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Michael Johnston
View Michael Johnston Profile
Michael Johnston
2013-06-13 15:32
Thank you very much for inviting me and letting me join you from another cloudy day in Halifax via video conference.
As you mentioned, I'm founder and president of TeamSpace. We're a custom software development and video game studio based here in Halifax. We maintain a full-time staff of roughly 80 people, the majority of whom live here in Nova Scotia, and some in Toronto, the United States, and England. Roughly 13 years old, we've grown steadily. We've been recognized five times as one of the fastest-growing companies in Atlantic Canada, and in 2011 we were named Nova Scotia's export company of the year.
Our core business is software engineering for world-class interactive projects. Many of our clients are global entertainment brands and broadcasters, such as MTV, Nickelodeon, Sony Pictures, Fox, and many others. They drive their businesses forward through the adoption and creative application of emerging technologies. To remain relevant to them, we must do the same.
For our part, in the past we used to maintain a lot of in-house IT infrastructure at TeamSpace. We had racks of servers, co-location facilities, and ran all of our internal systems on those servers. We built a lot of those systems ourselves or bought expensive ones off the shelf. It was costly up front and costly over time: there was constant updating as computers aged and software needs evolved, plus we needed a dedicated IT staff to look after all of that.
As a result we tended to invest a minimum amount required to get by. In recent years we've moved most of our systems to cloud-based offerings, rented monthly as needed from third-party providers. This trend has been game-changing for us and for many of our partners. It has allowed us to try new approaches and to stay current on more leading technologies without a huge upfront capital cost and risk from buying servers and on-premises software licences. We still invest heavily in workstation computers and mobile devices—smart phones and tablets—but the move to cloud services for our core operations has allowed us to keep pace with changes in our market.
We can test different tools to find the best ones for our business. We can afford to change and adopt platforms that our key clients use. This is important because it makes us more attractive to our largest clients because we're using similar platforms to do business and a similar vocabulary about how we work. Our people who work from multiple devices—laptops, tablets, phones—can access information when and where it's needed without complex set-up or technical support.
I would actually argue that at a macro level, we now spend more on IT than we used to under the older on-premises model of infrastructure, but we tend to spend on the right things that fit our business now. We can afford to take risks and try new approaches, helping us realize incremental value without massive capital outlay. To use a metaphor, we sample a lot of things from the menu now, rather than ordering one big entrée that we might not like.
I realize that the numbers show that companies in the U.S. tend to spend more on IT than Canadian firms do. My experience certainly aligns with that data. Perhaps it's an American ethos. Most start-up companies I know, including one that I founded in Boston in 1999, work hard to establish a dominant image from day one. That often means having the cool office space and all the latest gear.
My experience starting companies here in Canada would suggest that similar Canadian firms tend to err on the cautious side. We spend only what's needed to get by, and we build our brand a little bit more slowly. Perhaps that's cultural; perhaps that has to do with a different funding landscape between our countries. In general, there is simply more debt and equity financing available to U.S. companies than Canadian ones, certainly at least Atlantic Canadian ones. Perhaps it's simply because in general new technology is always available earlier in the U.S. than it is here. It generally costs less for the same items. A move to globally priced cloud services may help to erase some of those differences.
Looking at things through a human resources lens, there is a war for talent in many industries, especially the IT sector in which we operate. Companies like Google, who are well known for their office spaces and passion for technology, are defining the new normal for companies like mine. For our own part, we are presently planning an office move to a new, open, more Google-like space in the coming few months, almost entirely to help us attract and retain talent here in the region.
Companies in Silicon Valley, with whom I'm competing for talent, attract talent by posting pictures on their websites of what the employee's desk would look like when they start—loaded with all the latest gear from Apple. We're starting to do more of the same to attract and keep those people. It's costly, but we simply can't afford not to do it. I honestly wish we could do more.
I believe that spending on the right types of IT can drive both efficiency and growth for our company, but we need to see the value first, and then take the risk and invest. I believe our government may be able to help on the cost side of the equation, working creatively to reduce that risk to companies that are considering investing in IT.
Tax programs to encourage borrowing for IT expenditures might be considered, as might federal support for labour-based credits by industry. We have digital media and gaming tax credits here. They're administered provincially at the moment, but a look at things like that on the federal level might help to free up capital, which in my sector almost always gets reinvested into IT-driven innovation initiatives. Working across borders to bring costs for technology more in line with other markets might also help.
As a member of a company working in the global marketplace, I'd close by suggesting we need to review Canada's position in a global context, not just relative to the United States. Every month I'm bidding for work against new competitors out of Brazil, Costa Rica, Belarus, India, Israel, and other emerging economies.
I don't have the hard data in front of me. I expect that for now Canadian firms probably do spend more on innovative new IT than do firms in many of those countries, but I also suspect that the spending rates in many of those markets are trending upwards a lot more quickly than they are here in Canada.
Thanks. I'd be happy to open it up to discussion if I can be of any use.
View Mike Lake Profile
CPC (AB)
Now I'm really interested in hearing how you got from where you started to where you are now. When did your company start? Of the things you mentioned, what was the genesis of your company?
Michael Johnston
View Michael Johnston Profile
Michael Johnston
2013-06-13 15:41
I'm a Nova Scotian boy. I took off to Boston to do a degree in physics and biochemistry at Harvard in the mid to late 1990s. Instead of going to med school, I ended up in IT in Boston in the late 1990s period, in the heyday of the dot-com era.
I built up a portfolio of client relationships and started a dot-com in health care IT in the late 1990s.
The bubble burst. My wife was pregnant with our first kid, and I managed to trick her into letting me start another company as long as it was north of the border, where we didn't have to deal with visa issues.
Back home to Nova Scotia we came. We brought a lot of our client contacts with us and started doing IT services work for customers I already knew out of the U.S. Most of those were in the corporate space. IBM was a big contact for us.
I did a lot of work building out corporate learning and software systems with a very small team here in Nova Scotia and a co-founder in the U.K.
I realized we were building scalable, interactive software in the early 2000s in a way that very few other firms were. I saw there was an opportunity to do that, not just in the corporate e-learning sector but in entertainment, in media, in gaming, in banking, in health care. There were a lot of sectors where rich interactive software that was built in a way that allowed it to scale to an enterprise-quality level was unique and rare. There weren't a lot of companies doing that.
If you combine that with the cost base of doing it from Nova Scotia, we actually had a pretty good global business. We kept our heads down and we hired a bunch of people slowly over time here in Nova Scotia. We have done very little work for Atlantic Canadian companies, very little work for Canadian companies. Most of our work is export-driven, bringing work into the region, employing 65 or so people here in Halifax and 15 or 20 abroad.
We've evolved by word of mouth, largely. We don't have an active sales force. We do interesting work that has an engineering component that's attractive to large companies and to a lot of partners in marketing and branding, and in creative industries, where there's a lack of understanding about how to build good software. We're largely software engineers, and that skill set has made us a valuable partner to a lot of companies that are trying to adopt technology quickly and trying to find creative ways of doing that in an affordable way.
View Phil McColeman Profile
CPC (ON)
View Phil McColeman Profile
2013-06-13 16:02
Shifting gears to the global context of being competitive as a Canadian business, I want to make sure the committee understands what your competitive advantages might be. You've relayed to the committee through your comments and some questioning that you're a price-driven company. In other words, if someone from Argentina or other parts of the world can provide a similar product of equal quality, consumer demand is based on price. Is that accurate, or are there other factors? We know the reasons people do business with others. But is price right up there as the number one issue?
Michael Johnston
View Michael Johnston Profile
Michael Johnston
2013-06-13 16:03
No, I'm sorry if I miscommunicated there. If we build a website, we need to host that on a server. Absolutely, we're looking for the best cost on the cloud-based infrastructure we use to deliver the service we provide. But actually, it's quite the opposite: if we compete on price, we lose every time. Every offshore jurisdiction that can rent people at $15 an hour is going to beat us every time on price, if we're looking at unit value.
We tend to be more valuable to clients who are looking for a slightly better cost than they can get in New York, Boston, Atlanta, or L.A. But they come to us with problems that aren't fully formed—that fuzzy area of trying to drive their business forward, to create a new technology. They need a friendly partner from the north they can sit down with and solve a problem on the back of a napkin. They trust us to deliver in a cost-effective fashion, but they realize that if they have a specification for software already built they can hand that off to an offshore company for cheaper. It's the cutting edge of new business that they need us for.
View John Carmichael Profile
CPC (ON)
Thank you, Chair.
Thank you, Mr. Johnston, for your testimony today.
I'd like to go back to a part of your opening remarks. I'm familiar with a company that is in the technology world and originated in Calgary and has moved much of its operation to Newfoundland. It found that, outside of the lifestyle—and you've addressed that as a cost of doing business—people were more readily available and more competitive. The opportunities presented to it made it worthwhile for it to take advantage of some of the provincial opportunities.
When you talk to my colleague's previous comment about the various digital hubs across the country, the various digital environments in so many of the major centres across Canada, can you tell us how you compete one for one with those in your industry when you look at Toronto, Montreal, Winnipeg, Edmonton, etc? That is the first part.
The second part of that would be to get a better understanding of this. It seems to me you're dealing on a global basis, certainly a North America-wide basis, with very specific skill sets. You're highly specialized. You bring a product to the market that is unique, from what I understand from your testimony. I'm not sure if that's fair or accurate, but could you speak for a minute about competitiveness across Canada, for starters, with those thoughts in mind?
Michael Johnston
View Michael Johnston Profile
Michael Johnston
2013-06-13 16:21
I honestly think in some ways I've tried to avoid that by selling to non-Canadian clients. We do competitively bid on projects to our American and European clients with other Canadian firms. We've lost a couple of jobs to some great companies.
Sorry?
Yousef Haj-Ahmad
View Yousef Haj-Ahmad Profile
Yousef Haj-Ahmad
2013-05-21 15:40
Thank you very much.
Ladies and gentlemen, thank you very much for the opportunity. It's an honour to be here.
I would like to talk to you mainly about the commercialization of technology. Since we're living in an age of knowledge-based industry, I'll share with you my experience in Norgen and various other companies. I'll begin with a timeline. I've been in life technology and biotechnology from the early 1980s to the present. I earned my Ph.D. at McMaster University in 1986. I was a post-doctoral fellow in Labatt's research department, working in yeast. In 1988, I co-founded Procyon Biopharma with colleagues. Later on, I became a professor at Brock University, and 10 years later, I started Norgen Biotek.
Based on all these years, I came to the conclusion that we have lots of science to start a biotech in Canada. We're not short of good science and good scientists across Canada, but we're lacking in commercialization and successful commercialization. We have too many start-ups, but very few make it all the way.
I concluded that you need three key ingredients to form a biotechnology company, and I would like to talk about biotech; that's my area. You need good science, and there's plenty of good science and good scientists across Canada. You need good, experienced executive teams. Very often, those executive teams are very impressive. They call them high flyers. They come from big pharma. They recruit them to the biotech area, to start-ups. And of course you need the money from venture capital, and we do have plenty of venture capital—perhaps not as freely as we think; nonetheless, it's there.
This is the traditional formula. Over the last 20 or 30 years, we've encountered problems with this traditional formula, and you have seen many biotech companies go public. After a short while, they simply were on life support, and finally, they went bankrupt. What's the problem with science? Professors very often lose interest because they become marginalized as soon as they have venture capital coming in. The golden rule is, first, he who has the money rules. Second, the executives who run the company listen less and less to the scientists. The scientists lose interest in driving the science forward or taking it all the way to the end. The executives' primary focus is merely on raising money, polishing the story, and making more and more presentations to raise more and more money. The venture capitalist loses interest. After a short while, there is a lack of progress and they start to find an exit strategy. Very often, the exit strategy is to take the company public sooner rather than later. Most Canadian biotech companies go public much sooner than their U.S. counterparts. They initiate mergers and acquisitions with other companies. It may not be of great benefit to the technology, but it's an exit strategy for the venture capitalist.
Alternative funding strategies: obviously you can see the traditional one on the left side of this slide. I'm not going to repeat it. The one I followed for Norgen was based on experience and the dos and don'ts from my previous ventures with various other biotechs. Earlier, I relied primarily on parental financing, small business loans, and products and services. This isn't new. Biotech companies, like any other company, knowledge-based or non-knowledge-based, must have some sort of revenue, and this revenue must be deliberately designed to grow over time. You don't need to out-license all the technology. You could license part of your technology, but not everything. Part of it is to finance your growth. Of course, there are research grants. Our National Research Council has a pretty good funding program.
Here is an example of a possible problem: the growth rate versus the burn rate. Most start-up knowledge-based companies have a burn rate, which they characterize by how fast they are burning their cash.
Here I just used hypothetical numbers. As a start-up, you may raise $1 million in the first round and burn it in a few months. When you go back and start to sharpen your skills, you raise $5 million, and you burn that pretty quickly. Then you go for $15 million, and you burn that pretty quickly. But if you're producing and selling some sort of product from your knowledge—you have plenty of scientists—this growth rate will be sustainable, and one day you will achieve sustainability.
These are hypothetical numbers I have in here, but they are not too far from reality.
Geoff Fernie
View Geoff Fernie Profile
Geoff Fernie
2013-05-21 15:58
Thank you, Madam Chair.
Yes, the Toronto Rehabilitation Institute is a member of the University Health Network, so Chris Paige in the corner there is my boss. This is an unfortunate coincidence. I have to watch very carefully what I say.
Voices: Oh, oh!
Dr. Geoff Fernie: The Toronto Rehabilitation Institute is now Canada's largest rehabilitation hospital. It's also grown in less than a decade to be the largest rehabilitation research group in the world. That is due to many of you around the room here supporting the Canada Foundation for Innovation, CIHR, and NSERC over the years, so we're really talking from a position of strength about how to go to more strength.
I have to resist talking to you about the things that we make, the things that we do, but they're things that will all affect you, if not now, then at some point in your lives. They're not the traditional areas of focus that you've heard about in the past. We're developing very practical solutions to common problems—the common problems of how you get your mom up in the morning, get her dressed, and toileted, and bathed, and around, and how you keep an eye on the family when you're at work or when you're out somewhere.
We've successfully launched three start-up companies within the last two years, and we expect to launch another two more start-ups within this next year. So we're speaking from a position of experience, and experience in start-ups primarily, in working with small and medium-sized enterprises.
I think you'll all agree that a major reason why there is no crisis in health care caused by the growing elderly population is actually that lengths of stay in hospital have been reduced through the development of improved medical devices and techniques that permit far less invasive procedures. You can go in and have a heart operation and come out the same day, or at least the next morning. Things are changing. That's what has allowed us to control health care expenditures. Yes, I know they're ramping up, but they haven't gone wild.
What we've really done, as you well know, is we've shifted the burden of health care onto the families. The families are now the largest health care labour force that we have. In Ontario, for example, over one-quarter of families have been providing continuous care for the last two years. Most people would prefer to live in their own homes. The government would prefer that, too, because it saves us taxpayer money. However, familial caregivers are caring for sicker and more disabled people, and they're under growing physical, mental, and financial stress. There are a lot of people under these stresses. There's a huge demand for technology that facilitates greater independence for seniors and helps informal caregivers complete their tasks with greater safety and ease.
One point that I want to make is that it's very important to recognize that not all sectors of the health technology industry are homogenous. You can't treat them all the same, particularly in terms of investment needs for entry. My colleague Andrew has talked about the need for a billion dollars sometimes, or hundreds of millions, to invest in drugs. Actually, new companies in the fields that we work in can often get started with $2 million, with a follow-on of another $3 million or $4 million or $5 million. They're actually below the radar screen of venture capital. Venture capital isn't interested in investment in small companies. Small business opportunities, however, might be more appropriate for Canada since they require much more modest investments, and because they're below the radar screen, they need other mechanisms of financing. We're going to have to be creative.
We also believe in not rushing to license off our technologies to multinationals. It's too easy, and actually the return on the investment isn't that great. You get 5% royalty flow or something. We're really trying to get start-ups going and build wealth first, even if we exit later. Build wealth, build jobs, build a culture of innovation in Canada that we can live on.
I've listed some recommendations and tried to be wise. I've avoided any, except perhaps the last one, that would cost the taxpayer anything.
Geoff Fernie
View Geoff Fernie Profile
Geoff Fernie
2013-05-21 16:03
Thank you, Madam.
The first one is that Canadian research institutions should be encouraged to open their doors to involvement with small and medium-sized businesses. Government incentives such as tax holidays for start-up companies could be put in place and effectively implemented. It doesn't cost anything, because if they don't start up you don't have the tax. If an innovation comes out of a university or a research hospital, then give the company a bit of a break. It's not costing anything. You're just foregoing revenue for a while.
On the other side, business should be encouraged to interact with research. The new pilot program of tax credits to small and medium-sized business that came out of Tom Jenkins' report is a good incentive. It should be expanded with increased interaction, not only with universities but also with research hospitals. It is important that everyone in this room understand that research in health care is largely done in research hospitals.
Third, considerable engineering research is conducted within research hospitals and yet the Natural Sciences and Engineering Research Council funds must be administered by universities, and that's a bit of a nuisance. It is time to open access to NSERC funding to hospital-based researchers, in the same way CIHR operates.
Fourth, too often research proposals to NSERC are criticized for having too much health-related content. This may seem parochial to you, but it's a big irritant to researchers who bridge between engineering and medicine. These government agencies must be reminded that interdisciplinary research, crossing the boundaries of engineering and medicine, should be encouraged.
Fifth, and you've heard this before, our researchers should be rewarded for commercialization activities rather than penalized, as at present. Academic careers and grant funding are judged primarily on easily measured scales that score the number of publications and the status of the journals they appear in. How about this? Why don't we think about not just having a program of Canada research chairs, which is terrific, but about launching a program of Canada innovation chairs? So we set the tone. We set something that reminds the academic world that this is a worthy activity to aim for, that it has status.
Six, consideration should be given to increasing the budgets of the granting councils. Of course, you expect me to say that, but what about designating funds particularly for prototype-making and for intellectual property protection? This way, instead of being cut from the budgets, when you apply for the money they're in a special box. If your research is going ahead, you can apply for access to those targeted funds.
Seven, energy should be directed to reforms of government programs that encourage strategic procurement to encourage Canadian innovation. You heard this from Dr. Strangway the other day, and you heard this also from Tom Jenkins. There are opportunities, particularly in Defence and Veterans Affairs. Unfortunately, in health care, each province has its own program for approval of health devices. Maybe the Minister of Health might be encouraged to work through the FPT process to see if we can get some harmonization to improve this and get rid of some of the difficulties with interprovincial boundaries.
Eight, this one that might cost a little bit of money, but a new Canadian program akin to the small business innovation research program and the small business technology transfer program in the U.S. should be established, particularly to support small businesses and start-ups working with Canadian research and innovation centres. There are three fundamental characteristics that will make such a program successful. First is a real effort in keeping paperwork to a minimum. Researchers hate it, and it stifles innovation and loses opportunities. Second is a year-round and fast application and reviewing process that's relevant to commercial opportunities. Third, and most important, is a strong focus on strategically utilizing public procurement power to actively help small businesses find and secure early customers.
Done.
Paul Kirkconnell
View Paul Kirkconnell Profile
Paul Kirkconnell
2013-05-21 16:09
A small portion of these 28,000 clients are building innovative companies, developing or disruptively applying leading-edge technology. These high-tech entrepreneurs have a high tolerance for risk and ambiguity. These are the businesses BDC venture capital supports.
The past decade has been very difficult for venture capital. The global financial crisis reduced the amount of available risk capital and exit opportunities, and overall lowered returns for venture capital. For instance, in 2010 the Canadian Venture Capital and Private Equity Association reported that venture capital firms invested $1 billion. In 2011 and 2012 respectively, venture capital investments were up slightly, at $1.5 billion each year. That might sound like a lot of money, but these figures are down from a high of nearly $4 billion in the late 1990s. And it’s not only money. To succeed, entrepreneurs also need expertise, mentoring, and networks. All are in very short supply.
A few years ago we did a root and branch study of the venture capital industry to see how we could help stimulate and strengthen it. Following this review, we began to reorganize ourselves in order to better support the Canadian venture capital ecosystem. Crucially, we’ve emerged as an honest broker, trusted to bring together a variety of potential customers, investors, and strategic partners. The road to a robust venture capital industry requires patience and perseverance. That is why I'm pleased to report that our new strategy appears to be showing results. But given the unpredictable nature of venture capital, the road to recovery will continue to be potentially volatile.
BDC's venture capital role in technology innovation is best understood as helping through targeted investments to bring about an industry-wide turnaround in Canada's high-tech entrepreneurs and their industry. We invest in three ways. First, we invest directly in companies through targeted internal funds. These include internal funds in health care, information technology, and energy-clean tech. Our knowledge of the health care sector is broad and deep. Our focus is to support innovation that improves health care efficiency.
Across the world, aging populations are increasing the demand for health care services, while younger people are dealing with chronic diseases like diabetes and obesity. At the same time, the supply of trained physicians and nurses is falling. Consequently, governments and hospitals are trying to make the most of their resources. They are focusing on efficiency and productivity and seeking innovative ways to improve delivery. Fortunately, we have the tools at our disposal that support a rethink of health care. The ubiquity of wireless, mobile, and cloud computing enable new ways of communication, interaction, and data analysis. Advances in genetics, genomics, and diagnostic technology are creating a deeper understanding of disease causes and enable faster and more accurate diagnoses.
Recall that today's entrepreneurs think globally when they scan for opportunities. Helping meet the global need for better health care services is a powerful incentive and way for Canada's high-tech entrepreneurs to succeed. To support Canadian innovation to expand globally, our health care fund will grow new companies and enter new markets.
View Gary Goodyear Profile
CPC (ON)
Thank you, Chair. I appreciate that welcome.
Good morning, committee members and honourable colleagues. It is indeed a pleasure to be here again with you to answer questions and share information about the science and technology issues as they relate to my portfolio and the main estimates. Given that my portfolio also includes the Federal Economic Development Agency for Southern Ontario, I'm more than happy to speak to you about the overall efforts in that regard as well.
Since 2006, our government has provided more than nine billion new dollars in new resources to support science, technology, and business innovation. This funding has helped to make Canada a world leader in post-secondary education research and to create the knowledge and highly skilled workforce that businesses require. We continue to work in this regard as well to innovate and create even more high-value jobs.
Economic action plan 2013, the latest budget, builds on this foundation, helping to position Canada for stability and long-term economic prosperity, as well as a higher quality of life for Canadians, while again sticking to our promise of keeping taxes low for families and businesses and balancing the budget by 2015.
We are working to strengthen Canada's world-class research talent through such programs as the Vanier Canada graduate scholarships, the Banting post-doctoral fellowships, and the Canada excellence research chairs programs, and many others. The economic action plan further strengthens our advanced research capacity by providing another ongoing $37 million in new annual support for research partnerships with industry through the granting councils.
We are strengthening research infrastructure as well, through the Canada Foundation for Innovation. As you know, the 2013 budget allocates $225 million to support new competitions and cyber infrastructure and to sustain its operations, as well as to deliver programs that enhance collaboration and partnerships between the private and public sectors. Programs such as the centres of excellence for commercialization and research, the business-led networks of centres of excellence, the industrial research and development internships, and the college and community innovation programs all aim to build industry-academic connections that we know will lead to new products and processes in the marketplace.
As well, let me take this opportunity to highlight some of the findings in the recent Council of Canadian Academies report on the state of Canada's science and technology enterprise as it currently exists. The report concluded that Canadian science and technology is healthy and growing in both output and impact, with Canada being the only G-7 country to have achieved an increase above the world average in the number of scientific papers produced between 2005 and 2010.
The report also notes that there has been a net migration of researchers into Canada. This is probably the most profound and irrefutable evidence that our strategy here in Canada is working and that we should continue, so of course budget 2013 focuses on the drivers of growth and job creation, which include innovation, investment, education, skills, and healthy communities. This approach promotes business innovation through improved support for high-growth companies, research collaborations, procurement opportunities, applied research, risk financing, and so on.
Those measures include: $121 million over two years for the National Research Council to help continue its transformation; $20 million over three years for a National Research Council industrial research assistance program pilot project initiative to help small businesses access the research capacity and services at our post-secondary institutions and at not-for-profit research institutions of their choice; $325 million over eight years to Sustainable Development Technology Canada to continue support for the development and the demonstration of new clean technologies that can create efficiencies in businesses and help them with their bottom lines as well as contribute, obviously, to a cleaner environment and more sustainable economic development; $60 million over five years to help high-potential incubators and accelerators; a new entrepreneurship award that celebrates Canadian entrepreneurs; and $18 million over two years to the Canadian Youth Business Foundation to help young entrepreneurs.
Significant investments, obviously, in budget 2013 are also targeted toward human health and genomics, a very exciting basic research area, skills training, manufacturing, the aerospace and space sectors, infrastructure, and I could go on and on.
Given the level of business expenditures on research, science, and development, we want businesses to pursue innovation-based strategies that encourage them to increase their investments in machinery and equipment and help them gain access to highly skilled personnel and be more globally competitive. Our recent action plan 2013 included many new measures to do exactly that.
In addition to the science and tech portfolio, I am honoured to be the Minister of State for FedDev Ontario. This agency has been around a few years and in my view has made incredible efforts within southern Ontario to effectively support growth and long-term prosperity.
As you might know, southern Ontario, the area we work in, has approximately 12 million people, about 36% of the population of Canada. It is the heart of Canada's commercial core and does have incredible potential to create long-term success. Of course, the agency has funded hundreds and hundreds of projects in southern Ontario in this regard, but the agency is not just working with money. We are advocates for the region, conveners, and we are bringing together stakeholders, focusing on clusters, collaborations, and partnerships, building critical mass, again to get that edge on global competitiveness.
Some of the programs we have—and I'll be very brief—the applied research and commercialization initiative, for instance, have facilitated the development of hundreds of partnerships between the post-secondary institutions in southern Ontario and businesses. In fact, 560 businesses have been involved with students who get the added benefit of a real world educational experience.
We have put forward the prosperity initiative to help target investments to advance key economic growth in southern Ontario, including advanced manufacturing, digital media, green construction, and green automotive. I will give you another quick example of what this has done. We've made a significant investment in Western University's Fraunhofer Project Centre and Centre for Commercialization of Advanced Manufacturing Technology.
These centres will create opportunities literally for hundreds of businesses to collaborate with our educational institutions and not-for-profits to support global competitiveness coming out of southern Ontario in sectors, frankly, that are in the aerospace, defence, construction, medical devices, composite light-weight materials—another very exciting area of potential—automotive, and renewable energy sectors.
The facility itself will represent North America's premier hub for the development, validation, and industrial-scale testing of new advanced manufacturing materials and products.
We've also taken it upon ourselves to create a sense of curiosity for the next generation of business leaders with our youth STEM program. The folks involved in that have reached about 1.1 million kids in southern Ontario to get them stirred up about science and mathematics.
In our scientists and engineers in business initiative, we invested up to $7.5 million in this one project, VentureStart. VentureStart is a partnership of 12 research innovation centres throughout southern Ontario of course. It has already delivered entrepreneurship training to 128 highly qualified graduates, as well as provided mentoring support and seed financing for 88 new start-up businesses, and that's so far.
By the end of March 2014, VentureStart tells me they are online to fund 224 start-up businesses. Through other programs like investing in business innovation we're boosting private sector investment. This is an angel venture capital program to help businesses quickly bring their new ideas to market. We've been able to have significant leverage in this regard. I can tell you that the angel network in southern Ontario has grown from about 250 angels to well over 800 as a result of this program.
There are a suite of programs I'm happy to talk about, but mainly they fit under what we call the southern Ontario advantage initiatives. Under that suite of programs, we've invested more than $420 million in funding, resulting in partnerships with more than 5,000 organizations, and over $1.2 billion of additional funds leveraged for these investments—and those are almost exclusively non-governmental sources—as well as over $2 billion in a boost to the GDP.
In closing, Mr. Chair, I am pleased that economic action plan 2013 provides an additional $920 million over five years, which is basically renewing FedDev Ontario. This will start in April 2014 with $200 million of this renewal support to be allocated for the delivery of a new advanced manufacturing fund in Ontario.
The government's renewed commitment to the agency is clearly based on its success in creating jobs and increasing the productivity and competitiveness of southern Ontario.
There is still obviously a great depth of potential in the region, and I look forward to witnessing future successes in our incredible communities, forecasting great growth for them, for the nation, as well as continuing to grow the science and tech sector in Canada.
Mr. Chair, thank you for this time. I look forward to answering any questions the members may have with regard to my portfolio.
View John Carmichael Profile
CPC (ON)
I want to talk about FedDev, but maybe in context, just to include it if there is time at the end of your comments.
I'd like to hear more about the business initiative start-up on venture capital funding, and also the angel program on the business innovation initiative. As a businessperson, those are important issues to me.
If there's time, maybe you could comment on those, but I'd like to talk a bit about FedDev. Clearly, those of us in business were hit hard in 2008, in the region of southern Ontario. It's a region that has made a large contribution to the manufacturing sector of this country. In response, the Government of Canada acted quickly and created the Federal Economic Development Agency for Southern Ontario in 2009, something which I truly applaud you for doing.
Understanding that the Federal Economic Development Agency is vital to the re-emergence of southern Ontario, would you please give our committee an update on the agency's activities and possibly provide an example of where the money has been invested?
View Gary Goodyear Profile
CPC (ON)
Excellent. I will do my best.
Obviously, the agency has done very well in southern Ontario. That is the reason we are renewing it. The other reason, of course, is that we're not out of trouble. The manufacturing industry and other sectors in southern Ontario face everything from an unstable United States, the global market, pressures around the dollar and venture capital as you mentioned. We did a lot of stakeholder consultations in setting up the original programs and they were designed to assist that.
The venture capital market is also something the Jenkins panel recommended the government have a look at. The government as a whole has taken a serious approach to this with money in the budget for venture capital.
We saw a great possibility to increase the angel investor capacity of the southern Ontario market, so we developed a program to do just that. It has been highly successful.
I will give you an example. I have tons of examples, but I will give you just one. The Ice River Springs water company is a family-owned business that produces private-labelled spring water. The company expressed a desire to become more environmentally sustainable in all of its materials and practices, but they were limited by space.
They came to FedDev. They showed us this opportunity not only to help the environment and buy more locally, but to increase jobs, so we ended up helping them. They have now converted an automotive manufacturing plant, which saw some contraction as you know, into the first food-grade recycled resin manufacturing facility in Canada.
They are selling to foreign markets. They have new products. They've created 36 full-time jobs. That's my best example.
My apologies, Mr. Chair.
View Peter Braid Profile
CPC (ON)
Speaking of the past budget that was recently tabled, you indicated in your opening comments.... For example, there's an investment of $60 million over five years to help outstanding and high-potential incubator and accelerator organizations or centres in Canada. Could you elaborate on this particular new program, the purpose it will serve, what it will achieve, why it's important, and when that funding may begin to roll out?
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