By Hari Venkatacharya

We have all been there- we are introduced to an early stage company that has an amazing technological innovation; they have put a core team together, raised some seed financing and are now ready to take on the world! Soon, they realize that their skill sets in developing a technology are significantly different from developing a product, and building a company; but, by this time, they have burned through their capital, their investors are getting frustrated and there is a distinct possibility that the company will have to be shut down.

I keep asking myself: How can we create an ecosystem that nurtures entrepreneurship, brings capital providers to the table, and allows great technologies to have a fighting chance to become great companies?

The access to smart capital- by which I mean money that comes with those who have built products and/or companies, and successfully exited those ventures, is very rare in Canada. The risk-taking psychology, so necessary for companies to prosper, is in short supply. No doubt, we are able to fund and create path breaking technologies in the telecom, clean tech and medical device sectors, to name a few. But, fewer than 10% of those breakthroughs will survive more than two years, and fewer than 30% of those companies will actually see customers buy their products.

I believe there are a number of strategies that can be employed to try to increase the probability of success:

1. Successful entrepreneurs need to spend more time mentoring. Terry Matthews is a great example of this. At a recent Empire Club speech in Toronto, he shared some of his insights into how he has successfully launched 90 companies, out of which only four have failed. The number one reason for success has been the guidance he has given the companies, in addition to the obsessive drive of the founding team.

2. Canadian companies need to invest more heavily in strategic start-ups. Over twenty years ago, most capital came from companies who identified a niche that they were interested in filling, but could not do so internally. They would then spin out a division or company, fund it and deploy their top technical staff to develop the technology. This allowed the start up to have access to not only funds, but more importantly critical customer knowledge through their close corporate relationship.

3. Global connectivity. As I’ve mentioned in other posts, we are globalized, and the centre of commerce has shifted to India and China. However, we must as a collective leverage these connections and establish partnerships with companies in those countries, among others.

Without these three elements coming together, among others, I fear that although we may invest in and develop breakthrough technologies, we will continue to see only a very small minority of those ventures actually get to market, and successfully grow to create unique global niches. In essence, we need to question whether our vast investments in applied technology development are being wasted, if we cannot grow these start ups into successful world-leading companies.