Canadian tech firms can face challenges getting capital and keeping talent. So, what can we do to help founders build companies here at home? Abdullah Nobar, the executive director of DMZ, a tech incubator at Toronto Metropolitan University, and Kelsey Han, the CEO of Monarch, a leadership development platform, sat down with me to explain.

[Music] Abdullah, Kelsey, thank you so much for joining us on the rundown. Um, I'm gonna start with you, Kelsey. Which is the bigger problem in Canada? Enticing people to begin startups or increasing the size of existing ones?

Kelsey: I think for me um there I would probably go with um enticing people to start companies. I you know I think part of what we have in Canada right now is a bit of an entrepreneurship challenge.

Kelsey: Um this country was built on entrepreneurs. If you think about it, we are only most of us are only one or two generations removed from parents or grandparents that moved to this country uh and started their own businesses.

Kelsey: And I, you know, what we've seen over the last 20 years is entrepreneurship rates have been lowering. Um and so we have approximately um 100,000 less than we did 20 years ago. And yet over that same period, our population has increased drastically.

Kelsey: Um and so I think you know there's there's a little bit of um stigma in some ways that comes with entrepreneurship. You know in the US we celebrate entrepreneurs and it looks a little bit more like a badge of honor and experience and we celebrate failure and in Canada um you know I can speak for myself but the you know the first thing I thought when starting a company was oh I'm going to have to move away if I fail

Kelsey: um because I would lose you know all my networks and contacts. So yeah, I think for me it's it's more of the entrepreneurship piece.

Abdullah: they're so intertwined to be honest with you that it's hard to kind of pinpoint on one. I do agree with Kelsey though. It is becoming a bigger challenge for you know to see the the energy that you need in a market that needs to build the right incentives to to help entrepreneurs kind of start an idea and start a company here in Canada.

Abdullah: Truth be told, once people build a company, I think they quickly realize how difficult it is to scale uh uh in in Canada, not because we're in a small country only, but because the conditions haven't been created in a way that would allow an entrepreneur to really leverage the full extent of what Canada has to offer.

Abdullah: Um, and I know we could talk a lot about these things, but three areas that we really uh identified as big challenges today. Uh, number one is, you know, how do you take IP to commercialization? And that really gets back to the question of how do you really build really good companies that have the potential to become billion-dollar businesses in the future uh by leveraging the in insane amount of dollars that we're putting into research here in this country, but uh and not able to really build the incentives to get that research to commercial uh uh reality.

Abdullah: The second part is around VC and just venture capital dollars and the amount of money that can be supporting the company's growth in many ways limited. I won't say non-existent because that's not true, but it's very limited um in a way that doesn't really feed the entire funnel of of of of need uh from a startup perspective, especially with the amount of talent that we have uh in Canada.

Abdullah: And then finally, I think the government uh plays a big role in this actually and being able to shine a light on a lot of the entrepreneurs and the founders that are being supported uh locally and globally. Uh but then it goes deeper into things like procurement uh and even uh into buying Canadian and putting Canadians first.

Kelsey, there are some companies, Canadian companies that go to the US. uh do we have an idea of how many uh Canadian tech firms are deciding to go south of the border for maybe greener pastures?

Kelsey: Yeah, I mean look, I think every Canadian founder starts their company and probably one of the first pieces of advice they hear is get your product to the US. I mean that is the playbook. build if you can build your company, build your talent inside of Canada and go get your revenue outside of Canada as soon as possible. Validate beyond our borders.

Kelsey: Um, and I think, you know, there's some pros and cons to that, but um, it's it's largely an issue of market size. Um, we know that obviously. Um, there's just much more opportunity there. But I think when it comes to, it kind of goes back to my point around productivity. there's also just a willingness to adopt technology faster.

Kelsey: Um, and so, you know, you hear of these stories where Canadian companies, you know, there's one in Calgary that has um I think over 90% of their customer base comes from the US, but they have over 100 employees headquartered in Alberta.

Kelsey: Um, and so that that's a common story for many many Canadian startups.

Abdullah, you are in the incubation space. there are some very, you know, eager people to build something and I imagine maybe if you can pick up on the point what Kelsey said is the playbook to go to the US.

Abdullah: Look, yeah, we we don't have an innovation problem. We don't have a talent problem. Uh we certainly don't have an ambition problem in Canada. We have we've built great companies today. We've had an an an incredible uh uh past where Canada has been a leader on innovation in many ways.

Abdullah: what we don't have is the right infrastructure and the right incentives in place to allow uh people to really again build for to their full extent while being here in Canada. And what I mean by that when someone's looking to expand and build their company, they don't think about going from Ontario to Alberta or to BC or to Quebec. They think about going south because it actually is uh a lot of hurdles and red tape that they have to encounter by going interprovincial uh that we don't realize is a lost opportunity.

Abdullah: And this is part of the reality that founders have to face. And when you're building a company, it's your livelihood. You will do whatever it takes to keep that company alive. And if it means going south, that's what you do.

Abdullah: Uh but there certainly isn't a lack of of of of ambition in what Canadians can do here. And and quite quite frankly, the need to to build a business has to always be thought of globally. uh where our challenges come to come to come to set right now is that Canadians are leaving sometimes the country to go build abroad. That doesn't need to be the case.

Abdullah: Uh Kelsey as is a good example of that can continue being in Canada, being in her home, building a global business, hiring global talent, uh but focusing her HQ here right here in Canada. That needs to be the story line that we continue building moving forward. Otherwise, it's really it's ours to lose. It's a story that we have control of. the narrative should be in our favor, but you know, we're not building the right blocks to to to to go in that direction.

All right, I want to pick up with Kelsey. Uh Abdullah, you talked about interprovincial trade barriers. Uh Kelsey, you are based in Canada. Um I am curious, what are the barriers? What are those international barriers that are maybe perhaps permit uh you know stopping you from building in the US if that is something that you want to do?

Kelsey: Yeah. So uh honestly we're an AI based uh company and so one of the things we do is we we have a leadership intelligence product. So we analyze real-time meeting data from leaders and their direct reports. Um and then we turn that into performance insights to help them manage their lives more easily.

Kelsey: Um and so one of our biggest challenges of course is security risk compliance um and all of the different standards you know across Europe, the UK and the US um which which vary right um based on where you are the you know the rules of notetakers what kind of data you can keep where it is stored um how you use that data highly varies. So that would be one of the biggest challenges as AI companies navigate those borders which I think you know I think that's probably an acute problem. I think we're going to see that all catch up rapidly over the next um couple of years.

I want to stick with you Kelsey because I want to talk a little bit of uh let's talk dollars. Um how much money do you think you could raise if you moved your company to the US? Because correct me if I'm wrong. Is it a is it a 403 area code in Calgary?

Yes.

Is is there does there is there a little discrimination when uh we're talking investors when they see maybe a 403 area code versus uh maybe area code south of the border?

Kelsey: Oh. Oh yeah. I mean I think that's one piece in investing for sure. Um but no question as well in selling I think um we get obviously tons of inbound from Canadian companies and um there is an element of let's make sure they don't see we're too Canadian

Kelsey: um because that would signal maybe we move slower, maybe we're a smaller team, um maybe we don't have clients in the US. it, you know, and it just signals the things that you don't want a client to not get you to that next meeting stage.

Kelsey: Um, yeah, and I have friends that, um, have you founder friends that purposely buy and use different area code numbers to make sure that when they're cold calling and doing their sales calls, um, it doesn't appear that they're coming from a Canadian number.

Kelsey: And so yeah, lots of Canadian startups know a little bit of those tricks of the trade um to make sure that you know we take some of that bias out of either the sales or the investment process.

Very good. Abdullah, um Kelsey talked AI, so let's talk a little bit about that. How much harder is it for Canadian tech firms to find funding right now if their business is not leveraged by AI?

Abdullah: Yeah, look, we're in a moment now where AI, generative AI is everything, right? So, you know, a lot of the founders in the companies have now shifted their businesses to be called either native AI companies or AI enabled businesses. It really is the movement.

Abdullah: Um, but um, look, it I I it needs to be incorporated in some way, shape or form. uh and companies that are building deep technologies and really thinking about the future and what's what's to come are naturally just incorporating AI into into their into their startup.

Abdullah: So it's not uh you know it's no longer a matter of is is it incorporated it's a matter of how how deep into the business actually is it layered in and what are you doing with it to create a differentiated product. So it it would certainly be difficult to you know capture the the VC dollars if you will uh without having that well thought out.

Abdullah: Um uh and but again Canada is has always been you know at the forefront of this space and you know um something that we should take pride in the fact that we've helped build some of the biggest capabilities in the world from an AI perspective and something that we have such strength and and and uh and rigor with and right here in our backyard in Canada.

A AI programming we know is is different than traditional coding. Kelsey, do we have enough AI graduates or experienced coders who could handle um the demand that is out there right now? Are you hiring right now? Are you looking for uh some programmers and coders?

Kelsey: Yeah. No, I mean always hiring AI talent and trying to keep them with us. You know, I think we we are lucky in Canada in that is an amazing place to live, build a family, incredible work life balance. It's still obviously relatively affordable

Kelsey: um you know, politically stable. And so we do have other factors that can attract um people to come and set up their lives. And I think for many startups, we're holding on to that because if our talent went south, we would not be able to compete on the salaries and the drop of our dollar.

Kelsey: And so, we're just becoming less and less competitive. Do I think that we have the the talent here? And do I think we can continue to attract the talent? Absolutely.

Kelsey: Um but you know AI developers and I think no different than other developers and engineers they want to work for big innovative companies that have gumption.

Kelsey: Um and so you know that would be more of my call to action is like we need to support these big companies to Abdullah's point like getting past that or into that growth stage um because they want exciting meaty challenging problems.

Kelsey: Um they want to solve them. They're hungry. They're very curious and we need to keep that talent here.

Well, let's talk incentives, Abdullah. What incentives uh can employers uh put out there to keep people here in Canada?

Abdullah: Well, look, a lot of it comes down to from my side, I'm talking about particular startups, you know, to keep startups here in Canada and want them to kind of continue to grow and scale their businesses. You need to build maybe the two of the biggest things that we know in the in the south in the US that they've done really well is speed,

Abdullah: scale, and the ability to actually procure government contracts. Um, if we're able to figure out a model that would push uh the the the market here to start being first to move as opposed to always be a follow a follower in terms of what the US is doing and how the US is doing things.

Abdullah: uh the ability to actually uh remove some red tape and the barriers uh uh that would allow Canadians to scale within their own uh backyard uh from province to province to province from market and then in particular to government um and imagine for a day that we're able to unlock the biggest customer in the country for founders to actually leverage so that when they go abroad and start to to grow their companies and hire the best talent they can start with the position that our biggest customer or one of our biggest customers in the world is the Canadian government or the provincial government of Ontario of Alberta, BC of Quebec.

Abdullah: Uh that in itself holds so much weight that we haven't been able to crack yet. So I I think those are some of the big incentives that will beyond what uh what you know Kelsey mentioned around safety and standard of living and stability.

Abdullah: You know there needs to be again an entire uh uh cohesive market that's opening up that allows companies to see themselves being able to build a business that would actually grow and scale. And it has to go beyond the non-dilutive funding the grants that Canadians are so well equipped to get.

Abdullah: uh but um that in itself won't make us the most competitive nation uh in building what we want to build. We need to create a market that's that know that has speed that's able to uh think about scale across borders across uh provinces across countries and then looking at procurement from a government perspective.

Kelsey, last question to you. What are some of those potential solutions to entice, you know, tech firms to remain headquartered in Canada? Oh gosh, so many. I mean, I think of course tax incentives help.

Kelsey: Of course, the scientific research uh the shred program that the Canadian government incentivizes for R&D is incredible and we need more incentives like that for Canadian businesses around, you know, Abdullah mentioned it, government contracts around buying Canadian tech.

Kelsey: Um, so tax credits, incentives to encourage adoption, pilots. Um, you know, I think we have to face it as Canadians. We do not we inherently don't like risk.

Kelsey: Um, which is unfortunate, right? We're we're kind of we always have this cultural belief that just we aren't good enough. We aren't as good as the US and maybe our products aren't as good, which is absolutely not true. Our products are as good, if not better.

Kelsey: Um and so we're always looking for that external validation and um I think we need to be the champion of our own entrepreneurs. We need to dig in to what started this country.

Kelsey: Um and we need to champion and support the incredible ideas and innovation ecosystem that we are building here. Um and that is not just tech in and of itself. It goes beyond the tech borders. Right? That's to to Abdullah's point from uh universities, ecosystem partners, government and private businesses, other small tomedium enterprises in Canada.

Kelsey Abdullah, thank you so much. Really appreciate your insights.

Thank you.

Thank you.