCtechcompanies.TheprocessofrepatriatingCanadiansisfarfromstraight-forward.Itwillrequireaconcertedmarketingandrecruitmenteffortcombinedwithstreamlinedprocessesforrelocatingex-patsbacktoCanada.WerecommendaTechEx-PatRelocationProgramthatoffersexemptionsoncertaintaxesanddutiesthatareoftenadeterrentforCanadiansreturninghome.


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2.ENCOURAGEGROWTHANDGLOBALCOMPETITIVENESSBACKGROUNDSuccessfullygrowingmoresmallcompaniesintomedium-sizedcompaniesisessentialforthelong-termcompetitivenessofthesector.

Startupsare the fuel thatdrivesvibrant innovationecosystems,whilescaleupcompaniesdrive fastereconomicgrowthandgreaterprofitability.Mediumto large-sizedcompaniescreatemorestable,highpayingjobs,attractlargerinvestments,createnewspin-offsandelevatetheoverallecosystem.Theycanachieve thecriticalmassnecessary tosustain research,developmentandcommercializationactivities,expandinternationalexportsandincreaseoperationalscale.Mediumsizedcompaniesformapoolfromwhich large anchor companieswill emerge and support an ecosystem comprised of re-investable netincome, growth financing and development of skilled talent - all essential elements to advance theprovincialandCanadianeconomy.

OneoftheprinciplebarrierstofastergrowthintheBCtechecosystemistherelativesizeandscaleofcompanies.BC'stechsectorremainscharacterizedbymoresmallfirmsthanlarge,with81%ofcompaniesconsistingoffewerthan10employeesandthe95%ofcompaniesconsistingoffewerthan50employees.9Aconsequenceofthisisanover-relianceontoofewcompaniestodriveeconomicoutputandgrowth.Thus, on a national scale our GDP and revenues are competitive, however on a global scale, ourperformancefallswellshortcomparedtoUSstatessuchasCalifornia,Washingtonandotherglobalhubs.ScaleismajorbarrierthatneedstobeprioritizedifBCwantstogrowlarge$100M+techcompaniesthatdriveR&D,employmentandinnovationinthelongrun.BCisatriskoflosingouttomorecompetitiveregionsunlesssmallandmid-sized(SME)companiesareincentivizedtogrowtheirbusinessinourecosystem-andthiswillrequireaddressingtheotherpillarsmentionedinthispaper,mainlyfindingthebesttalent,capitalandstructurestoincreaseR&D,andthemeanstoexporttheirproductsandserviceswithastrongreferencebase.Encouragingly in recent years the number of medium to large-sized companies has grown from 348companies in2009to447companies in2014. Inthepast twoyears, thenumberofmediumto largecompaniesgrewby16%comparedtojust6%growthincompanieswithfewerthan10people--agroupthatstilldominatesthetechsector.10ThecompositionofcompanieswithinBC'stechsectorismaturingand this is a favourable trend thatneeds to continue toaccelerategrowth in the sector.Weneed toencouragefurthergrowthandscalingofcompaniesbyre-evaluatingtaxstructuresandincentivesthatmaybe keeping companies small. At the same timealleviating the time spentnavigating tax regimeswouldallowfortimefocusedonsalesandbusinessgrowth.

92016BCTechnologyReportCard,p610 2016BCTechnologyReportCard,p9


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1.StreamlinethemultitudeoftaxprogramstoencouragecompaniestogrowandinvestCanadaandBC’snumeroustaxpolicies(SR&ED,corporatetaxrates,capitalgainsexemptions,etc.)whileadvantageous for small businesses, namely Canadian Controlled Private Corporations (CCPCs),inadvertentlyencouragebusinessestoremainsmalltopreservetheirCCPCstatus,oftenattheexpenseofgrowth,investmentandproductivity.Werecommendstreamliningprogramsfocusedonsimilaroutcomesintoareducednumberofprogramsthatcanbeaccessedbyabroaderrangeoftechcompaniesregardlessofsizeorownershipstructure.2.ConsolidateprovincialtaxprogramsintoasingleR&DLabourTaxCreditTheeligibilityfortheScientificResearchandExperimentalDevelopment(SR&ED)taxcreditissubjecttoanassessmentofthescientificandexperimentalmeritoftheundertaking–whichoftenissubjectiveinnatureandnotnecessarilycorrelatedwithcommercialsuccess. WhileSR&EDprovidesrefundabletaxcreditsforCanadianControlledPrivateCorporations(CCPCs),theprogramismuchlessgenerousfornon-CCPCcompanies.Inrecentyears,thedifferentialinbenefithasbecomemorepronounced,andcreatestheconditionsforaberrantbehaviouratthemarginsofCCPCeligibility.In contrast to the complexities of SR&ED, the Interactive Digital Media Tax Credit (IDMTC) is astraightforward tax credit on labour, providing a 17.5% refundable tax credit on labour expenditures,regardlessofwhetherthecompanyisaCCPCornon-CCPC.Thisstraightforwardapproachalignswellwiththebroadertechsector,wherethemajorinputislabourandprogramsliketheIDMTCeffectivelyserveasanInputTaxCredit,incentivizingcompaniestoinvestinexpandingtheirlabourpools.Aspartofgoalofstreamliningtaxprograms,werecommendthereplacementoftheProvincialSR&EDtaxcreditandtheIDMTCtaxcreditwithasimplifiedR&Dtaxcreditbasedonlabour. ThisR&Dtaxcreditwould be calculated based on labour expenditures – providing the benefits of both a more straight

RECOMMENDATIONSENCOURAGECOMPANIESTOGROWANDACHIEVEGLOBALCOMPETITIVENESSSuccessful ecosystems have significantly larger cohorts of medium and large sized companies. Tocompetegloballyandscale-upBC's tech ecosystem,wemustemploya strategy that encourages thegrowthofsmallcompaniestobecomemediumandlargeanchorcompaniesbyimprovingandsupportingcompetitivetaxstructures.1.Streamlinethemultitudeoftaxprogramstoencouragecompaniestogrowandinvest2.ConsolidateprovincialtaxprogramsintoasingleR&DLabourTaxCredit3.AugmenttheR&DTaxCreditwithaTechnologyCommercializationTaxCredit4.SimplifyandextendthefederalSR&EDprogram


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forwardadministrationandcreatingtheconditionswhichwouldnotinadvertentlyfavourremainingsmallattheexpenseofgrowth.3.EstablishaBCTechnologyCommercializationTaxCreditCanadian technology companies have historically benefited from a support system that favours R&D,oftenattheexclusionofsupportsforsalesandmarketing.Thishasadverseeffectsoncommercializationsuccess and thewillingness of companies to invest in thenecessary expertise and talent to grow thecommercialsuccessoftheircompanies.Werecommendaugmenting theR&DTaxCreditwithaTechnologyCommercializationTaxCredit thatwouldproviderefundabletaxcreditstowardseligiblecommercializationcostsuptoamaximumamountof50%oftheeligibleR&Dtaxcredit.4.SimplifyandextendthefederalSR&EDprogramOnafederallevel,theSR&EDtaxcreditprogramsareveryimportanttoBC’stechcompanies,particularlyearly-stagestartups,whichmake-upadisproportionatenumberofBCtechnologycompanies.However,theprogramhasbecomeincreasinglycomplicatedwitheligibilityandrefundabilityconsiderationsthatareoftenatoddswiththeobjectiveofgrowingcompanies.Werecommend:

§ Introducingaflatrate,refundableSR&EDcreditwithnoreductionbasedonincomeorcapitalization

§ Eliminatingownershipstructureasacriteriontodeterminecashrefundability;rewardingcompaniesofallsizesanddescriptionsforundertakingR&DinCanada,andremovingdisincentivestoattractforeigninvestment.

§ Streamliningeligibility,simplifyingtheapplicationprocessandenforcingthesameconsistencyofprogrammingandreportingrequirementsacrossthecountry


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3.EXPANDACCESSTOPROCUREMENTANDGLOBALMARKETSBACKGROUNDGrowingBCtechcompaniesneedtobebetterpositionedtoaccessglobalexportmarketsandcustomersto succeed.While therehas been37%growth in tech exports over the last 5 years, growing at 6.5%annually,theBCtechsectorcontinuestolagincomparisontothenationalaverageintermsofexportsandR&D.Techaccountsforonly5%ofBC'stotalexportsandintheCanadianICTsectortwo-thirdsofSMEsdonotexport.11AstheBCtechsectorispredominantlycomprisedofsmallcompanies,thereisaneedtofurtherboostmarketaccessandexports.

Ironically,BCtechcompanieshavefounditeasiertoaccessandselltoglobalmarketsthantocustomersandgovernmentsinCanada.Creatingopportunitiesforsmalltechcompaniestoselltolocalcustomersiscritical – especially in establishing reference customers that are essential when approaching newcustomerandmarketopportunitiesabroad.ImprovingthesituationforBCtechcompaniesrequiresmoredeliberatefocusonfosteringahometeamadvantage. Government procurement (including departments, agencies and crown corporations)representsasignificantopportunitytofurtherthishometeamadvantageforsmalltechnologycompanies.

11BCTechnologyReportCard,p28

RECOMMENDATIONSEXPANDACCESSTOPROCUREMENTANDGLOBALMARKETSSmallcompaniestypicallylackthescaleandcapabilitytosuccessfullyaccessmarketsandcustomersabroad.SuccessfullygrowingBCtechcompaniesrequiresadeliberatefocusbygovernmenttofosterhome team advantage, demonstrate support as customers and support expanded access to newmarkets.1.ExpandtheBuildinCanadaInnovationProgramtoBC2.IntroduceapilotprogramforSet-Asidesingovernmentprocurements3.Improveaccesstoexistinggovernmentprocurementprograms

a)Shareprocurementinformationacrossgovernmentstopromoteadoptionbyothergovernmentsb)Introduceapilotprogramtomeasuregovernmentprocurementoflocaltechc)Instituteweightingforlocaltechaspartthebidevaluationprocess

4.Investinmarketdevelopmentprogramsthatexpandexportactivity

a)Improvethecoordinationofexportandtradeservicesacrossgovernmentb)Investinindustryacceleratorstodeliverprogramsthatsupportsmallercompaniestoexport


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1.ExpandtheBuildinCanadaInnovationProgramtoBCThefederalgovernment’sBuildinCanadaInnovationProgram(BCIP)wasdesignedtosupporttheearlycommercializationeffortsofentrepreneursthroughalimitedprocurementprogramthatwouldevaluate,provide feedbackandconnectearly stagecompaniesonhow todobusinesswith theGovernmentofCanada.WerecommendintroducingasimilarprograminBritishColumbiatosupporttheadoptionofproductsofearlystagecompaniesbytheProvinceofBritishColumbiaanditscrownagencies.2.IntroduceapilotprogramforSet-AsidesingovernmentprocurementsSMEbusiness is recognizedacross levels of government as a sourceof job creationandaneconomiccontributor.However,morecanbedoneatapolicyleveltosupportSMEsintheirbusinessgrowth.ThisincludesmandatingaportionofgovernmentprocurementtowardsspendingwithSMEtechcompanies.We recommend a pilot Set-Aside program (similar to the US SBIR program) for SMEs for small-scaletechnology procurements by government, agencies and crown corporations. The Set-Aside programwouldremainacompetitiveprocessamongeligibleSMEsandwouldallowsmalltechnologycompaniestoparticipatein“reasonableproportion”ofopportunitiesinBC.3.ImproveaccesstoexistinggovernmentprocurementprogramsItisfarfromeasyformostSMEtechcompaniestofind,accessandqualifyforbidopportunitiesofferedbygovernment.WerecommendenablingBCtechcompaniestobetteraccessprocurementopportunitiesbyofferingprocurementconciergeservices,includingonlineandin-personguidanceresourcesfortechcompanieslookingtodobusinesswithgovernment.a)ShareprocurementinformationacrossgovernmenttopromoteadoptionbyothergovernmentsWe believe there is an opportunity for government to share information on their adoption of localtechnology solutions across different government entities (municipal, provincial, federal and crownagencies),therebyservingascustomerreferencestoothergovernmententities.

b)IntroduceapilotprogramtomeasuregovernmentprocurementoflocaltechWerecommendpilotingaframeworktomeasureannualprocurementspendswithBCandCanadiantechcompanies.Thisbenchmarkwillprovidemoreinsightacrosslevelsofgovernmentandindustryandaserveasastartingpointforpolicydeliberations.c)InstituteweightingforlocaltechaspartthebidevaluationprocessTheRFPprocessshouldincludeaweightingframeworktofavourprocurementbidsthatincorporatelocaltechcompaniesaspartoftheproposedsolution.


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4.InvestinmarketdevelopmentprogramsthatexpandexportactivityBuildingon theappetite forprogramssuchasCanExport, there isagrowingneed formoreconciergeservicesandmarketdevelopmentprogramstohelpcompaniesinexporting.

a) Improve the coordination of export and trade services across municipal, provincial and federaldepartmentsThereisaneedtoimproveandlowerbarrierstoinformationexchangebygovernmententitiestobemoreeffective in helping companies gain more awareness, exposure and access to available services andresources.b)Investinindustryacceleratorstodeliverprogramsthatsupportsmallercompaniestoexport

Stimulating significantmarket expansion and job creation requires a long-term view and partnershipcommitmentbygovernmentandindustry.Werecommendthegovernmentcontinuetoprovidesupporttoindustryacceleratorprogramsfocusedonscalingupcompanies,accessingnewmarketsandincreasingexportactivities.


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4.EXPANDACCESSTOGLOBALCAPITALBACKGROUNDAhealthyandrobustcapitalecosystem iscritical in realizing thegrowthpotentialofBC’s techsector.Accesstostage-appropriateriskcapitalisanimportantingredienttofuelthelong-termgrowthoftechcompanies.12ManyofBC'sleadingtechcompaniesreliedongrowthandventurecapitalinvestmentsatcriticalstagesoftheirgrowth.Agrowingnumberofincubatorsandacceleratorscombinedwithagrowinginterest intechnologyentrepreneurshiparegivingrisetoanincreasingnumberoftechnologystartupsandaflourishingcohortofcompaniesthatrequirecapitaltosucceed.

Formanyyears,theBCAngelTaxCreditProgramhasbeeninstrumentalinsupportingthesestartupswithseedstagecapital.Recently,therehavebeennotableeffortstoimproveaccesstoearlystageventurecapital.In2013,thefederalgovernmentlaunchedtheVentureCapitalActionPlan(VCAP)thathassinceresulted inover$1.3billionofnewventurecapital funds. In2015,theBCgovernmentannouncedthecreationona$100millionBCTECHFundwithasimilargoalofincreasingtheavailabilityofventurecapitalinBritishColumbia.

Despitetheseefforts,accesstocapitalcontinuestobeachallengeformostBCtechcompanies.StartupsintheUStypicallyraisefourtimesasmuchincapitalastheircounterpartsinCanada.Despitebeingsimilarsizeintermsofpopulation,SeattleoutperformsVancouverbynearlyfivetooneintermsoftotalventurecapitalraised.Asthenumberofstartupsandearlystagecompanieshascontinuedtoincrease,thereisagrowingdemandforcapitalandaneedtofurtherstrengthenthecapitalecosysteminBC.

12TheExpertPanelonFederalR&D(Jenkins2011)

RECOMMENDATIONSEXPANDACCESSTOGLOBALCAPITALTOGROWCOMPANIESAccesstocapitaliscriticalinfuellingthegrowthoftechcompanies.Toaddressthefundingchallengeatallstagesofgrowth,weneedalong-termviewthatbuildsonastrongfoundationandpositionsBCtoattractglobalcapitalingreaternumbers.1.Investinbuildingstrongprogramstoattractglobalcapital

a)Investinahighimpact,globalcapital-raisingprogramb)Enhanceconciergeservicesforfinancingoptionsandcapitalfirms

2.EnhanceandexpandtheAngelTaxCreditprogram

a)CreateaNationalAngelTaxcreditprogramb)EnhancetheprovincialBCAngelTaxcreditprogram

3.Continuetosupportexistingventurecapitalprograms4.Expanddebtandlendingoptions


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1.Investinbuildingstrongprogramstoattractglobalcapitala)Investinahighimpact,globalcapital-raisingprogram

Toattractmoreglobalinvestmentwerecommendmakingconcertedeffortstobettermarkethigh-growthtech companies, and raising the reputation of BC as a destination for outstanding tech investmentopportunities.Werecommendprogramfundingforqualifyingacceleratorstodevelopandmanageaspecializedglobalcapitalprogramthatselects,advisesandmatchestopcalibrecompaniestoanetworkofglobalinvestors.b)EnhanceconciergeservicesforfinancingoptionsandcapitalfirmsWerecommendgovernmenttofurtherinvestintheNRC-IRAPconciergeserviceandestablishaone-stopshop program for tech companies to better understand and access grant funding, financing options,investorsandventurecapitalfirms.2.EnhanceandexpandtheBCAngelTaxCreditprogramBCwasthefirst jurisdictioninCanadato implementaSmallBusinessVentureCapitalprogram(widelyreferred to as the BC Angel Tax Credit program) that encourages angel investment in early stagecompaniesbyextendinga30%taxcreditforinvestmentsineligiblesmallbusinesses.Thisprogramhasbeeninstrumentalinsupportingcompanieswithseedstagecapitalrequirementsandessentialinbridgingthegapbetween“friendsandfamily”financingandventurecapitalfinancing.Tobuildonthesuccessoftheprogram,werecommendthefollowing:a)CreateaNationalAngelTaxcreditprogramWerecommendthattheBCAngeltaxcreditprogrambeadoptedonafederalbasis,creatinganationalangeltaxcreditprogramwhichwillallowformoreinter-provincialcapitalflows,freeingprivatecapitalfrom the sidelines and ultimately allowing companies to raise larger pools of capital. If the FederalGovernmentprovideda15%credit,matchedbyProvincesthatwishedtodoso,BC’sexistingpooloftaxcreditswouldeffectivelybedoubled.b)EnhancetheprovincialBCAngelTaxcreditprogramby:

§ Eliminatingtheannualcontributionlimitof$200,000perindividualinvestor§ Extendingthetaxcarryforwardperiodforcorporateinvestorsfrom5to10years§ IncreasingthemaximumEBCcreditforacorporationfromthecurrent$5millionmaximumtoa

$10millionmaximum(tobethesameasaVentureCapitalCorporation)

3.Continuetosupportexistingventurecapitalprograms


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TheVentureCapitalActionPlan(VCAP)hashelpedtocatalyzeover$1.3billionofnewventurecapitalfundsintotheCanadiantechindustry.WeencouragethegovernmenttostaythecourseonprogramslikeVCAPandthenewBCTECHFund,whichwillleverageadditionalprivateinvestmenttoenhancethecapitalecosysteminBC. 4.ExpanddebtandlendingoptionsWhile venture capital andequity investmentplay a critical role in funding tech companies, there is agrowingdemandforalternativefinancingvehiclessuchasdebtandprojectfinancingtosupporttheshortandmediumtermneedsoftechcompanies. ThebanksinCanadahavetraditionallybeenreluctanttoprovidefinancingtocompaniesthatlackthebalancesheetortrackrecordnecessarytomeettheirriskprofile.Federal programs such as those offered by Sustainable Technology Development Canada (SDTC) andWesternInnovationInitiativefromWesternEconomicDevelopmenthavehelpedtoprovide importantloaninstrumentsthatfundprojectcommercializationandmarketexpansionactivities.WerecommendfurtherexpansionoftheseprogramsandencouragingtheBusinessDevelopmentBank(BDC)andExportDevelopmentCanada(EDC)toplayagreaterroleinprovidingdebtandloaninstrumentstosupportthegrowthoftechcompanies.

CONCLUSIONInsummary,weneedtobuildastrongerfoundationforBC’stechsectorandincentivizecontinuedgrowthandscalingofBCtechcompanies.WithstrategicactionsthatbuildcapacityinourSMEtechcompanies,reinforce our capital ecosystem, invest in talent attraction and development and improve access tocustomers,ourprovincewillbewellpositionedtorealizethebenefitsofafastgrowingglobaltechnologysector–bringingmorewealth,stablehigh-payingjobsandthetechnologyexpertiseneededtogrowallindustriesinBritishColumbia.Actingonthis4-PointPlanwillbecriticaltoacceleratingthegrowthofthesector,solidifyingourglobalcompetitivepositionandpropellingathrivingeconomyoverthecomingyearstoaheightenthelevelofinnovationandeconomicprosperityinCanada.Intheupcomingmonths,theBCTechAssociationwillcontinuetoworkwithgovernment,academiaandotherstakeholderstoadvancethesepolicyrecommendations.Formoreinformationpleasecontact:[email protected]


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ACKNOWLEDGMENTSWewishtorecognizetheparticipationandcontributionsofhundredsofmembersofourcommunityinhelpingtoformulatetherecommendationsinthisdocument,includingthefollowing:BCTechAssociationPolicyCommitteeBCTechAssociationBoardofDirectorsBCTechAssociationCapitalAdvisoryCouncilTechSectorLabourMarketPartnershipProgramInformationandCommunicationsTechnologyCouncilVancouverEconomicCommissionBCInnovationCouncilWorkforceDevelopmentCommitteesSub-sectorAdvisoryCommitteesResearchUniversities'CouncilofBCPSECo-opProgramDirectorsLifesciencesBCBCCleantechCEOAllianceDigiBCAssociationofConsultingEngineeringCompaniesofBCAccelerateOkanaganVIATECInnovationIslandKamloopsInnovationBCTechAssociationC-CouncilsDigitalC-CouncilGamesC-CouncilAnchorC-CouncilEmergingCleantechC-CouncilCleantechC-CouncilSaasC-CouncilWirelessC-CouncilIT/WebC-CouncilSoftwareC-Council


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ABOUTBCTECHASSOCIATIONTheBCTechAssociationisguidedbyourvisionofmakingBCthebestplacetogrowatechcompany.Formorethan20years,BCTech(formerlytheBCTIA)hasbeenprovidingopportunitiesforthetechindustrytocollaborate,learn,andgrowtogether.Wearededicatedtoconnectingcompanies,developingtalent,sharingstories,andadvocatingonbehalfoftechcompaniestokeepourindustrythriving. Weserveasaplatformtogrowthetechecosystem,buildingprogramsandinitiativesthatupholdourcorevalues:BeofService,SucceedTogether,PayitForward.www.wearebctech.comAffectingpositivechange,together.TheBCTechAssociationisatrustedvoiceforthetechsectorinBC.Representingthebroadcross-sectionof software, ITandservices,communications,digitalmedia, lifesciencesandcleantechcompanies,weseektoadvancetheinterestsofthetechcommunitybycollaboratingwithmanystakeholdersandbuildingacollectiveandunifiedvoice.Ourfocusisonnurturinganecosystem–ensuringthatBCtechcompaniescanrealizetheirfullpotential.As the fastest growingeconomic contributor to theBCeconomy, the tech sector ispoised toplayanessentialroleinBCandCanada’sfuturegrowth.Deliberateandstrategicpoliciesandinvestmentwillplayanessentialroleinfurtheringourgoalofaninnovative,diversifiedandprosperouseconomyinBCandCanada.DevelopingtheBCTechpolicyframeworktoguideadvocacyefforts.Weconductourpolicydevelopmentprocesswithonegoalinmind:tocreatethepoliticalandeconomicconditions thatwillmakeBCthebestplacetogrowatechcompany.Tous, that includesscalingtechcompanies,expandingourmarketshareandattractingincreasingamountsofcapitalandhighlyskilledtalent.WeconsultextensivelywiththeBCTechcommunity,sectorandbusinessleaders,educationinstitutions,investorsandgovernmentcolleagues.Wehostindustryroundtables,conferencesandotherforums;and,intruetechstartupfashion,wetestourhypothesesinanagilelearningframework.Theoutcomesoftheseinitiativesguideourongoingpolicyframework,our4-PointPlanforGrowth,whichoutlinesrecommendationstoshapeandgrowBC’stechsectorbyaddressingthekeyissuesofinvestinginworld-classtalent,expandingaccesstoglobalmarkets,encouraginggrowthandcompetitivenessandimprovingaccesstocapital.

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