Ottawa is the best place in Canada to start a company. But when it comes to sustaining that growth, Jeffrey Dale says, the city too often falls short.
This is my third opinion piece in a six-part series on the changing local economy. It will focus on the role of the private sector in fostering strong economic growth in the region.
In my most recent column in November, I talked about the importance of the federal government as the capital’s largest single employer.
Still, as vital as the public service is to this city, it’s time to debunk the myth that Ottawa is nothing but a government town.
In actual fact, the local economy is driven by private enterprise, which falls into three categories: market-based, export-based and tourism companies.
Our market economy is our internal economy – that is, where we shop, live and spend our money. The more money that is spent in our city, the more our economy thrives. That growth is fuelled by exporting companies, tourism and the federal government.
Overall, the city’s market-based economy is doing well. Since its success is based largely on our export economy’s success, I’ll focus my thoughts there.
Let me begin with startups. Ottawa is the best place in Canada to start a company – period.
Whether you run a locally focused business, a social enterprise or a technology company with big dreams, Ottawa is the place you want to start. The capital’s multitude of world-class universities, colleges, hospitals and research labs help fuel innovation that seeds new ideas as well as the talent to start new companies.
Startups also have access to great entrepreneurship programs at our educational institutions (such as the University of Ottawa’s Startup Garage and Carleton University’s Lead to Win), grassroots support and mentoring (including organizations such as the HUB and Startup Ottawa) and incubation and acceleration spaces that nurture companies during their critical development phases (for example, Invest Ottawa and L-Spark).
In addition, there are numerous government programs and agencies as well as Crown corporations that financially support startups, such as the National Research Council’s Industrial Research Assistance Program, the Business Development Bank of Canada, the Scientific Research and Experimental Development Tax Incentive program and Export Development Canada.
While Ottawa and Canada as a whole might be great places to start a business, we are not as successful at building our startups into globally competitive companies.
A recent study by the Organization for Economic Co-operation and Development showed that Canada had the best record among the OECD member nations surveyed for creating high-growth companies (defined as businesses whose revenues or employment increases by at least 20 per cent a year) that are less than five years old. But when the organization looked at eight-year-old companies, Canada dropped from first to last place in sustaining growth.
Clearly, Canadians are great at launching startups. But when it comes to sustaining them, we too often fall short.
A little over a decade ago, in the heyday of Silicon Valley North, Ottawa was the home base for a number of large, thriving tech companies, including Nortel, Mitel, JDS and Newbridge, which employed a total of nearly 40,000 people.
Today, those companies and their successors employ fewer than 10,000 workers in Ottawa. More importantly, most of the senior management positions at those firms have been moved out of the city – a brain drain of valuable talent.
Indeed, many of our star companies have been sold to foreign firms. But that is not always a bad thing: it creates new opportunities for entrepreneurs and it injects new investment capital into the market.
Ottawa’s tech sector is starting to rebuild its anchor companies, and the industry now employs more than 75,000 people. But we have yet to make up for the exodus of talent and capital over the past decade.
As our tech companies transition from hardware-based products to the new reality of software and services, firms that have relied on just a few hundred customers are having to find and support thousands of clients to attain a similar level of success.
A big challenge for these companies is that Canadian businesses tend to be very cautious and careful about how they grow.
Local and national markets are too small to create sustainable companies. In order to grow our economy, we need more businesses to expand into international markets.
Former TD Bank chief executive Ed Clark sounded the alarm recently, telling TD shareholders that Canada’s non-commodity exports have declined over the past five years, with more than 50 per cent of the country’s exports being driven by fewer than 50 companies.
Naysayers also argue that Canada lacks the depth of management talent to grow great companies. I believe they are wrong.
Canada – and Ottawa in particular – has a deep talent pool that has gained valuable skills and experience from starting companies of its own or working for the likes of Nortel, JDS, Newbridge and Mitel. We need to get this experience working in new startups with a mandate to grow internationally.
However, many of our most promising young companies are reluctant to bring in senior talent to help them grow. Instead, they rely on their existing talent pool, and in so doing are not learning from the people who have the most international experience and contacts.
I have had the opportunity to travel and work in the United States, Europe, South America and Asia. I’ve witnessed firsthand the hard truth of the matter – Canada’s international competitors are expanding more aggressively and with more success than we are.
The federal government has recognized Canada’s vulnerability in export markets. It has launched its Global Markets Action Plan to put in place trade agreements, programs and services to help Canadian companies go global.
Export Development Canada and federal departments such as Foreign Affairs and Trade and Development Canada have practical programs, services and financial supports to help our businesses. However, in my experience, most companies that need their services don’t know they exist or how to take advantage of them.
Ottawa needs a strong private sector to foster sustainable economic growth. The key is for our companies to go global, fast and smart.
As Mr. Clark told a recent business audience, “Do not cross the border other than in your best suit. You’ve got to be really, really good.”
Thank you to all the readers who have commented on this series so far. I thoroughly enjoy receiving your opinions and suggestions. Please keep them coming!
Jeffrey Dale is the director and co-founder of the Odawa Group as well as the former president of the Ottawa Centre for Research and Innovation.