Considerable attention is being paid to the fact that much of Canada’s educated talent is moving to the U.S. to pursue employment, start companies, etc. While government can take steps to suppress brain drain, Canada must develop strategies to prevent other assets from also draining into the U.S.
Experts suggest that jobs are best procured through networking and not via applications. However, to network yourself into a position, you need to have companies to talk to.
As a professor in biomedical engineering (BME), I’ve been suggesting that graduate students consider doing some of their training in a U.S. hub so they can network themselves to a job and career. That’s because there’s not much of a BME hub in Calgary – or in Canada, for that matter.
The advice I give students who want to remain in Calgary is to become more versatile and to leverage their peripheral professional skills (such as project management), to fit into the energy sector. At least that’s what I used to tell them when the energy sector was hot in Calgary.
Things are different for information and communication technologies (ICT), at least at Ontario’s University of Waterloo (UW), which has had one successful spinoff, Research in Motion (RIM, a.k.a. Blackberry). Because of UW’s reputation, leading companies from Silicon Valley and elsewhere actually go to Waterloo to interview and offer jobs to its ICT graduates. Of course, taxpayers are jaded when students can take advantage of Canada’s superior, heavily-subsidized higher-education system, only to procure employment in the land of opportunity.
One way to buy Canadian loyalty is to implement a training grant system much like what’s done for top talent in the U.S. This would be in the form of a contract indicating that in exchange for subsidized education, a student promises to work in Canada for five years post-graduation. Such a draconian system would require that gainful employment could be found in Canada. Herein lies the rub.
How can we blame Canadian tech students for going to the world’s best ICT hub in Silicon Valley? Hubs are great places to learn and grow. When Calgary’s energy hub was firing on all cylinders, friends of mine bounced between companies and efficiently climbed the corporate ladder. The problem for today’s youth is that Canada doesn’t have hubs where careers can grow in meaningful ways. This is because Canada has so few small and medium enterprises (SMEs) due to another form of brain drain: companies.
Most tech companies in Canada are built with venture capital investment. This is an impatient form of capital, where shareholders expect a return on their investment in three to five years. Companies are forced to present an exit strategy, which often means becoming acquired by a larger U.S. company. Venture investors aren’t interested in the long-term growth of the company in Canada.
One potential solution is the slow and steady corporate growth model, such as what has been done with Stemcell Technologies Inc. (STI), Canada’s largest privately-owned biotech company. Rather than focusing on the boom-or-bust of model of venture investment, STI has grown steadily into a multinational company through continuous product development and sales.
Another potential solution is to develop more patient venture capital, whose mission is not to exit in three years but rather to develop companies that choose to stay in Canada. Such a model would require changes to the way investment is done to promote growth. Key to this would be the recognition of intangible assets such as intellectual property.
While venture capitalists are savvy about recognizing the value of intangible assets, banks aren’t. Since so much of the value of tech is wrapped in intangible assets, patient capital needs to structure financing that recognizes the increased valuation of companies during their growth in Canada.
Finally, Canada has to contend with the Dutch disease related to the draining of our bitumen to the U.S. First observed during the North Sea energy boom, Dutch disease occurs when the rapid growth of the energy sector suppresses the development of secondary economies by raising the costs of goods, talent, capital, etc.
Dutch disease is the reason Calgary hasn’t built a strong secondary economy in biotech – or any other sector for that matter.
Now that the energy sector has gone through its second major downturn, there’s renewed talk of entrepreneurship and economic diversification in Alberta. Save for Dutch disease, this will only occur if Alberta’s next boom is a regulated one (for example, why can’t we process our own bitumen?).
If not, then all the work, infrastructure and capital invested in creating Alberta’s next secondary economy will go down the drain like it did during the last boom.
Derrick Rancourt is a professor in the University of Calgary’s Cumming School of Medicine and a director on the board of the Alberta Council of Technologies Society.
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