Matt Toner: Creative economy ranks high on B.C. Green party's list of priorities

    1 of 1 2 of 1

      There are plenty of fun things to do in this very summery province: street festivals, boating, hiking, camping. All very B.C. And as we've seen so far this season, there are some new activities being taken up by our political class: cheerleading (economic news of questionable provenance) and cherry-picking (data).

      Certainly we saw plenty of both during the recent bit of political theatre that was the LNG summer session. And now it seems that the cheerleading-and-cherry-picking approach to policy is coming to the province's tech sector.

      Fresh on the heels of the B.C. Liberals' recent exhortation to "get out there and cheer on #bctech!" (hashtag for extra street cred), Vancouver's ranking plunged in the recently released 2015 Startup Genome report from San Francisco-based Compass.

      The aim of its exhaustive research is to provide detailed comparative metrics for leading startup clusters (cities or regions where there is a critical mass of tech-based entrepreneurship). This analysis can then be used to provide guidance for entrepreneurs considering where to establish their next venture, investors looking for untapped value or policymakers actively invested in their region's success.

      It's seen as a report that matters.

      The first Compass report came out in 2012 and gave Vancouver a middling rating of Number 9 out of the top 20 innovation ecosystems surveyed (with Silicon Valley setting the pace at Number 1). Which wasn't great.

      But this year's report shows Vancouver toppling to Number 18, tied with Toronto for the biggest single decline of any startup cluster of the 40 global centres surveyed. It isn't that we all started to collectively do things wrong, it's that the rest of the world is getting a lot better at this sort of thing.

      If provincial policymakers—regardless of their political stripe—are concerned about these outcomes, they need to start taking an interest.

      Here's why. Innovation-based startups are interesting economic entities in that they are self-contained engines for growth: the more of them you have, the more of them are likely to spring up nearby. And this concentration leads to the rapid incubation and commercialization of new ideas and technical innovations.

      It attracts big investment money to fund rapid growth, which in turn draws in typically younger, more creative and more entrepreneurial talent to make these companies viable. Ryan Holmes and the Hootsuite story is an excellent local example.

      Startup viability means more locally concentrated wealth, which seeps into the overall economy in the short-term through increased consumption and a healthier tax base to fund needed social improvements. And in the longer-term, it helps create a much more diverse and robust economy...which should be of interest to any politician who can imagine a future where we don't define our joint prosperity from hewing wood, drawing water, and fracking for natural gas.

      Reading the detailed report is instructive. The overall drop is deeply troubling, though the depth of the swoon may be partially due to changes in methodology since the 2012 report. But on reference points common to both studies, it paints a pretty bleak picture of a creative economy trundling along with no coordinated strategy to keep pace with a rapidly changing global market.

      There are some big strikes against Vancouver:

      1. Our ranking in investment financing dropped from Number 12 in 2012 to Number 19.

      This is bad for an industry that lives or dies on risk capital, especially at a time when it is historically easy to raise money.

      Vancouver startups tend to raise 34 percent less venture financing than their counterparts in other clusters, are less likely to share that smaller pot of wealth with their employees, and often exit earlier for smaller sums.

      As a result, the report's authors specifically cited Vancouver as a stagnant investment climate.

      This is a crucial failing, as success on these points are what primes the entrepreneurial pump. Founders flush with cash after an exit are more likely to invest in the next generation of local tech startups and their example serves to both inspire other startup execs, potential investors, and top talent considering where their next career move should take them. Success breeds success.

      2. Vancouver's relative talent rating dropped from an impressive Number 4 in 2012 to a mediocre Number 14.

      That really hurts. As the authors of the study state: "smaller ecosystems with close proximity to larger ecosystems often have a hard time continuing to grow due to new and existing talent and capital migrating to the larger nearby ecosystem." Skilled labour and technical innovators have immense mobility today: they will follow the action to the place where their talents can be best realized. And investor-heavy Seattle (Number 8) is just down the road.

      What's worse is that, as a matter of policy, we seem to have contributed to this exodus of talent. While the provincial government has made much of recent expansions in Vancouver by leading tech companies like Microsoft, there is increasing evidence that these facilities will be used for "people laundering". Microsoft can poach tech talent from around the world and, after a minimal period in Vancouver, transfer them to their operations stateside.

      Net benefit to Vancouver's tech talent pool? Zero.

      3. Finally, our startup ecosystem's performance crashed from a reasonable Number 9 in 2012 to Number 18 today, with our growth index dropping to half of the average of all cities surveyed.

      Scary. Partly, this plunge is due to methodological changes that put a heavier weighting on the value of "exits" or cash events driven by the success of the startup's innovation. But Vancouver is still way off the mark: while companies that choose to base themselves in Silicon Valley can claim close to 50 percent of these cash events, Vancouver entrepreneurs only glean 0.5 percent of the financial rewards.

      This is almost certainly why Slack, a Vancouver company, has such a strong and growing presence in San Francisco. And there is no shortage of other local founders who quickly made the move south or would choose to do so from day one in their next venture.

      For those that do stay, we give up easy access to the significant capital available to our competitors. We are—in the words of the immortal Erlich Bachmann—bringing piss to a shit fight.

      Most of the leaders in our startup ecosystem have taken this in stride: we know what we're up against in a space where competition is now truly global. But perhaps we haven't been cheering loudly enough to meet Technology, Innovation and Citizens' Services Minister Amrik Virk's policy goals.

      If the provincial government is at all serious about having a competitive startup ecosystem sector, it needs to roll up its sleeves like the rest of us and get to work on policy changes that matter.

      And municipally, the city of Vancouver needs to do the same.

      The first step to fixing a problem is admitting you have one...so it was a little weird to read a frankly head-scratching piece from the Vancouver Economic Commission that celebrated Vancouver's diminished standing in the Compass report.

      Without attempting to rebut every single rationalization made by the VEC, suffice to say that—in this blog post at least—it draws some very unsound conclusions. Like the proximity argument for competing clusters. Or the undervalued gems argument for secondary centres. We just can't afford to get those things wrong.

      So, in sharp contrast to others on the policy side, the B.C. Green party is taking an interest in analyzing why Vancouver has fallen so far, so fast. We feel this is crucial to our collective future.

      The means to create and support an active industrial strategy for the creative economy are a fraction of those deployed to defend the present government's pipedream of British Columbia as an LNG superpower. The jobs produced are cleaner, greener, more sustainable, better paid, and less environmentally destructive than those in the resource-intensive industries that dominate the political discourse in this province. And much of the wealth generated is recycled right back into the startup cluster and the local economy that supports it.

      This is why the creative economy will be a crucial plank in the B.C. Green party's 2017 election platform. But we're not going to wait until then to start work: we're going to end this summer season of cheerleading and cherry picking by rolling up our sleeves and talking directly with local entrepreneurs. There are plenty of great minds in Vancouver that have thought long and hard about our collective future as a startup ecosystem: it's time to engage them in the creation of a tech strategy that is second to none in Canada and allows us to compete with other centres around the world.

      Matt Toner is the B.C. Green party critic for finance and the new economy.

      Comments

      7 Comments

      Venture to the USA

      Aug 6, 2015 at 2:18pm

      I am taking my start-up next month in the tech sector to San Francisco due to Venture Capital.

      Basically what the Government or any Political party does or not do is not determinate in the Tech sector to the success or failure of the enterprise.

      In Tech you stand on the merits of your Business model not what Government or the Green Party can do for you.

      In Canada especially in the Financial Sector Venture Capital is small minded and risk averse.

      Both bad things in the Tech start-up sector. In the US I can get $10 Million round 1 financing on a viable business startup within a growing category here in Canada I would be lucky to get a 5 minute meeting let alone funding.

      Contrast that to the US Funding of Tech startups it's high risk high reward that's why the US Tech sector is bigger, smarter and has better Tech companies than Canada.

      The best in the world go there due to the Financial & Services they can get down there vs here.

      In BC & Vancouver we see local Government provide Corporate Welfare to big Tech companies.

      Office space in the old Sears building and subsidized Offices for that other well known Tech company you mentioned, aka Corporate Welfare by the Municipality of Vancouver.

      Governments and Political Parties have little to contribute to the Tech sector unlike Oil & Gas.

      Unless the Green Party is going to provide a Venture Fund in the Billions to local SMALL Tech start-ups which will never happen for several reasons...

      1. Under our System of Government the Greens can never get into power unless Proportional Representation is in place and yes I am a Green platform supporter but voting for others,

      2. Political Parties can not be picking which Tech Start-ups to Fund that's for VC, Crowd sourcing & other Private Enterprise,

      What Canada and BC ought to do is provide Free education including in Tech to Canadians.

      Canada & BC can only afford to do that if the Governments run for the people instead of doling out Corporate Welfare.

      In BC we see lots of Corporate Welfare in LNG & also in the Tech sector for big name Tech Corporations.

      Say no to Corporate Welfare for Big Tech, Oil & Film Companies! No subsidies. Let em go.

      Corey Woods

      Aug 6, 2015 at 3:05pm

      Didn't you see the newest sign when last entering Vancouver? Full on Neckbeard brogrammers. Need real jobs.

      Canadians are incredibly risk adverse and don't have the substantial capital that the Americans have thus not surprised by Vancouver or Toronto being so low on financing. Government regulation also doesn't help.

      Regarding the issue of talent, Vancouver as a city isn't able to attract world class talent because of high cost of living, rising cost of housing and the lower wages. Why would any talent want to live in a city such as Vancouver when they could easily have it better in any of the other cities listed in that report.

      Final point, you only exit and thus make a significant chunk of money when your product is actually good and able to generate revenue. Of all the recent acquisitions that stand out in the local market most have been around for over 10 years - Plenty of Fish and Clearly Contacts.

      Beenthere

      Aug 6, 2015 at 7:18pm

      I wish the Greens were a progressive party, because I then would vote for them. But here in Canada, the Greens are the Libertarian Party.

      Dan Garson

      Aug 6, 2015 at 8:47pm

      I am confused and very disturbed the Green Party has a techie in an important position. Everything about the tech industry and the sickening culture that surrounds it is incompatible with what Green parties are supposed to represent. I will NEVER vote for the Greens if this is what they are now.

      Start ups and techie culture have brought misery to almost everyone and have ruined San Francisco. The only good thing in this article is that Vancouver seems to be driving them away and is becoming less and less friendly to the types.

      Bruce

      Aug 7, 2015 at 9:54am

      1) Yes, all the oxygen is sucked up by the real estate bubble.

      2) Wages are relatively low and the cost of housing is extremely high. See (1).

      Bruce

      Aug 7, 2015 at 12:41pm

      @Dan

      Yes, there's always been a strong thread of hate in the greens, of people who meet the stereotype of environmentalists as neo-luddites, religious fanatics (sorry, "spiritual"), and alternative-everything.

      So I'm right there with you; if they'd just live up to the stereotype, they could finally dry up and blow away, and stop splitting the vote.

      There's nothing.. nothing.. more mobile than 'Tech'

      Aug 9, 2015 at 9:45pm

      You can move a 'Tech' operation in the blink of an eye. You can move it overseas, you can move it underground, you could even move it out to sea if you had the right satellite linkups. Tech doesnt NEED Vancouver. NOTHING is more mobile than TECH.

      The USA is a tech haven and the key reason is... its tech economy is massively subsidized by its governments' funding a huge TECH venture known as the US Military. Do you really think your iphone's guts came from early research in China? Do you think HOOTSUITE is really technology compared to, say, a cruise missile's software?

      Being hewers of wood and drawers of water is honourable, pays well, does not need a US military to drive it, and hey.. the water, trees and LNG are staying right where they are no matter what San Francisco looks like to some programmers out of China.