The past six months have had a catastrophic impact on the global economy and recovery will require serious collaboration between private and public sectors. It’s hard to believe, but even though many countries have been shut down for months, we are still in the COVID-19 response phase. However, I do believe the innovation economy –– where we’ve seen so much growth from startups across the world –– will serve as the supply chain to the new economy, post-COVID-19.
Startup founders put everything on the line just to have a chance to build something that improves the world. It’s in their nature and it’s at the core of innovation. The scrappiness and creativity these leaders show will be tested during this downturn, and it is clear that those that survive and come out of this crisis with greater strength and resilience will lead the recovery into the new economy.
Why are startups key? Take the Canadian example. Before March 11, our innovation ecosystem was growing rapidly. Here at MaRS, the largest urban innovation hub in North America, we had more than 1,400 startups with 18,500 employees. The MaRS entrepreneurial community represents more than 25 percent of tech startup activity in Canada –– these companies raised more than $1.9-billion in 2019.
It’s imperative we don’t push reset on everything we have crawled over broken glass to build over the past 15 years. The onus isn’t just on startup founders, who need to continue innovating to make the hard decisions and pivoting their businesses, but also on incumbent sector leaders in advanced industries, venture capitalists and governments to support these entrepreneurs at a crucial time.
As a sector, our tech startups, and the advanced industries they power, already contribute 12 percent of our national GDP and 10 percent of our overall employment base. The key takeaway is that this sector is growing at greater than three times the rate of any other sector in Canada. Clearly, Canada’s new economy will be built on the backs of its innovation economy. And the key to the innovation economy is the connection between our startups and incumbent sector leaders who will adopt technologies into their industries.
Look, funneling cash will only take us so far, even if it goes to exactly the right companies in the most impactful industries. Until there is a vaccine and treatment, the restart and global economic recovery will look more like an accordion than an upward curve. So, governments will need to move from safety nets toward incentives, such as tax breaks and smart policies. Those venture capitalists and other private investors who are sitting on the sidelines will need to be nudged to get back in the game and to continue investing at pre-pandemic levels.
That said, I have been incredibly impressed by the magnitude and speed of the response by our federal government –– their willingness to listen and quickly adapt to create effective tools in supporting the needs of our tech startups. I come from the private sector, as a serial entrepreneur, business builder and investor, and I have never seen this kind of speed and agility come from the private sector, much less the public sector.
In Canada, the government has administered programs delivering emergency wage subsidies, talent retention funding and bridge capital financing. The common denominator of impactful policies, in Canada and elsewhere, has been speed –– quick support for those in need. A couple of months is an aggressive time frame for governments to change over funding priorities and build new, reactive programs. But by giving entrepreneurs the time they need to pivot and make hard decisions, we will emerge better off. This is especially true of companies that are trying to help end the pandemic by conducting new research, delivering patient care and supplying new protective services or gear. Quick, strategic government action goes a long way.
If governments can help increase the innovation coming from technology entrepreneurs and increase the incentives for venture capitalists to back entrepreneurs when they need it most, we can hack Darwin’s Law. Most startups fail because they should, but under COVID-19, companies are failing that shouldn’t. Without startups, the road to recovery will be so much longer. In order to rebuild the economy, let’s give them the tools to keep doing what they do best.
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