Canada is a big country, but not a big market. The earlier start-up entrepreneurs realize this and turn their attention to international markets, the more likely they are to outperform their peers. Unfortunately, data shows that too few SMEs are exporting their goods and services too late, at a big cost to both themselves and our economy.
Just as SMEs need to do a better job of understanding their market opportunities, their business ecosystem—organizations that help them get good ideas off the ground—has to do a better job of responding to this glaring vulnerability. Righting the ship means a greater focus from both sides on two things: connecting with international markets early and protecting intellectual property. Getting these critical elements right will result in job creation and economic growth for Canada.
Studies show that SME exporters generate twice as much revenue on average than other SMEs. They tend to grow faster and invest more than their non-exporting counterparts.
A good example is Montreal computer software company Beeye. Its B2B management solution aims to improve profitability while ensuring employee well-being through a “smart time management assistant.” Last year, supported by the Mitacs Entrepreneur International pilot program, Beeye converted a $4,800 investment into more than six new international clients and $97,500 of income in 2018 and is forecasting $650,000 this year.
For Canada, having more SME exporters means succeeding in our international trade strategy. While only an estimated 10 per cent of our SMEs are now exporters, they accounted for 42 per cent of total merchandise exports in 2017. The potential upside of doing a better job is huge.
When going global, we need to guard against the danger of focusing on only one market. Currently, Canadian SME exporters face a substantial concentration risk because the U.S. accounts for 74 per cent of the value of exports. Diversification is imperative, especially to emerging markets and Europe.
Mitacs is increasing efforts to address the SME exports gap with the launch of its Entrepreneur International program. This unique approach helps new companies succeed in the global marketplace by connecting them with incubators in partner countries, opening doors to potential new customers and providing opportunities to increase sales in worldwide markets. Yet, this is only a start to boost our country’s economic growth.
Canadians are really good at innovating, but globally, when it comes to sales and access to foreign markets, we’re not seen as risk-takers—particularly when it comes to scaling up. This problem may be tougher to fix than our over-reliance on the domestic market and may call for a cultural shift.
The same shortfall results when companies don’t have a proper IP strategy, which happens too frequently in Canada. For many start-ups, ideas and innovation are their business, yet it’s essential that they take steps in the early days of their ventures to protect their intellectual property through patents, trademarks and copyright. That’s what investors are looking for and that’s why up-and-coming players in Canada’s ecosystem need to do a better job of ensuring our entrepreneurs are more literate about IP—they have to hold on to it longer and monetize it.
With other countries excelling in IP protection and commercialization, foreign buyers all too often scoop up Canadian start-ups that struggle with these challenges too soon in their growth trajectory. They’ll scale it, take it global, and make the real money, leaving Canadian start-ups short-changed.
If Canada is going to continue to power start-ups, we need to do more to help entrepreneurs expand their market view, master sales to international markets and properly structure their IP strategy. For the health of our economy, the time to act is now.
Eric Bosco is chief business development officer at Mitacs, a national, not-for-profit organization that connects top-level research with private-sector needs. In his role, he works closely with governments, academia and industry to promote innovation. An entrepreneur and business leader who helps companies grow through research and development, he was founder and CEO of XYZ Imaging prior to joining Mitacs in 2007.