This edition of The CCI Newsletter was originally shared with CCI’s subscriber community on May 1, 2024. To receive our monthly briefing on the scale-ups shaping Canada’s future, the policies that matter, and insights you won’t find anywhere else—subscribe here.

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Dear Innovator,

When Finance Minister Chrystia Freeland delivered her budget on April 16, I am confident that she didn't expect the kind of response we've seen from the Canadian tech sector.

The government expected to get a quick win from hiking capital gains taxes and delivering an overly simplistic 'soak the rich' justification. Instead, what the government got was an open letter signed by more than 2,000 CEOs, investors, executives, and tech employees, calling for the government to take a different path. Since then, CCI has been spreading this message on TV, podcasts, and in print, and delivered this message in a meeting with the Deputy Prime Minister days after the budget was released.

The fact is that Canada needs a serious growth agenda, driven by innovative Canadian technology companies and policies in line with the 21st century economy. We are at a point where the Bank of Canada is saying we need to break the glass and declare an emergency over our productivity crisis. The thing is, we can't tax our way out of Canada's productivity crisis. More importantly, Canada can't go down a path that discourages a highly mobile population of in-demand skilled workers from contributing to Canada's homegrown tech sector.  

CCI has been clear and forceful in our message to government, that they need to reverse this tax hike and build a path to prosperity that is focused on economic growth and building Canada up.

To unpack these ideas more, I hope you'll join me on Friday at 1pm ET at CCI's Tech Sector Pulse Check, where we'll chat with Stephany Lapierre, CEO of TealBook, Daniel Eberhard, CEO of KOHO, and Rebecca Kacaba CEO of DealMaker. Register here to join the call.

At CCI, we believe that governments should be the wind at the backs of our innovators, not the wind in their faces. Globally, the most robust innovation economies feature governments that eliminate growth barriers for their domestic companies, aligning their success with national prosperity. In Canada, we believe our innovators deserve the same support. We are committed to making this vision a reality.

Keep growing,

Benjamin Bergen

Benjamin Bergen is the President of the Council of Canadian Innovators, a national member-based organization reshaping how governments across Canada think about innovation policy, and supporting homegrown scale-ups to drive prosperity. If you are interested in learning more about the Council or joining our cause, get in touch.

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INNOVATION UPDATES

Capital gains hung over everything, but April was an enormous month for important policy discussions at CCI.

To start the month, we published Buying Ideas: Procuring Public Sector Innovation in Canada. This landmark report from CCI examines the challenges and opportunities of procurement, and identifies concrete steps that we can take to improve how the government buys technology. Procurement is a massive 14% of GDP; if Canada can get this right, it can have a major impact on our economy. Read the report here, and watch the video of our launch event.

In Mooseworks, CCI's policy director Laurent Carbonneau also wrote about why procurement reform is so important to the Canadian economy right now, and he appeared on a podcast last weekend outlining the recommendations in the report.

In April we also published a policy brief for a Canadian innovation box. The federal government has been consulting on ways to create a patent box tax structure that encourages businesses to commercialize their patents in Canada. We believe the government should widen its scope, and include various kinds of intellectual property that can be directly linked back to R&D done in Canada.

In April, CCI also hosted our national Budget Season Debrief for Canadian Tech Leaders, where our team of leading government affairs professionals offered insights and policy updates on government budgets from coast-to-coast. If you missed it, you can watch the video recap here.

In Ottawa, Finance Canada launched the second phase of consultations on Scientific Research and Experimental Development (SR&ED) reform. Click here to participate.

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THE BIG READ

"Canada’s current board leadership seems to be comfortable surrounding itself with generalists. But in a complex global economy evolving with greater velocity, there is a pressing need for more technocratic directors," wrote Neil Desai (above) in the The Globe and Mail this month.

We agree, and it's part of the reason why we launched the Innovation Governance Program (iGP) in the fall of 2021. This week, we kicked off the 9th cohort of this professional development certificate program, that trains current and aspiring corporate directors in the governance and business dynamics of the 21st century economy. It's also why, in partnership with The Dais at TMU, we're launching the Public Policy for Canada’s Digital Economy Program tomorrow.  

CCI's programs help board members and policy makers understand the challenges innovators face scaling-up, and connect them to a community of peers committed to supporting the sector's growth. We have more programs in the hopper that we look forward to sharing with you in the coming months. Building Canadian capacity, as this newsletter's tagline states, is part of our mandate at the CCI, and it underpins the advocacy work, programming and events we lead on behalf of Canada's fastest-growing firms.

You can read Neil's full piece here: "Corporate boards have a diversity problem – and not just the one you think."

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THE BIG DEAL

Vancouver-based Sanctuary AI, led by CEO Geordie Rose (above), has been on a tear recently. They're on a mission to build human-like artificial intelligence and general purpose robots, and in April the company announced that their Phoenix humanoid robot will be part of a pilot project in Magna International's auto parts manufacturing assembly line. Phoenix is the only general-purpose robot featured in TIME’s Best Inventions 2023.

In April, Sanctuary AI also announced the 7th generation of their Phoenix robot, which includes an improved range of motion, and a 50x improvement of the speed at which tasks can be automated.

Learn more at sanctuary.ai

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SCALE-UPS TO WATCH

CCI's national movement on innovators continues to grow! We believe that the most potent force for Canada's economy is the homegrown scale-up companies that are commercializing research and turning millions into billions.

CCI is thrilled to welcome Underknown CEO Steve Hulford and Embark CEO Andrew Lo as our newest members!

We were also proud to see many of our members recognized on the Macleans 2024 Power List, including D2L CEO John Baker, WELL Health CEO Hamed Shahbazi, and Thornhill Medical CEO Lesley Gouldie.

Here are a few other highlights from the Canadian tech sector in April:

• Qohash secures $17.4 million in Series B funding
• Morgan Solar wins 2024 BGIS Supplier Innovation Award
• WELL Health acquires 10 primary care medical clinics from Shoppers Drug Mart
• Interac acquires "Key Employees" exclusive Canadian rights to payments personalizer Vouchr
• Clarius Mobile Health named to Fast Company's 2024 List of the World's Most Innovative Companies
• Lightspeed Commerce's Dax Dasilva on why he is thinking about taking the company private

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CCI IN THE NEWS

Our advocacy on behalf of Canadian innovators has been covered by the news media this month. Here are some recent media hits:

CCI President Benjamin Bergen writing in the National Post: "Why Would Anyone Invest in Canada Now"

If Canada is seen as an unfriendly place to invest, due to high taxes, investors will simply take their money elsewhere, and propel the growth of promising tech companies in other countries.

What’s more, highly skilled talent is more mobile than ever before, and among innovative high-growth companies, stock options — subject to capital gains tax — are a key form of compensation.

We’re not talking purely about CEOs and tech founders here either. The dedicated early players of a promising tech startup earn their stock options with sweat equity. Their dedication, taking a risk in the prime of their career, is often the key ingredient for the success of future innovation champions.

John Ruffolo (above), co-founder of CCI and Managing Partner at Maverix Private Equity, speaking at the Canadian Club of Toronto (as reported by Bloomberg):

Ruffolo said the country’s productivity slump is related to a long-term shortage of investment by Canadian firms in productivity-enhancing technology. Taxing capital gains at a higher rate, he said, runs the risk of “creating a situation that’s antagonistic for investors” and may prompt them to prefer to invest in US startups instead.

“Mark my words, if this tax change stays the way it is, we’re going to see an outflow of angel capital for sure,” Ruffolo said. “Foundations, high-net worth folks that are holding the capital into companies — that’s going to be gone.”

Sean Silcoff's article in The Globe and Mail on Saturday, April 27, 2024, featured CCI's commentary:

“We have to show a united front on why this is an issue and what this means not only for the technology ecosystem but the entire Canadian economy,” said CCI president Benjamin Bergen. “People are rightly angry, but the way it’s being framed by the government is intentional and designed to try to divide Canadians. What I don’t want to see happen is for the regional economic hubs to come out and not listen to what the technology community has said.”

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DISPATCHES

Last week, CCI hosted our second annual Capital Markets Summit in Toronto. The event brought together more than 120 C-Suite executives, investors, and ecosystem builders for a full day of discussions and dealmaking meetings. A special thank you to our 2024 Summit partners: Export Development Canada, BMO Capital Markets, RBC Capital Markets and RBCx, Roynat Capital Scotiabank, and Wealhouse Capital Management.

Click here for a recap featuring insights from some of our panelists and guests.

Happy reading!