Viewpoint

Matt Spoke: Canada needs less ‘innovation theatre’ and more productive growth

In optimizing for vanity metrics, we’ve fallen behind other countries in our ability to create world-changing businesses
Shopify's Harry Brundage (left) and Anna Lambert are shown at Shopify's offices, Friday, March 18, 2016 in Ottawa. Justin Tang/The Canadian Press.

Canada doesn’t need more startups.

Bear with me for a minute. After all, I’m a startup founder in Canada. I’ve raised tens of millions of dollars building two companies and have employed over 100 people during that time. 

But like most tech startup founders, I didn’t set out to build a startup. The goal is bigger, more aspirational, and ultimately what our policies should be working to incentivize. 

I’m building a company that aspires to change the world in a small or big way. To do that, my company can’t stay a startup for long. In fact, what I’m ultimately building is a massive company. It just so happens that “startup” is step one. 

The statistics suggest that I’ll likely fail. But the fact that I’m trying—alongside so many others like me —means some of us will succeed.

From the perspective of policy focused on encouraging innovation and economic growth, the purpose of this process needs to be to change the odds so that we as a country create more winners and fewer losers, as compared to our competition (the U.S., China, Europe, wherever).

“Startups”, as we’ve come to call them, have become a little bit of a romanticized notion in Ottawa. Politicians love the imagery of 20-something-year-olds in hoodies crowding into government-subsidized incubators to build startups. The problem is that we’ve created a policy environment that incentivizes what you might call “innovation theatre”.

The goal is not measured in the number of companies that go on to dominate their markets globally. It’s not measured in impact on GDP growth. It’s not even measured in employment. It’s measured in optics. 

How many entrepreneurs have been supported through the laundry list of government funding programs? How diversely do they represent Canada’s regions? What demographic do they fall into? 

In optimizing for these vanity metrics, we’ve fallen behind other countries in our ability to create world-changing businesses, started by world-leading Canadian entrepreneurs. 

“Startups” are NOT small businesses.

There is a missing distinction that politicians too often don’t understand. Every political party spends a disproportionate amount of time and energy focused on what they broadly call “small businesses”. 

And although I don’t like the way we often use the term in Canada, startups are NOT small businesses. They are huge businesses finding their footing in a new market, optimizing their odds of winning, and ultimately growing to be big drivers of wealth and productivity. 

The unpopular reality that Robert Atkinson does a good job describing in his recent Dialogue with The Hub is that small businesses generally slow down productivity. In fact, the bigger a business is (all else being equal), the more productive it necessarily is. It earns higher margins, pays better wages, contributes more in taxes, captures more market share, and innovates.

Until we understand that distinction, we will continue to primarily prioritize policies that encourage more small businesses, more startup theatre, and fewer global winners.

As any entrepreneur would likely agree, we’re not sitting on the sidelines waiting for our government to figure out the right policies to help us win. But as with any economic policy, we are influenced in our decisions by the things that are permitted, encouraged, and celebrated, as well as those that are restricted, discouraged, and frowned upon. 

In some cases, despite bad policies, a Shopify will spring up from Canada and go on to create a market and win. And today, Shopify is the most valuable company in Canada, and one of the largest contributors to our national productivity and economic growth. 

There is no government program that led to its success, nor any that could have stopped such a world-class team from building what they built.

But what we can and should expect from our government is a recognition of the importance of new innovative companies that start off as startups, but ultimately aspire to become massive, successful companies. 

We should assume that our most valuable companies in 10 years will not be the same brands that hold those titles today. The question then becomes how do we make that true.

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