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CCI Ontario Pre-Budget Submission
- 1. 20 24 September 2023 ONTARIO PRE-BUDGET SUBMISSION
- 2. CCIโs Recommendations for Ontarioโs 2024 Budget Create and deploy a procurement concierge service through Supply Ontario Continue to support home-grown innovation through the Building Ontario Business Initiative Implement an innovation pathway, starting with the healthcare sector, to stimulate a responsive and integrated funding approach for innovators across the province Establish a co-investment strategy through Venture Ontario to increase access to capital in high priority sectors Employ quantifiable performance indicators to measure the impacts of both domestic innovation expenditures and foreign direct investment (FDI) policies Address Ontarioโs skilled labour shortage by improving access to talent for domestic innovators Develop a provincial chips strategy Offer regular updates and opportunities for input from domestic industries regarding key government initiatives in the digital and data sectors related to the intangible economy Access to Customers: Procurement Modernization and Local Companies Access to Capital: Fueling Growth Access to Talent: Scaling with Skilled Talent Streamlined Government Approaches to the Digital Economy CCI | 1
- 3. On behalf of the Council of Canadian Innovators (CCI), representing over 150 of Canada's fastest-growing, technology-intensive companies, with 75 proudly headquartered in Ontario, we pleased to share our recommendations for your 2024 pre-budget consultations, building on our advocacy for innovative policies that support job creation, intellectual property generation and commercialization, innovative procurement strategies, and long-term economic prosperity in Ontario. Despite Ontario's strengths, the past year has brought challenges such as rising interest rates, inflation, supply chain disruptions, labour shortages, healthcare vulnerabilities, and housing shortages. These uncertainties require the provincial government's focus on fostering a strong domestic technology industry that can drive long-term economic growth. A significant cluster of 'scale-up' companies play a crucial role in our economy, creating high-paying jobs and stimulating positive economic spillover effects. These companies attract investments and have the potential to digitize and enhance traditional industries through intangible assets like intellectual property. In today's landscape, data, software, and connected technologies underpin every Ontario industry. To ensure that our government remains agile in the face of these transformative economic shifts, we present a set of strategic imperatives that focus on increasing access to talent, capital, and customers for Ontarioโs fastest-growing companies. These recommendations, originating from our members, are designed to strengthen domestic companies by creating a government and economy aligned with the digital age. We look forward to discussing these strategies with you this fall and into the new year. Skaidra Puodลพiลซnas Director, Ontario Affairs spuodziunas@canadianinnovators.org CCI | 2 Hon. Peter Bethlenfalvy OntarioโsMinisterofFinance
- 4. Recommendations Access to Customers: Procurement Modernization and Local Companies 1. Create and deploy a procurement concierge service through Supply Ontario Procurement is the most powerful economic development tool available to the government. When used strategically, it fulfills public sector needs with unique solutions while also serving as a major validator for vendors. When a firm in Ontario sells goods or services to the provincial government, it is considered a significant endorsement for the companyโone that helps attract investors and accelerates future sales with other governments and businesses across Canada and globally. Unfortunately, domestic technology firms are often discouraged from engaging with the government on procurement due to the time, energy, and human capital required. Additionally, there is an information gap in Ontario between suppliers in the tech space and public purchasers. Suppliers have an in-depth understanding of the goods and services they offer but may have little or no insight into how to sell to the government and address the government's business challenges. Conversely, government buyers are not always aware of what is currently available in the marketplace, especially in rapidly changing industries or those exploring new technological advances. To bridge these gaps, we recommend that the government continues its whole-of-government approach to modernizing procurement through Supply Ontario. We also suggest empowering the agency to implement a Procurement Concierge, modelled after British Columbia's recently introduced Concierge Program. The concierge program would collaborate closely with local innovators to reduce the administrative burden of request for proposals (RFPs) for both parties involved. By making the procurement process more transparent and accessible to domestic companies, the government will level the playing field. This signals to the local tech sector that the provincial government is committed to purchasing 'Made-in-Ontario' technology services to address 21st Century policy challenges. CCI | 2
- 5. CCI | 3 Reduce the administrative burden of RFIs or RFPs and assist domestic innovators in navigating the procurement process seamlessly from start to finish. Act as an 'innovation broker' within the province, actively channeling ideas from potential innovation suppliers to networks of potential public buyers, including ministries, cities, hospitals, and civil protection authorities. Enhance the transparency and accessibility of the procurement process for domestic companies by effectively communicating the needs of public buyers. This includes providing educational services and tools to guide vendors through the procurement process. Connect public sector buyers and vendors based on their profiles and areas of interest to facilitate pre-market engagement. This will enable public buyers to gain a better understanding of their needs, requirements, and constraints related to an RFI. It will also enhance vendors' understanding of the government's needs, enabling them to respond to the RFI in a manner that aligns with procurement objectives. Increased dialogue with Ontario firms will broaden the range of voices present in the procurement space. Develop a pathway for unsolicited proposals. Businesses may have unique, innovative, and valuable ideas for the government, even if they do not address identified current needs or priorities. By creating a platform for unsolicited proposals, the government will encourage suppliers to submit ideas that can enhance the delivery of public services. The conciergeโs core objectives should be to: 2. Continue to support home-grown innovation through the Building Ontario Business Initiative. We commend the government for its proactive response to CCI's calls to expand opportunities for Ontario's homegrown innovators. The emphasis on fostering a level playing field and providing greater access to procurement opportunities for Ontario-based businesses within the Building Ontario Business Initiative Act is vital to enhancing their competitiveness in the global market. The ambitious approach of this initiative will position domestic firms on the strongest footing possible to address the government's challenges and drive economic growth in Ontario. Furthermore, we encourage the government to adopt a more nuanced approach in defining an "Ontario business" and to consider factors related to freedom to operate and intellectual property. Recently, the government solicited feedback on the proposed policies, and we submitted recommendations on behalf of our members. Crucially, we urge Ontario to prioritize Canadian-controlled and Canadian-headquartered
- 6. CCI | 4 companies, while also adopting a more nuanced definition of what constitutes an Ontario business. While certain criteria, such as employee thresholds, serve as valuable indicators, they may not fully capture the potential of companies with strategic plans for substantial expansion within Ontario. The legislation should incorporate an evaluative framework that takes into account scenarios where Canadian-headquartered companies, while currently falling below certain thresholds, have robust plans for investment, hiring, and significant contributions to Ontario's economy in the near future. This approach will ensure that the Act attracts promising Canadian enterprises and stimulates investment from other provinces into Ontario, ultimately fortifying the province's economic foundation. This approach avoids the potential pitfalls associated with foreign direct investment and ensures that government procurement funds are directed towards bolstering the Canadian economy, while also positioning Ontario as an especially appealing destination for investment. 3. Implement an innovation pathway, starting with the healthcare sector, to stimulate a responsive and integrated funding approach for innovators across the province. Ontario's innovation challenges do not stem from a lack of commercialized and market-ready Canadian-made innovations, but rather from issues related to their adoption. The absence of a dedicated system to evaluate and fund innovation has a direct impact on the local economy and, in the case of our vulnerable healthcare sector, directly affects patients and providers. The most common means of funding the adoption of new technologies in healthcare are either through fundraising or one-time government funding. This creates a problem for both entrepreneurs and healthcare providers because neither approach is permanent or scalable. It results in high-impact innovations being trapped in a cycle of never-ending pilot programs. While this approach may appear cost-effective in the short term, it leads to the majority of Canadian-made health innovations not being utilized locally. This is why we support the government's implementation of an Innovation Pathway, as mentioned in Budget 2023. Active collaboration between Supply Ontario, Ontario Health, the Ministry of Health, and the Treasury Board Secretariat is needed to assess promising new innovations and provide funding to health service providers for their procurement across the health system. The Innovation Pathway requires a framework for prioritizing which technologies are included, how they progress through the pathway, and how they may be removed from consideration. The goals of the pathway are to increase opportunities for local adoption and simplify the process for obtaining public reimbursement.
- 7. Generate Evidence: Fund multiple studies with health system partners to establish local evidence for both the clinical and health economic benefits of the proposed health innovation. Expand Adoption: Increase the adoption of high-impact innovations in tandem with their evidence generation and reimbursement assessment to deliver benefits to patients and providers as soon as possible. Reimburse Publicly: Following a positive health technology assessment (HTA), approve the highest quality innovations for reimbursement, ensuring that every patient and provider in Ontario can benefit from the widespread use of innovation. This would encompass three broad areas: Most importantly, Ontario should prioritize domestic companies whenever feasible. When domestic businesses successfully sell or implement their innovations for the government, it has positive effects on the local economy. As they grow and thrive, they create opportunities for collaboration and knowledge-sharing within Ontario. This, in turn, attracts more investments and skilled individuals to the province. Access to Capital: Fueling Growth 4. Establish a co-investment strategy through Venture Ontario to increase access to capital in high priority sectors Access to capital is a critical factor for the success of many domestic businesses, particularly those operating in high-growth and technology-driven industries. Adequate capital allows companies to invest in research and development, bring new products and services to market, and build the infrastructure necessary to scale their operations. For CCI members, Venture Ontario is well-positioned to play an important role in supporting the growth of high potential innovative companies operating in Ontario. In Budget 2024, we recommend that the agency pursue a co-investment strategy with the private sector to increase the flow of capital into high-priority sectors such as life sciences, advanced manufacturing, and data. By working in partnership with private sector investors and offering matching investment capital, Venture Ontario will be able to maximize the impact of its investments and increase the availability of capital for innovative companies operating in Ontario. The increased capital pool is critical for domestic companies that often face significant barriers to securing investment from traditional sources. It will also demonstrate the government's commitment to promoting innovation and growth in strategic sectors of the economy. CCI | 5
- 8. CCI | 6 5. Employ quantifiable performance indicators to measure the impacts of both domestic innovation expenditures and foreign direct investment (FDI) policies Canada has an โinnovation philanthropy problem.โ Canadian taxpayers foot the bill for R&D and innovative program costs that do not realize positive economic results. That is, innovation funding programs do not employ quantifiable performance indicators, such as ensuring any intangible assets created as a result of the funding are commercialized to Canadaโs benefit. One need only look to the federal governmentโs Innovation Supercluster Initiative (ISI) for an example of this. In 2020, the Office of the Parliamentary Budget Officer noted the majority of spending to date (59%) was allocated toward administrative and operating costs in lieu of distributing those dollars to innovative research programs. In order for innovation expenditures to meet their stated objectives, it is critical to create and track metrics that monitor outcomes and progress. CCI asks the Government of Ontario to employ quantifiable performance indicators to funding pools and tax credits aimed at spurring innovation (ex. Skills Catalyst Fund, Ontario Innovation Tax Credit, etc.). This would create a results-oriented climate for public investment while ensuring transparency and opportunities to retool, if necessary. In addition to tracking the impact of innovation expenditures, it is critical that the government devote time and resources to study and measure the negative spillovers of FDI in the provincial technology sector. Canadaโs economic strategy and investment policies require an updated, more nuanced understanding of the new innovation economy. The most important step for the government to be more deliberate when evaluating the impact of a particular foreign investment will have on the domestic economy and the companies that operate there. This means devoting time and resources to study the negative spillovers of FDI in the technology sector, such as the impact multinationals have on wage inflation and the effects this can have on smaller, scaling companies that are hungry for talent. Understanding these impacts will empower the government to adapt their approach to foreign investment so that it is better aligned with the needs of the intangible economy. Access to Talent: Scaling with Skilled Workers 6. Address Ontarioโs skilled labour shortage by improving access to talent for domestic innovators For years, the provinceโs domestic tech sector has been struggling to access high skilled talent to scale their businesses, and the recent shift to remote work has only exacerbated the
- 9. CCI | 7 Invest in upskilling and re-training programs problem. In this new labour market, where physical geography and national borders are less important than ever, companies headquartered in Ontario can hire international talent without having to relocate them, but more importantly, large multinationals are able to hire Ontarioโs best and brightest without setting up an office in the province. Domestic innovators find themselves in fierce competition with global companies who can offer significantly higher salaries, for the same crop of high-skilled workers. This competition is only getting more intense. Canadaโs digital economy is expected to employ 2.26 million digitally skilled workers by 2025 (about 11% of all employment in the country), triggering a demand for an additional 250,000 jobs. In order to help the provinceโs innovation ecosystem grow, the government needs to stop measuring success by the ability to lure foreign companies that promise new jobs. Instead, it must pursue innovative strategies that enable Ontarioโs tech companies to access the talent they need to scale-up. These companies are committed to growing within the province and should be championed. For Budget 2024, CCI encourages the government to dedicate resources towards the following initiatives: The government should work to ensure there are longstanding funding avenues available for corporate-run upskilling or re-training programs, whereby a company takes it upon themselves to develop an initiative that focuses on creating and hiring new tech talent in the province. These programs have seen incredible success in the creation of talented tech workers across the country. For example, Montreal-based FX Innovation partnered with the University of Ottawa to build the CloudCampus program, which aims to bridge the gap between current skills of cloud specialists and future skills required (ready-to-work) to fill a broader range of roles in the cloud computing sector. Similarly, In Alberta, Calgary Economic Development provided a portion of the funding needed to create AltaMLโs Applied AI Lab program, which aims to generate AI talent for the tech ecosystem and provide technology solutions for traditional firms like Suncor. The government should embrace and judiciously invest in such efforts in Ontario. In providing employees with a convenient and tailored opportunity to develop their skills, these programs serve as an effective employment generation and retention tool for domestic companies. As a first step, we would like to see a new round of funding committed to the Ontario Skills Development Fund (SDF) which enables domestic firms to generate unique upskilling and re- training projects. This program should be championed by the government as means to fill important labour gaps in the domestic innovation economy.
- 10. CCI | 8 Increase investments for domestic focused Work Integrated Learning (WIL) programs within the province The government should work with industry partners, universities and the federal government to develop more focused experiential and work integration learning opportunities for students โ co-ops, internships, micro-credential programs and fellowships โ to help meet the labour market needs of high-growth firms in Ontario. Canadian universities have the potential to develop the high skilled talent desperately needed by domestic firms. However, this potential cannot be realized with the current state of university programming which reflects a lack of symmetry with the domestic technology sector. The absence of domestically focused programming within STEM programs, coupled with the insufficient length of co-op placements, has made it challenging for a consistent talent pipeline between universities and local innovators to be established. Streamlined Government Approaches to the Digital Economy 7. Develop a provincial chips strategy Following historic investments in reshoring chip manufacturing by the Biden administration in 2022, Canada has a once-in-a-generation opportunity to bolster our semiconductor industry, create direct and indirect jobs, and avoid the generational threat of brain drain to the United States. The outlook for growth in the chip industry, which generated $600 billion in sales globally in 2021 and is projected to reach $1.3 trillion by 2030 due to increased demand from new technologies like AI, is extremely positive. Geopolitical developments in Asia have also created an urgent imperative to strengthen domestic semiconductor capacity to protect Canada's economic and national security and sovereignty. With AI, quantum computing, the journey toward net zero emissions, and the increasing deployment of connected devices, we stand on the cusp of a generational transformation of the industry with enormous potential for disrupting existing players. An opportunity like this may not come again for a generation or more. In Ontario, the chip shortage has not been a priority for the provincial government. With the announcement of Ontario investing up to $77 million in two projects to help Ontario companies
- 11. CCI | 9 Encouraging the growth of domestic chip manufacturers through tax incentives, funding for R&D initiatives, and improved access to skilled labour. Protecting domestic intellectual property to support the growth and commercialization of products related to chip manufacturing. Fostering collaboration and partnerships among the federal government, other provinces, industry stakeholders, and academia to maximize the impact of these initiatives and achieve common goals. adopt, develop, and bring to market critical technologies such as 5G, ethical artificial intelligence (AI), blockchain, cybersecurity, and robotics, we also noticed the glaring omission of investment in the chip industry. This industry will play a vital role in the growth of critical sectors like defence, telecommunications, and technology. In Budget 2024, CCI urges the government to collaborate with industry and other governments on a chips strategy that includes policies aimed at increasing semiconductor acquisition and enhancing supply chain resilience. The strategic importance of investing in a robust domestic supply chain for chips cannot be overstated. The government can play a pivotal role in strengthening the competitiveness of a growing industry, creating jobs, promoting innovation, boosting economic growth, and ensuring its ability to meet the demands of a complex, global market in the long term. We recommend that the strategy focus on: 8. Offer regular updates and opportunities for input from domestic industries regarding key government initiatives in the digital and data sectors related to the intangible economy. In 2021, Ontario announced its Digital and Data Strategy, "Building a Digital Ontario," with the aim of establishing the province as a world-leading digital jurisdiction. Over the past two years, we've witnessed some notable progress in the intangible economy domain. This includes the establishment of Intellectual Property Ontario (IPON), a new agency dedicated to encouraging the development, protection, and commercialization of intangible assets. Additionally, there was the announcement of the Ontario Data Authority, which is expected to focus on creating two new data standards for land and development approvals. These standards are designed to reduce approval timelines, eliminate duplication and overlap, and contribute to the supply of housing units. Furthermore, the Ontario Data Authority will play a broader role in managing and overseeing provincially held data sets. For CCI members, the creation of these two entities signifies a significant step forward, underscoring the government's commitment to building capacity, adapting policy frameworks, and positioning the province's tech sector for success. However, an update to Ontario's whole-of-government approach to the digital and data strategy is required, and more deliberate and frequent engagement with domestic innovators is essential.
- 12. CCI | 10 Approaching these initiatives in isolation might lead to inconsistent policies or regulations that can confuse businesses and impede their growth in the province. It is imperative that the government ensures that the strategic plans of agencies like IPON and the Data Authority are well-coordinated. Furthermore, it is essential that their activities align with ongoing efforts to modernize the province's privacy legislation. This can be achieved through periodic "intangibles reviews" involving industry representatives to evaluate the collective impact of these policies on the domestic technology ecosystem. Taking these precautions will enable the government to create a more robust and supportive environment for the development and commercialization of new technologies and ideas. It will also prevent duplication of effort and ensure efficient and effective use of resources. Ultimately, these measures will benefit Ontario's economy and its citizens by generating more jobs and fostering economic growth.
- 13. Learn more about our members and our initiatives at www.canadianinnovators.org. Established in 2015, the Council of Canadian Innovators represents and works with over 150 of Canadaโs fastest- growing technology companies. Our members are the CEOs, founders, and top senior executives behind some of Canadaโs most successful โscale-upโ companies. All our members are job and wealth creators, investors, philanthropists, and experts in their fields of healthtech, cleantech, fintech, cybersecurity, AI and digital transformation. Companies in our portfolio are market leaders in their verticals, commercialize their technologies in over 190 countries, and generate between $10M - $750M in annual recurring revenue. We advocate on their behalf for government strategies that increase their access to skilled talent, strategic capital, and new customers, as well as expanded freedom to operate for their global pursuits of scale. AbouttheCouncilof CanadianInnovators CCI | 11 bbergen@canadianinnovators.org Benjamin Bergen President spuodziunas@canadianinnovators.org Skaidra Puodลพiลซnas Director, Ontario Affairs