Trudeau faces uphill battle in wooing Silicon Valley
Venture capital funding has boomed, but Canada lags global players in R&D
Technology and innovation is at the centre of Prime Minister Justin Trudeau’s economic vision for Canada, so his visit to San Francisco on Thursday is as much about symbolism as it is about drumming up new business.
Trudeau, the first Canadian leader to visit the city in years, meets Amazon.com Inc. founder Jeff Bezos, no doubt hoping to bolster Toronto’s bid for the company’s second headquarters, as well as chief executives from companies such as EBay Inc. and salesforce. com Inc.
The San Francisco stop is part of a trip to the U.S. that includes visits to Chicago and Los Angeles, aiming to boost Canada-U.S. ties at a time when the North American Free Trade Agreement remains under negotiation.
The Amazon headquarters in particular offers the biggest potential prize for Trudeau, who has become the salesman-in-chief for an industry he hopes will transform the Canadian economy into a centre for brainy tech companies, from its traditional role as commodity producer.
Yet, given the sector only represents 4.5 per cent of the nation’s gross domestic product, a level that’s changed little over the past 10 years, it’s an ambitious goal.
How is Canadian innovation and the tech sector faring under Trudeau?
RESEARCH AND DEVELOPMENT
The country still lacks any major global tech players. There are no Canadian companies among the world’s top 300 spenders on research and development, which is a deterioration from 2015 when BlackBerry Ltd. almost cracked the top 200. One change, a software design company, Constellation Software Inc., has now risen to the No. 1 spot in Canada.
Total business research and development in Canada has actually declined from its 2015 peak, according to Statistics Canada.
VENTURE-CAPITAL
Venture-capital funding boomed last year, reaching an eight-quarter high, as artificial intelligence and health-care startups soaked up a growing share of investments, according to an industry report. And Canadian tech has been gaining attention internationally. Facebook Inc. and Google expanded their presence in the country, while China tech giants Tencent Holdings Ltd. and Huawei Technologies Co. have boosted their Canadian exposure to everything from electric vehicles to AI.
VISAS
As President Donald Trump moves to crack down on the immigration of high-tech workers to the U.S., Canada is poised to benefit from its new fast-track visa program for high-skilled workers. Computer programmers, systems analysts, and software engineers are the top three categories of workers to benefit so far. The bulk come from India — the same country that makes up the majority of U.S. H-1B visas issued — followed by China and France.
MORE FOREIGN ACQUISITIONS
There’s definitely been more investment activity. Foreign investments into Canada technology or internet-based companies have surged since Trudeau came to power in November 2015, according to Bloomberg data, with 394 completed transactions worth US$9.6 billion. That compares with 263 in the preceding two years worth, US$3.2 billion.
Among recent tech deals are the US$2 billion acquisition of Toronto-based financial technology provider DH Corp. by San Franciscobased Vista Equity Partners LLC and the purchase of bitcoin miner Backbone Hosting Solutions Inc., based near Montreal, by Israeli tech firm Blockchain Mining Ltd announced last month.
At the same time, the pick up in Canada is in line with increases globally for the industry and Canada remains a tiny player. Canadian companies were involved in just under four per cent of tech transactions over the past two years, which is down from about 4.5 per cent the two years before Trudeau came to power.
INVESTMENT LEAVING?
Canadian technology and internet-based companies meanwhile continue to look for opportunities outside Canada rather than inside their home country, a tendency that Trudeau inherited. Their acquisitions abroad have totalled about US$22 billion under Trudeau, versus just over US$3 billion within Canada.