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OCTIE - The Ontario Cross Border Technology Ecosystem Study

The OCTIE Study Blog

The Science, Technology and Innovation Council (STIC) recently published a report ranking Canada very low in areas of open innovation and collaboration. The process of innovation includes many parts from the research and development of new products, technologies and processes to the financing of these new developments. The organizations involved in this process range from universities that teach and train future innovators, to accelerators and supporting networks that provide innovation hubs for the commercialization of new ideas through start-up companies, to professional services that link these companies to potential financers and investors and finally to government organizations and bodies that develop strategies and programs that assist in the whole process.

Each of these organizations plays an integral role in the development of a country or region’s innovation culture, including angel and venture capital (VC) investors. These investors specialize in financing new and risky start-up companies. In comparison to the US counterpart of VC funds, Canada is much smaller and more specialized within the start-up community. According to the the International Consortium of Entrepreneurship (ICE) data of 2006, 35% of total VC investments in Canada were in seed, pre-investment stage start-up companies, or in start-up companies, over three times that of the US. These investments are highly concentrated around the communications, IT and biotechnology industries with about 80% of the VC investments in Canada going to these sectors as opposed to about 88% in the US. Another important point to note is the vital role that government programmes and policies play in the development of innovation within industries, which is highlighted in a study by Wonglimpiyarat in 2006 that attempted to understand the financing practices within VC management by examining the major Canadian industrial clusters and key players.

The importance of formal, informal and other social networks in assisting start-up organizations in getting finances from various organizations including VCs is evident from industry practices and through various empirical studies however, there has been limited research of the topic within the Canadian context. Since the inception of various internet technologies, newer, more efficient and less costly methods have been used to improve the flow of capital and knowledge between innovation development players. This has resulted in a lower cost of financing and managing deals which has, in turn, given financers the ability to take bigger risks by financing companies outside of their geographic and industry specialization scope, expanding their social capital and reputation within the whole innovation ecosystem.

The industry has evolved to include many online organizations from match making services to organizations that go a little further by screening investors and start-ups, to organizations that use crowdsourcing, or crowdfunding, to finance and gain wide spread opinions on new start-up companies.

Currently, there is no formal source of reliable information on the flow of information and capital, in terms of deal size and nature, within the innovation ecosystem in Canada.

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