November 9, 2017

Recap of Startup Canada Survey Results

Startup Canada recently sent me the executive summary of their survey of small business owners.  Here’s my attempt to ‘summarize the summary’:
  • The survey is based on feedback from roughly 150,000 entrepreneurs and business owners.
  • Nearly 60% of respondents indicated that they ‘have access to funding’, but if you’re outside Toronto or a visible minority, you’re SOL.
  • 93% of entrepreneurs leverage online tools as part of their business.
  • 43% of entrepreneurs sell beyond Canada, mostly to the US as a primary market, with another 29% planning to expand their international sales.
  • Entrepreneurs seem to be crying out for incubation, collaboration, student co-op / intern opportunities and don’t seem to feel governments and educational institutions are doing a good job of supporting this need.

From personal experience, I can vouch for most of the conclusions listed above.

When you live in a community that doesn’t receive the same level of attention or interest as Toronto, KW, Ottawa, Montreal, Vancouver and a few other satellite areas, the market tends to very fragmented and ‘opportunity organizations’ tend to compete against each other for the attention of entrepreneurs and growing businesses.  For example, London, Ontario has more than 13 organizations that are set up to support and/or help guide new businesses.

The challenge for an entrepreneur:  no time to investigate and marginal returns on effort.  There’s nothing wrong with networking and getting to know folks on a local basis, but when you have to choose between building a business and doing applications for programs that may or may not accept you, I’ll choose the former every time.

Another issues is that there tends to be a pretty severe age bias when it comes to government and university programs and funding.  This age bias must be removed, especially for communities that have more middle-age workers that are looking for ways to implement ideas with a little guidance and financial support.

Funding is another huge issue.  If we’re really serious about supporting entrepreneurs in Canada, we need to find better ways to pool capital, tap existing pools of capital and reduce the risk of doing both.  I’ve advocated for changes to RRSPs for many years and interest in this concept is picking up, but it’s still not on the radar for policy makers.

The concept is simple:  if I am fortunate enough to have saved $50,000 in an RRSP following some years in a professional career and some focused saving, I should be able to withdraw some or even all of these funds to finance my own new venture.  However, when I do this today, I’m penalized in many ways:

  • I am charged a withholding tax.
  • It’s counted as income for my current year.
  • I lose the ‘deduction’ that I originally made when depositing funds to my RRSP.

Funds withdrawn for financing a legitimate enterprise should not be subject to penalty or loss in contribution amounts.  In other words, these types of withdrawals should be treated exactly like the Homeowner’s Plan that fueled demand for houses through the 1990s.

We could also extend the withdrawal program to life partners and business associates who are also willing to make an investment in a new business in Canada.  This would put an end to the invisible wall the exists between me and access to decent levels of funding for my new business.

Finally, we have the technology today to support a network of potential investors looking for qualifying companies, essentially opening the possibility of an exchange of sorts.

FULL TEXT OF STARTUP CANADA EXECUTIVE SUMMARY:

Canada is a nation of entrepreneurs who drive economic growth and job creation. A fulsome understanding of the state of entrepreneurship and entrepreneurship support is required to support the success and scalability of startups and small businesses across Canada.

A national census distributed to Startup Canada’s network of 150,000 entrepreneurs and enterprise influencers establishes baseline data to measure this. The following key strategic insights from this census will be leveraged by Startup Canada, members of the Private Sector Advisory Council, broader industry partners, government, and academia to improve support resources to increase entrepreneurial success.

Access to funding continues to be a top barrier for entrepreneurs, particularly for visible minorities and those residing outside of large cities.

  • Overall, only 11 per cent of respondents say funding is very accessible to their company.

  • Fifty-seven per cent consider funding to be somewhat accessible, and 32 per cent consider it to not be accessible at all.

  • Respondents who identify as visible minorities perceive financing to be more of an obstacle than those who are not.

  • Of the respondents who indicated finding financing as a major obstacle to growth, over 80 per cent reside outside of Toronto.

  • Startup Canada, industry and government partners have a significant role to play to remove demographic and geographic barriers to funding accessibility.

Entrepreneurs are early adopters of new digital technologies, but are struggling to keep up with the rate of technological change and turnover.

  • Over 93 per cent of respondents have an online presence.

  • Seventy per cent consider themselves to adopt new technologies before the majority of society, with 24 per cent considering themselves innovators in the space.

  • Forty-three per cent identified costs related to training, updating and maintaining digital technology as a main barrier to technology adoption.

  • Women are 20 per cent less likely to leverage digital technologies when operating their business than men.

  • Opportunities to increase digital adoption amongst entrepreneurs include virtual training available to every entrepreneur when and where they need it; incentives and grants to up-skill teams and hire new employees with in-demand digital skills; and, support for programming created by and for women.

Entrepreneurs have ambitions to scale and reach new international markets.

  • Forty per cent of respondents expect their yearly average sales to grow by more than 20 per cent annually.

  • Forty-three per cent are selling globally, and 29 per cent of those who are not selling to global markets plan to in the near future.

  • The United States (90 per cent), Europe (55 per cent), and Australia (33 per cent) are listed among top global markets for international expansion.

  • Startup Canada, industry, and government can support high-growth and international ambitions by working together to provide entrepreneurs with access to training, funding, and connections to grow in Canada and globally.

Networks, communities and incubators/accelerators are perceived to provide the most support to startup and small businesses.

  • 95 per cent of respondents would recommend Startup Canada to their fellow entrepreneurs to access support and resources.

  • Government, regardless of level, as well as universities and colleges are perceived to provide little to no support.

  • Anchor companies and industry associations have the lowest support rating amongst respondents.

  • Funding (65 per cent), sales (54 per cent), and exposure (51 per cent) are the most significant supports required by entrepreneurs to help them grow their companies.

  • Industry, government, and academic institutions are well positioned to partner with Startup Canada and leverage its extensive network to raise greater awareness of entrepreneur programs and resources.

These strategic insights provide opportunities for Startup Canada, members of the Startup Canada Private Sector Leadership Advisory Council, broader industry partners, government and academia to improve its support and resources for entrepreneurs, and to measure the state of entrepreneurship in Canada over time using this baseline data.

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