The following is a transcript of a panel discussion on innovation hosted by the Public Policy Forum in late November, 2022. The discussion was moderated by Kathleen Gnocato, PPF VP of Strategic Engagement with guests Ilse Treurnicht, former CEO of the MaRS Discovery District and Managing Partner, TwinRiver Capital; Judy Fairburn, co-founder of The51; Dozie Amuzie, head of Johnson & Johnson Innovation, JLABS Canada and Simon Kennedy, Deputy Minister of Innovation, Science and Economic Development. This transcript has been edited for length and clarity.

Kathleen Gnocato: We are hosting this panel at a time where there’s a shift from this neoliberal order to one that is based in industrial policy. The great powers have never been more competitive than they are today, as evidenced by Inflation Reduction Act, the U.S. semiconductor export strategy, onshoring and friendshoring strategies that we’re seeing announced in the news daily. It’s time for Canada to remain globally competitive, yet over the past 20 years, our R&D and research intensity has fallen. We now rank 21st of the 36 OECD countries on research intensity. And so, the question is: what is our competitive advantage and how are we going to show up globally in this increasingly competitive environment?

Judy Fairburn: I’m very involved in the Creative Destruction Lab in venture capital, working with founders with a history of being right on the ground, going from the lab right up to large-scale commercial in terms of hard tech commercialization. I’d say Canada has tremendous strength in starting the process of innovation, in terms of our science across multiple sectors. And I see that in terms of what we have growing here in food and agtech, on energy transition, on health, biotech. I think we put an awful lot of great supports in from government. We’re certainly at a time now, particularly given what’s going on in the U.S., where we really have to think and double down even harder on what scale-up is going to take in our hard tech sectors – so energy transition, biotech, health tech and the like. There’s a lot of effort that has to go into that. What’s it going to take now to have global players?

KG: Ilse, you have witnessed firsthand that challenge of taking invention or lab-based research from the bench into practice. Where do you think the biggest opportunities lie for Canada in terms of our unique competitive advantage?

Ilse Treurnicht: Our opportunities and our people. We have extraordinary people across this country in all communities and all sectors, in all subsectors, but we are small in the global context. And so, I think what’s really a fascinating challenge for us now is just to become a lot more intentional, strategic, laser-focused in terms of understanding the nuances of the supply chains. We’re never going to be able to fill it in a blunt instrument way, but where are the unique opportunities where we can layer our capabilities in artificial intelligence with next generation semiconductor chips, or precision medicine? What does that mean for biomanufacturing? Find those niches where we can bring unique value to the world and really be at the forefront of the way these industries are shifting. I think the challenge for us is that this is not the way we’ve really thought about this. It raises the question of how are we going to harness the expertise that’s out in industry, that’s out in academe, that’s out in our partner allies, in the global firms we do business with? How are we going to bring all that expertise so that we can make really informed decisions in real time as these markets are shifting in a way they haven’t shifted before? And I think that’s kind of a structural challenge of: how do we build not just the mindset but the toolbox to make those calls, and then act in a way that is relevant to the pace of change internationally? The interesting thing is, as a lot of these industries are shifting, they’re playing to our strengths and away from large-scale manufacturing, which was tougher for us to compete in in previous eras. It’s a unique opportunity, but it’s going to take a very, very different approach to finding those opportunities and then moving quickly. I think that’s the piece, the execution challenge that we have collectively is a huge barrier for us.

KG: Dozie, what are you seeing as some of the unique opportunities facing the country out of JLABS, and your experience also in the U.S. as compared to Canada?

Dozie Amuzie: I will double down on some of the things that Ilse and Judy have said already, which is the idea that people are a strength here, and also early research is a strength. But as it comes to healthcare or life sciences, it is true that good ideas can come from pretty much anywhere, but it’s also true that they come in higher numbers in places where there has been some intentionality and strategic building. There are some differentiated ideas that are coming out in neuroscience: in digital diagnostics, digital therapeutics or therapeutics, and that’s across the country; an ecosystem that is looking to build and grow. It is good to ride in an emerging area where the rules are not entirely written, and you can be part of writing the rules. In terms of biomanufacturing, it is great that the government has laid out a strategy. We are seeing already that cell therapy companies are coming from abroad, from Europe and from the U.S. to come and situate here because the people are here, the strategy is supportive and there is an opportunity to stand up that industry. There’s a lot of early-stage effort here, but this strength is not fulsome from early stage to commercialization. What we find is that one half of our entrepreneurs are repeat entrepreneurs, which means they have the network, they have connections to venture capitalists and so forth. But one half of the people driving these ideas are actually first-timers and they need a different kind of support in their entrepreneurship journey.

KG: Judy, I want to go to you next because this is exactly what you do in The51. How do we avoid brain drain when we don’t nurture our talent at home? And how do we get over that commercialization barrier?

JF: That’s something I’m very passionate about; commercialization is an absolute imperative for our nation. And I must say, I’ve done a lot of things in my career as a senior executive, board chair of Alberta Innovates, but I have learned the most about commercialization and commercial skills in my last three years in co-founding co-CEO and fund managing partner of The51. We have 29 companies in our portfolio, 175 investors, largely women and all our network effects, the wonderful brains and networks they bring and mentoring our companies that are largely women-led. And every day you’re working with companies is like a mini-MBA in terms of working with them on what it’s going to take to go from what seemed like a wonderful idea to actually build that scale. One of the most important things is developing commercial and financial acumen; I think it makes the difference across any early-stage founder. To understand how do you know that customer traction is real? People can talk to you, but they might just be wanting to learn from you. How do you actually structure and negotiate so that if you do X, Y and Z with this company, they’ll actually buy from you and guide you? Otherwise, you can waste a lot of time and a lot of energy. I think the other thing is really knowing what it takes to be a successful entrepreneur. It’s a hard life. You have to be incredibly driven to get through whatever barriers are there. And it takes partnerships. And so, if there’s one callout, I could do is it’s really important, in clean tech and in biotech, that we see what is in our national labs and the provincial labs. Their ability to take you from the bench to larger-scale piloting is absolutely strategic to moving at pace, to helping these entrepreneurs that have a good science-based idea move quickly to compete in the world. I think we have to put more emphasis on that. I had a situation recently with a biotech company that I’m involved with, and unfortunately, they had to go to Europe because they couldn’t get in to do their next stage of piloting for a year. And that was going to be too long. The European arrangement that they struck was also 20% cheaper than the Canadian range. Lots of great expertise here, but we need to reinvest and recognize how important our national labs are, and the skills and the assets there to scale up.

KG: Dozie, any comments on that?

DA: Part of the reason why people don’t continue to build here is when there are barriers to scaling, and those could be on access to capital, but also some of the things Judy said. What we also find, especially in healthcare, is that it’s a competition like the Olympics, where the degree of difficulty is very, very high and the whole world is playing. So, starting in an early stage but having a clear view of the end stage, which could be a disease stage, really, really helps. And that’s kind of what we’ve tried to do with the Johnson & Johnson network, where we introduce our portfolio companies to physicians who have seen the disease for decades and will be able, in an hour, to distill for them: ‘okay, these are these are problems to be solved and these are the ones that I would concentrate on.’ That can help guide the person or group to focus. We focus on the innovators themselves, but I think there is the role for external bodies like government or non-governmental organizations. And I’ll give an example. Canada has a Nobel laureate in virology; Canada has delivery systems for vaccines. What I don’t know if it’s quite strong enough is the MRNA component. So, what areas do we have already differentiated strengths but are missing a component? If an external party comes in and brings up that component, it could bring higher value to the other ones that are pre-existing and longstanding.

KG: Simon, incredibly competitive companies are saying Canadian companies are saying they’re being scouted by American firms daily. What does this mean for Canada’s innovation economy? What are we going to do about it? And what does it mean, specifically, for our manufacturing capabilities?

Simon Kennedy: I think I can just tease that the government did in the Fall Statement talk about the necessity of coming up with a response to the Inflation Reduction Act, and it talks about the necessity of a level playing field. I think it’s not lost on any policymakers that that legislation does put in place some very significant incentives in a whole variety of areas related to clean technology. And that Canada is going to have to make some decisions about how it responds. We have certain advantages as a country, and there are certain disadvantages of being a relatively small economy sitting right next door to one of the biggest and most dynamic economies in the world. I think some of the things that government has tried to do in public policy terms has been to try to offset some of those disadvantages. So, both of my brothers are in the arts, apropos of nothing. If you really, really, really want to play with the best jazz musicians in the world, you go to New York City. (I mean, maybe you go to Montreal.) And if you want to be a professional in theater, there’s like three cities in the world in English anyway, you would ever think to go to be a top player in theater. If you want to be a movie star, you go to Hollywood, maybe you go to Bollywood, and that’s hard to tilt against. You can be the world’s greatest actor, but if you’re in Saskatoon, the opportunities are going to be more limited than if you go to Los Angeles. And I think that there’s a version of that that plays out, frankly, in clean tech or in virology or whatever. The capital pools are a lot deeper in the U.S.; the ecosystems, a lot bigger. The odds of running into people or making the kind of connections you need to take your business to the next level are just more likely to happen. By the way, we have sectors where we have that advantage, like mining. The entire world comes to Canada every year because guess what? The leader in the capital markets and expertise in the entire planet is in Canada. Governments have put a lot of money into venture capital – like, a lot. The clusters program that the government has put in place is explicitly designed to try to force some of those connections in areas where we may be just at subcritical mass, but with a little bit of elbow grease, you might get critical mass. In the U.S., some of these clusters happen organically because it’s just huge numbers of people and activity. In Canada there are areas where we think with a little bit of encouragement, we can maybe stimulate that with a bit of government intervention.

KG: Any thoughts from Judy, Dozie, Ilse on that?

IT: Maybe I’m the glass half full, but sometimes I have to remind myself that we have to think back a little bit on how things have changed. A few very short years ago, great ideas coming out of our universities were essentially plucked as ideas. We are now at a stage where there’s global recognition that Canada is a great place to start and grow a company. There is no magic bullet, there’s a whole bunch of stuff that’s happened over many, many years. Canada is also a great place to live if we look around the world, so smart entrepreneurs want to raise their kids here. They want to do all of the other things that we do well. So, we have a lot going for us. I think that the opportunity for us is just to take that foundation that we’ve worked really hard to build. So how do we up our game so that we can be the most relevant, the most targeted, the most effective in this moving landscape? But we’re talking from a place of strength today. Venture capital is one example. The one plea I will make, and this is maybe just my personal obsession: For a few years when the tech sector was hot, we’ve tended to equate innovation with software, with digital technologies, with the cool stuff that you read about and that you see, the gadgets in your pocket. Commercializing clean tech opportunities or health tech opportunities have a lot more structural barriers, and we have to become much more specific in our programing because these two sectors are going through a massive transformation at the moment. From a programing perspective, the tools that work in digital are not the same tools. And I think we’ve recognized that in clean tech we have a lot of programs, but they are in 15 different places. It’s hard to navigate. Turning that around into a central nervous system that can make it as easy as possible for our talent to do what they do best in the global context, I think is the opportunity for Canada now. But we’re not starting from a deficit position, I will absolutely defend that. And if you ask people around the world, they would acknowledge that too.

JF: I totally agree. And I think intentionality about pace is very important, particularly in the more industrial or hard tech areas we’re talking about, beyond software. There are success stories that I’ve been involved in where we went from bench to large-scale, commercial, major clean tech project in seven years. It was very business driven, we had amazing partnerships with the national labs and ScaleUp, other key partners. The regulatory kept pace as well. We can do this as a country and I think being really intentional about saying we need to move at pace to be able to build on this great science that we have created in Canada in terms of early-stage company growth, so that we can get the maximum value. To a lot of venture capital in the world I’m in now, that would be success. Being able to build it farther now, to a point where then it can really get picked up in a global transaction, is success. We’ve come a long way in the last decade or so in terms of being able to maximize the value for what we are putting into investment in science and government programs in this country.

Question from Senator Peter Harder: Thank you very much. Terrific discussion. About 20 years ago on the other side of the canal, there was a gathering of a smaller number of public servants talking about innovation. And we had Lester Thurow for our discussion. And he said the single greatest problem in public policy is dealing with incremental decline. Earlier, there were some references to OECD and other comparative data, which shows that Canada has in fact declined on a number of indicators that are key to innovation. This conversation is so optimistic, and yet the reality of Canada’s performance would suggest that we’re actually losing to our competitors. In your optimism, we need to ensure that we are outperforming our competitors. And what does that require? For example, I’ve not heard one word tonight about provinces and their role in this journey; crucial that there be some kind of alignment. I know it’s a Canadian problem but Simon, you know that we’ve got 4% of GDP on the sidewalk to be picked up in terms of inter-provincial barriers. How do we ensure the kind of alignment we had during the Free Trade Agreement negotiations that were sectorally informed and provincial jurisdiction-sensitive? How do we capture some of that architecture for the next phase of our innovation journey?

KG: Great. Dozie, we’ll go to you first. Easy question.

DA: I didn’t realize we were that optimistic. One of the areas that I really want to delve into is biotherapeutics and the challenge for Canadian innovators to take a biotherapeutic idea from beginning to end. You would find very few examples of people who have raised more than $10 million of capital for biotherapeutics exclusively in Canada. And when I think of first-time innovators, somebody can have a really good idea, and there’s people who are willing to give capital into it. But once it starts getting north of $10 million, there is no one. This is where first-time innovators have the least network and it becomes really, really difficult. There are good ideas here that could be transformational, but right now we don’t know if they will make it through the next year. On the contrary, if you go to a place like Boston or San Francisco or maybe even San Diego, it is hard to find that. Those ideas would find money to support them. In fact, increasingly, Philadelphia is becoming that kind of place. Right now, I have ideas sitting here with people who have capital from the U.S. to commit, but they don’t want to lead the rounds from outside the country and there is no one within the country who would lead the rounds. Risk capital can be transformational and pull an ecosystem along with it and I think that area requires a little bit of love.

KG: Excellent. So, I want to pick up on that and tie a few threads together. A question in there is how do we unlock risk capital? And a question from the audience that ties to that is the idea of how do you move from incremental innovation and incremental ideas to transformational ideas? And how do you unlock risk capital to do that?

JF: As individuals, we may not be willing to take the same risks that we might take when we’re in a group and can learn from others. I’ve certainly seen that at work at Creative Destruction Labs; you pull all that business judgment together and sector experience from unbelievable experts around the world, it’s made a huge impact in terms of really starting to invest in early-stage ideas and getting them rolling. I think for The51 as well, we come from a philosophy of capital plus community accelerates commercialization because you don’t have it all in one brain yourself and the ability, when you come together, to then say: ‘okay, we can do this.’ I think we need more of that in Canada because we are a more risk-informed nation, I would say. The second point is across provinces, what I see in the private capital markets is we don’t really feel a sense of borders. We operate as: where are the best opportunities? How do we collaborate together? And I think one of the things I’m particularly proud of is my home province of Alberta, we’re actually up 6% year-over-year in venture capital dollars, versus kind of being down 39%. This is the time to invest, when the market is down a bit and our deals are up 23% versus the rest of Canada is -8%. There is opportunity when times are challenged.

KG: Should we be picking winners going forward? Is that how we get to unlocking risk capital, producing transformative solutions at scale?

SK: I thought Ilse’s remarks earlier that we have certain areas of competence or expertise and like part of public policy is to try to figure out what those are and figure out how to leverage that and make something of it. And then Dozi was saying earlier, one of the world’s leading minds and the leading center of expertise for lipid nanoparticles is in Vancouver. And the Pfizer-BioNTech vaccine employs this technology, it’s a Canadian technology. And there’s a real cluster in in British Columbia in this space. And that’s really important. There’s a little bit of Canada in every Pfizer shot. How many people know that? And when we go to see the Americans and they talk about the competence we have in areas like quantum computing and A.I., it’s not just made up, we actually have really serious competence there. So, it’s not about picking winners in the sense that we like that company, we don’t like that company, it’s more, I think, we don’t want to abandon framework policy because good frameworks are really important. You want to have good regulatory frameworks for intellectual property and all that sort of stuff. But we want to be conscious of what are some of the areas of strategic advantage or knowhow or capability we have, and then how do we reinforce and leaven that and try to take advantage of the fact that that’s an area where we have a lot of competence. So, the fact that we now have built over time this amazing cluster in A.I. is becoming a magnet. There’s a reason why a lot of biotech and pharmaceutical companies are putting more personnel into places like Toronto – it’s because the A.I. competence is really important. Our banking sector is a big user of this, they’ve hoovered up a lot of this stuff and they can use it to advantage, they can offer better products and services. We have sectors and competencies that matter and we can use public policy to double down on those areas and help build ecosystems that will pull capital in and get entrepreneurs to come in. It’s not about individual companies, it’s about sectors and areas of competence where we have a world leadership position. A.I. is a general-purpose technology, thoughtful people say it’s like electricity, this has the potential to transform every industry. And we have some of the world’s leading minds in this country, leading start-ups and researchers; we probably should keep doubling down on that, and we should be reinforcing that, and we should be ensuring we keep a leadership edge. If we do that, the capital might follow, the best minds will follow, the VC funds will set up shop here. That’s what picking winners is about.

KG: I think that gives a clear strategic direction as to how we pick those two to three areas. But how we do this inclusively? There is this real responsibility that we have in Canadian politics and in policymaking to ensure its inclusive as we place those big bets, as we determine those areas of competitive advantage, specifically for women. Judy, I stole this stat from you: two thirds of financial wealth by 2030 will be held by women in this country. It’s a fascinating stat. How do we bolster not only women, but how do we ensure an inclusive way forward if we are to pick those two to three areas and place those bets?

JF: This is something I’m very passionate about, the importance of inclusive innovation. That’s the center of what the The51 is about. With the stat that by 2030, it’s forecast that women will be controlling two thirds of the private wealth, it’s a big momentum to make sure that women are prepared to be able to do that well, invest well, and, frankly, participate and invest in the economy. We want to see the economy that has social and environmental impact alongside it. What’s encouraging is that if you look at early-stage companies, we see an awful lot of diverse founders. People ask us the question, is there enough deal flow? I think we’ve met with around 2,000 companies. And we have to be selective; we’ve invested in 29. But there is amazing talent out there. We have to bake in early that that there is diversity at the investor table, because then you have diversity in the leadership, you have diversity in the board. And that starts to shape where your economy goes in the future. You need to start at the beginning of capital formation in companies when they’re being formed to set the future you want.

KG: Ilse, you’ve been a champion of many female founders. I’ve watched you in action. How do we keep diverse talent here? How do we pursue that inclusive strategy?

IT: Unfortunately, there’s no magic bullets to any of this stuff. We have to do all the things. And I think I think the government does deserve credit for the effort they’ve made to shift the really horrendous statistics in the venture capital industry. We know when the venture capital industry is under pressure or declines, the first thing that goes, the percentage going to women founders drops from 3% to 2%. You know, it’s really quite pathetic. I think there’s been a real effort to try and, from the ground up, build more inclusive teams of venture funds that are benefiting from the government’s investment. I think the talent is being unleashed as we speak. And our obligation is to make sure that that talent has the barriers removed so that they can blossom. This is why I’m spending my time in the whole area of impact investing because the early adopters of impact investing are looking for market-based mechanisms to grow and scale the economy, but also to do so in a way that is positive for the environment and for society at large. The early adopters globally of this movement are female. If we do this right, we will build the kind of country and the kind of economy that will serve us incredibly well and will bring us full circle to where we started this evening – for seven generations. This is a real opportunity for Canada, but there’s no easy answer. And we can’t let up on this for a moment because the minute you take the pressure off it slips back to standard patterns, that’s just the way the economy, the sector, has built itself. It’s a chance for Canada to do something differently, and to show the world how it’s done. I’m excited about it, partly because the talent is just staggering. Not just women, but we’re benefiting from the entrepreneurial spirit of our immigrants, people who come to this country with global networks, trading relationships and partnerships that we can build if we mobilize the human networks and make sure that those entrepreneurs can build truly global, new economy companies. My defense for my optimism is that I think we work in the new part of the economy, a lot of statistics are based on a lot of our established businesses. I think the pandemic has certainly shown they can do digital transformation if they have to, but there’s a new wave of businesses being built, and frankly, they don’t have their first customer in Canada. We have to get much better at being their first customer in the health system and in our energy system. But most of them have to be baby multinationals from the day they’re born. And they have a very, very different mindset because our market is just too small for these new technologies to be adopted in your neighborhood. It’s a very, very different beast. But if we don’t take care of that layer of the economy and its growth, I think we’re going to be stuck with some of that bad data.

KG: Dozie, I’m going to give you the last word on this and we’ll wrap up.

DA: Diversity is an area where I actually do believe Canada is doing really well with strategy. I have deep family networks in South Korea, in Nigeria, and I spent 20 years in the U.S. and of all the places I’ve been, I’m fascinated by how all of these countries are connected in Canada, doing business in Toronto. We’re finding Korean companies come and invest in A.I., I think in part because of the underlying diversity of the people that creates the relationships and networks that makes these not-so-easy, intercultural, across-language conversations a little bit easier. In the 50-30 strategy, we also have to pay a little bit more attention in the details to make sure that some subgroups of minoritized people are not underrepresented. I think that’s something that we have to be a bit more thoughtful about.

KG: I want to close by thanking you all for your honesty or your candor and your leadership in Canada on these issues. I heard that we can’t take our foot off the gas, even for a moment, but not only as it relates to inclusive innovation, but as it relates to our competitiveness on the global stage. Thank you so much.