Canada’s research and innovation ecosystem needs to embrace failure, take more risks and experiment with new models of funding wealth-creating research, panellists said at Research Money’s 24^th annual conference in Ottawa.

Academia and industry also need to collaborate much more, university scientists need entrepreneurial-focused training, and more funding is required for very early-stage startups, they said during a session titled “New Models for S&T Research Support.”

“People need to take a bit more risk. I think we operate like a country that is fearful of being successful,” said panel moderator Alison Evans (photo at right), president and CEO at Ottawa-based Research Canada, which brings together the health research and innovation ecosystems.

“Why is it in Canada that our startup companies think they’re going to take [their company] to a certain point and then get bought out?” she asked. “Why don’t they want to become a ginormous Canadian company that eats up a whole bunch of other companies?”

“Our status quo is not acceptable and if we don’t want to go the route of the kind of top-down, drastic change that we see going on in other places, we all have to take responsibility to move the needle ourselves,” Evans said.

One of the biggest differentiators between Americans and Canadians is that “failure is an acceptable outcome of innovation in the U.S.,” said Ken Doyle (photo at left), executive director at Tech-Access Canada, a not-for-profit that connects innovators and entrepreneurs to a network of Technology Access Centres across Canada.

The U.S. innovation ecosystem encourages entrepreneurs and founders with startup companies to fail a few times, learn from those failures, start up again, and then investors will put money into the early-stage company, he said.

“In Canada, that culture of failure – embracing it – isn’t there. It’s almost shunned,” with banks not loaning money for seven years to a startup that’s failed, Doyle said.

Another challenge is the different timelines that companies, post-secondary institutions and governments work to, and the different “languages” that each sector speaks, the panellists noted.

Companies work  from quarter to quarter and from sale cycle to sale cycle. Post-secondaries operate from semester to semester. Governments think in terms of the April 1 to March 31 fiscal year.

The three sectors represent “not even a Venn diagram with any overlap. You’ve just got three [isolated] circles,” Doyle said.

The lack of communications among different sectors and siloed thinking are also challenges, said Sarah Lubik (photo at right), academic and executive director of the Charles Chang Institute for Entrepreneurship at Simon Fraser University (SFU).

“A lot of the time industry doesn’t know how to work with universities. Universities don’t necessarily know how to work with industry, either,” she said, adding “we should probably be talking to each other more.”

Lubik is also the national director of SFU’s Invention to Innovation (I2I) program, co-founded with Mitacs and based on decades of research on the specific challenges of science-based research.

I2I offers a part-time, eight-month Mitacs I2I skills training program to help participants build a compelling plan to take their own research to impact while building a national network of peer-learning and expert mentoring. I2I also offers follow-on credit courses leading to a graduate certificate in science and technology commercialization.

Lubik said I2I deliberately waits until university students, who are working on their own innovations, are partway through the program before bringing them into national learning groups and various sectors, and embedding mentors from industry.

That’s because the program’s goals include “building the capacity to speak between worlds” and building the students’ knowledge of what industry’s problems actually are, she said.

“But it’s not saying right away, ‘Industry problem or nothing else.’ Because we’re too far away in [a different] culture. There’s a kind of acclimatizing and socializing before we get to that point” of finding solutions for industry’s problems.

The need to try new models of research funding

When it comes to trying new models of research funding, Stefan Leslie (photo at left), CEO at Research Nova Scotia, pointed to the provincially funded, independent non-profit corporation’s launch earlier this year of its Focused Research Investments program.

The program focused on research teams that were working across disciplines and selected on the probability they were going to solve actual problems that people in the community had, he said. Forty-six teams submitted proposals, nine were selected to proceed to full proposals, and four projects were awarded a total of $27 million in funding.

Leslie said he hired a person fulltime to work with the nine teams to help them shape their proposals and projects; this person continues to work with the teams.

All the research funded consists of outcomes- and mission-driven projects, including multiple projects around a set of issues that will produce solutions to societal/community problems in Nova Scotia.

“What makes this [model] interesting is that I think we can work within the existing system we have and push and prod it a little bit,” he said.

Canada’s research and innovation ecosystem needs to “focus on the outcomes rather than being wedded to our processes, and find people who want to do stuff [that has societal impact],” Leslie said.

Doyle said there are now about 70 Technology Access Centres (TACs) affiliated with colleges and Quebec’s CIGEPs, with each centre’s area of expertise based on the importance of specific industrial sectors in the local region.

The TACs provide companies with access to facilities, specialized equipment, people who know how to use it, and professional R&D staff to work collaboratively with companies on their problems.

The service is predominantly used by small companies with innovation challenges but that have no in-house R&D capacity to solve them, Doyle said.

Students are integrated whenever possible into the multidisciplinary project teams, giving them a competitive advantage when they graduate.

Along with providing companies with objective advice, “We help them on their commercialization journey or to adopt new technologies to be more productive and innovative on the shop floor,” Doyle said.

The TACs “are not pushing innovation on a company, hoping to hit it big,” he noted. “[They’re] solving a problem the company has so it can get on its way to commercializing.”

Moreover, any support provided by the TACs is non-dilutive; the TACs take no equity stake, royalties or intellectual property in the startups, leaving them unencumbered so they can commercially exploit their innovation.

More than 120 colleges are now eligible for funding from the Natural Sciences and Engineering Research Council of Canada that supports the TACs’ core operations, Doyle said.

However, because the TACs are supporting publicly assisted post-secondary institutions, other funding to support the TACs comes from the three federal research funding agencies that were designed to support academic R&D – not industrial R&D.

“There’s not really a place for us [in the research funding ecosystem] that supports industrial R&D,” he said. “We’re having to contort ourselves into programs that were really built for universities.”

“I’d love for there to be a separate [funding] program for industrial R&D that enables the colleges to work with companies to commercialize [innovation] to create wealth in Canada,” he said.

Doyle pointed to the federal Canada Innovation Corporation (CIC) proposed by the Justin Trudeau government but not heard of since Mark Carney’s Liberals formed the government. The CIC was supposed to be an industry-led, outcomes- and project mission-driven organization “with a clear and focused mandate to help Canadian businesses across all sectors and regions become more innovative and productive,” according to the agency’s blueprint.

“Why not just give the mandate and the resources to IRAP (National Research Council-Industrial Research and Assistance Program) and fund them properly?” Doyle said. “I think IRAP should be a billion dollar-a-year operation, helping Canadian companies create wealth.”

Early-stage startups lack funding and scientists’ training is outdated

The lack of funding for early-stage startups that are pre-revenue and founder-led is another big challenge.

“There’s no funding for them,” said a Research Money conference delegate during a Q&A with the panel.

“The system as a whole does not support the early-stage risk taker,” other than through accelerator programs where they get training on business principles and some mentorship, she said. “In reality, that’s not workable for these [entrepreneurs].”

These are the startup founders that really need the funding, yet they’re required to have revenue, a business track record, sales and cash flow to get it, she said.

Leslie said there’s a role for public investment to play in supporting the R&D of such early-stage companies, with the intention of moving to that next stage of investment.

Doyle said the federally funded Futurpreneur program is aimed at helping entrepreneurs, including providing access to a $60,000 loan to start their business.

However, R&D expenditures are explicitly ineligible under the Futurpreneur program, he said, adding: “Making R&D ineligible just sees short-sighted.”

In contrast to Canada’s approach, he said Brazil’s Embrapii (Brazilian Agency for Research and Industrial Innovation) connects startups and entrepreneurs with public and private technological and research institutions to develop selected projects and provide co-financing. Those startups also get pre-qualified for other public R&D support because they’ve been vetted by an objective intermediary.

Canada’s TACs would be well positioned to act as that intermediary in assessing startups in Canada if they had the mandate and funding to do so, Doyle said.

Lubik said Simon Fraser University also sees entrepreneurial students, postdocs and faculty members who are trying to access capital to develop their ideas, but they can only access funding to do the actual science, or research.

University entrepreneurs aren’t able to access funding to support students with innovations, startup founders or to help with market validation of their innovations.

The I2I program does offer entrepreneurial co-op training that comes with a stipend, she said. “That gives people in universities the opportunity for a semester to focus on their own venture. It ends up being like a scholarship for entrepreneurs.”

SFU had one student group go through I2I that had four co-op training positions that cost the university $40,000, Lubik said. Those young entrepreneurs are now on the Maclean’s Global 100 power list, she noted.

The University of Waterloo has started a commercialization PhD, she said. “So they’re embedding that into their PhD programs. You start with that outcome in mind.”

Lubik noted that Canada's system for  training scientists "is very old-school. Our culture for scientific research in general is very old-school.”

“We don’t have a culture yet where scientists go, ‘Yay! Entrepreneurship!’ out of the gate.”

Changing how Canadian post-secondary institutions and other sectors view training and what needs to be included in training is critical to building in the entrepreneurial mindset, she said.

“If we say entrepreneurship is important, if we say commercialization is important, why are we not putting a little bit of money in [to the ecosystem] to let them focus?” Lubik asked.

As a model Canada could learn from, she pointed to the Small Business Innovation Research program in the U.S., where several major federal agencies, including the Department of Defense, the National Institutes of Health and the Department of Energy, are required to spend two percent of their budgets on procuring innovations from American startup companies.

“It’s tagging some pot of money that says, ‘You need to be working with the early-stage companies [and] the risks,’ and saying ‘That is your outcome.’”

“Tuning” Canada’s research and innovation ecosystem to ensure sustainable funding

Evans said one of the biggest things she has seen during the past year and a half while working at Research Canada is that there are many different types of health research, including clinical research, translational research that helps get innovations into the health care system, research on the system itself, and other types of health research.

“I actually think we have a massive knowledge gap of things other than discovery [research],” she said.

All these types of health research – plus other areas of research – are competing for the same limited amount of available funding.

“Research funding at the levels we are going to need in the future is not going to come from the federal and provincial governments alone,” Evans said.

Canada will need to tap funding from businesses, philanthropists, venture capitalists and other sources, she said. “We are going to have to get much better at partnering and we’re going to have to be more creative.”

During a Q&A with the panel, Marcellus Mindel, CEO at Mindel Solutions, which led a collaborative, interactive workshop at Research Money’s conference, said in talking with an entrepreneur at one of the workshop tables, “it became wonderfully clear that Canadian entrepreneurs might not be as risk-adverse as we think because they have to stake the private equity of their home in order to get a loan, whereas in the U.S. they don’t.”

However, change and breaking out of the status quo require awareness, desire, knowledge, ability and reinforcement, he said. Most stakeholders in Canada’s innovation ecosystem actually have the awareness of the problems, desire for change and the knowledge of what needs changing, he said.

What is lacking is the ability to change and the positive reinforcement for that change, because there are “three levels of management above you approving every decision and everything is reduced to a sound bite,” Mindel said. “So it is the ability and the reinforcement [that’s key].”

A first step, Mindel said, would be to enable that ability and reinforcement in Canada’s research funding agencies so they could be innovative and try some different funding models, such as having individual innovation officers empowered to experiment and take some risks.

Leslie said that in the absence of a philanthropic model to fund research, Canada needs much more prominent, non-profit, public-facing research organizations.

Canada’s research and innovation ecosystem also needs to “focus on the outcomes rather than being wedded to our processes, and find people who want to do stuff, rather than [make] more declarations,” he said.

“I think we also need to lose the self-righteousness a little bit,” Leslie said, referring to the impulse to always ask for more research funding because some other countries are providing more research funding per capita as a percentage of GDP than Canada.

“I actually think a better move first is to demonstrate the value of what we’re creating with what we have, which is actually a lot,” Leslie said.

“We’re a rich country that has put a lot of money into the research sector. Let’s actually demonstrate that we are mobilizing at least a portion of that in service of the problems that people have.”

One response to what’s happening in the U.S., with researchers and scientists losing their jobs and funding cuts to research and science organizations, is to use it as an opportunity to attract displaced and disgruntled U.S. academics and government scientists to Canada, he said.

But an equally valid response is to use this moment to achieve something for Canada’s R&D objectives and heavy R&D-based industries, he added.

“Let’s look at how we can tune at least a portion of the scientific endeavour to make use of the work that has been done in service of those societal objectives of growing the capacity to build the country.”

As for building more partnerships, he pointed out that a valuable partnership is when your organization works with another organization that has similar but not identical interests and that brings something to the relationship you can’t bring yourself.

“I would rather spend 100 percent of a project cost on something that’s going to create value than 50 percent on something that is less than what we need to have done, just because we can get access to the funds,” he said.

“If we think clearly about what do those other sectors or potential partners need and can contribute overall, I think you actually get a better product as well as better funding and more interesting projects,” Leslie said.

Lubik said as new models of research funding, scientific training and workforce training are piloted, “having empathy for the user whose behaviour and culture we want to change is going to be paramount.”

[We need to] meet them where they are” and figure out what barriers are keeping them from the behaviours we want to see but also the ones they themselves want to have, she said.

“Don’t expect that we’re just going to say, ‘Well, we need more of this,’ and it’s going to happen.”

R$