Co authored by Dan Herman and Sally Daub. Published in the Financial Post, February 26, 2023.
The global tech industry has had a rough few months. Venture capital funding is down globally by 42 per cent according to research from Prequin and sector-wide job losses have surpassed the 150,000 mark. For policymakers and job seekers alike, this might seem like a moment of reckoning, a bubble bursting of sorts, but tech isn’t going anywhere. Strong balance sheets, strong teams and strong intellectual property (IP) are what will survive.
Unlike the dot.com crash of 2000 which called into question the adoption of new tech, this most recent crash in tech valuations is about separating fiction from reality among those creating new tech.
Co-author, Sally Daub, experienced the tech downturns of 2000 and 2008 and throughout those periods she was building ViXS, a leading semiconductor company in the competitive video chip space. One thing that helped her company survive throughout the ups and downs of the tech market was the value of strategically protecting the company’s IP and using that strategy to drive brand positioning. As an investor, Sally continues to see IP as one of the cornerstones in starting and building a successful company and something founders need to get right at the very beginning.
Since the 2000s, the global tech economy has expanded rapidly beyond North America and Europe wherein today’s global tech economy is truly global. Think Israel, South Korea, and Brazil. World-class tech and world-class tech companies are being created everywhere.
Canada should be well set up to succeed in this increasingly global economy given our world-class research institutions and a vibrant start-up landscape. Yet despite these assets, in late 2021, the Organization for Economic Cooperation and Development (OECD) predicted that Canada would be dead last by 2030 for GDP growth out of the 38 member countries who are all considered high-income economies. Something’s amiss in our economic policy-making, and corporate strategizing, if we can’t figure out how to turn great foundational assets into growth and prosperity.
A key to fixing this recipe is a more strategic and far more well-funded approach to the creation and commercialization of IP. Of the S&P 500 companies, 91 per cent of the US$22-trillion total value is attributed to intangible assets, whereas in Canada less than 10 per cent of Canada’s economic drivers come from intangible assets. And the problem seems to be growing.
Canada filed 1,370 fewer patents in 2021 than in 2005, according to the Canadian Intellectual Property Office. Despite lots of talk about the importance of IP, our innovators and researchers aren’t following up with action. The result is that too often our domestically created IP ends up in the hand of foreign companies, leading to growth in corporate headquarters elsewhere, therefore losing the downstream benefits that come from developing IP into full-fledged products within Canada. These dismal growth figures are part and parcel of an approach that has seen the outcomes of our research funding land in the hands of others. We cannot continue down this path.
Tesla, for example, has made major investments into battery tech developed in Nova Scotia that was largely fuelled from public funds, giving the company significant control over the exploitation of the technology. Huawei was able to secure 5G technology for a mere million-dollar payment and we are now seeing similar movements in funding to gain access to other critical Canadian technology including quantum.
Canada can and should lead the world in new tech in fields such as automotive, medtech, life sciences and the AI and quantum technologies that will enable it. Yet we can’t be content to be knowledge creators. We need to strive to be the commercial owners of these innovations. This is why the government of Ontario recently launched Intellectual Property Ontario (IPON) and why the two of us, among others, are contributing as board members. IPON is the first provincial agency in Canada dedicated to helping researchers and businesses maximize the value of their IP and strengthen their capacity to grow and compete in the global economy. Our prosperity in Ontario, and more broadly across Canada, is tied to whether we can stop maintaining status quo and be competitive and strategic when it comes to IP. This will directly increase the prosperity of current and future generations in our country, and chart a better course that doesn’t land us dead last for GDP growth among OECD countries as predicted.