Canada's tech sector to get a boost in 2017 from government

[Brad Duguid (L), Ontario Minister of Economic Development, Employment and Infrastructure, and Navdeep Bains, Canada Minister of Innovation, Science and Economic Development, check out a Chevrolet Bolt EV electric vehicle at the North American International Auto Show in Detroit, January 12, 2016. REUTERS/Mark Blinch]

More Canadian tech startups could be receiving contracts from their country’s federal government in 2017.

The Canadian Government announced intentions to increase the $30 million it reserves to buy new technology from start-ups through its Build in Canada Innovation Program [BCIP]. Outside of the program, its procurement budget is $18 billion annually and Innovation Minister Navdeep Bains says its time to use more of that money to encourage growth in Canada’s emerging technology sector.

“It’s very modest and we can do better,” he told The Globe and Mail, referring to the current $30 million sum. “This is something we’re pushing very hard … I would like to see this in the budget.”

It’s something those in the tech sector would very much welcome. Typically, even landing a government contract can be very difficult. With the process seen as cumbersome and geared towards larger, more established firms, many Canadian technology start-ups usually turn to foreign investment first, but Bains’ plan could be the first step to change that.

“The moment the government has procured from your firm, it makes it just that much easier to gain more orders because you have a first customer. You’re much more proven and a more stable vendor,” says Matthew Seddon, a policy advisor at the Brookfield Institute for Innovation and Entrepreneurship who co-wrote a report called The State of Canada’s Tech Sector, 2016.

Among its key findings, the report notes that Canada’s tech sector made up 5.6 per cent of the country’s employment and generated 7.1 per cent of the country’s economic output, which was an output greater than both the finance and insurance industries.

“As the tech sector continues to grow and emerging technologies from around the world become more common, it is now more important than ever to ensure Canada maintains its growing, prominent tech economy,” reads the paper’s introduction. The government seems to agree.

“We think the government can play a major role … to be a marquee customer [and] to help validate products and services to allow companies not only to succeed in Canada, but globally,” continued Bains.

Though he didn’t comment on how much money he would like to see the government put towards technology contracts, The Globe and Mail reported the Innovation, Science and Economic Development [ISED] department requested up to $300 million from the finance department, which would come from the existing procurement pool.

The Trump effect

It couldn’t come at a better time. With the American tech industry waiting to see if president-elect Trump implements the protectionist policies around trade and immigration that he promised during the campaign – potentially stifling innovation and making it more expensive to hire foreign workers – such alienation could be to Canada’s advantage.

“Right now Canadian Universities have noted increased enrolment from American students because of Trump. Could that same thing happen in the Canadian technology industry? It’s hard to say,” says Seddon.

But Sean Mullin, the Brookfield Institute’s executive director told the Toronto Star that Canadian startups may think twice about making it big in the U.S. given the coming political climate and more U.S. companies may follow the examples of General Motors and Thomson Reuters and expand their Canadian divisions to get around potential immigration restrictions.

“At the very least that trend won’t stop and it may accelerate for Canada given that we’re one of the few countries in the world where you can bring talent and openness and inclusivity and diversity,” Mullin told them.