Growth Times

Canadian Business totally misses the mark in its poorly researched editorial on Ontario’s Green Energy Act and the Emerging Technologies Fund in the June 15 issue.

I support innovative ventures in the cleantech space on a daily basis through my consulting practice at Growthroute Ventures, and I recently co-authored an article entitled “Could Ontario be the Next Germany?” with regard to both the Act and the Fund, published in Renewable Energy World Magazine, the most widely-read magazine on clean energy.

As we all know, Ontario has been pouring money by the billion into the car manufacturing industry and other dinosaurs. It is about time some public support be devoted to innovation in cleantech. The Green Energy Act is modeled after the German incentives, which are recognized in the industry as widely successful. California, which Canadian Business refers to as a great model, has in fact been seriously discussing moving towards the German system. But more importantly, Canadian Business’s assertion that California’s model is significantly different in its support of clean energy — claiming it does so less selectively– is downright incorrect. Among many other examples, the western State pays a premium for 5 years on all solar photovoltaic projects, and offers select incentives to wind and biomass projects. This “winner-picking” approach Canadian Business criticizes is a constant in the energy industry, as a quick look into the huge tax incentives our government is offering for oil sand exploration, or all the public money that has gone into nuclear power R&D, would have told the editor. The support now offered to cleantech is a minuscule fraction of those amounts. If Canadian Business advocates for a leveled field, it should make sure it is looking at the entire field first.

As for the Emerging Technologies Fund, it is again just a drop going to innovation against the ocean of dollars poured into the US car manufacturing black hole. Canadian Business forgets to note that Quebec recently announced the launch of a fund offering over 3 times the amount of Ontario’s fund, and that la Belle Province is increasingly being seen as much more supportive to innovation than Ontario. Dismissing the Ontario’s ETF initiative on the basis that there is little venture capital money to match, and that “most VC-backed investments fail”, demonstrates a serious misunderstanding of how venture capital works. VCs bet that out of 10 investments, nine are going to fail or just get by, and one or two are going to make up in a big way for all the others. The metric that matters here is the investment ROI on the entire fund, not on individual investments. The VC industry raises its money from larger funds, who allocate their investments based on ROI and risk. Until now they had found it quite lucrative to place bets on VC funds.

But Canadian Business argues that VC investments are inherently too risky. Taking the magazine’s logic to its conclusion, it is not advocating against the Ontario fund as such, but against the VC model as a whole, in essence saying that VC investments are bad investments, and that no money should be put into that model. The truth is, the VC model may be under fire, but again, one needs just to take a look at the broader picture to see that is but a flawed assumption: how about the recent financial returns from the securities industry, the car manufacturing industry, or real estate? If we are to invest anywhere, I say putting more money in the hands of VCs (and angels too, by the way) is as good a bet as any. Actually, it is a much better bet.

The VC industry in the US is widely seen as a critical catalyst for the rise of the Silicon Valley. Companies like Google, eBay, Facebook, Cisco Systems and a number of other innovation heavyweights act as vivid proof that the model works. In my daily job, I constantly witness how the quasi-permanent lack of funding for early-stage innovation in Canada stifles growth and highly-qualified employment. I am not arguing against Canadian Business on the importance of letting markets do their magic, and getting out of the way, but at a time when the government is distorting those by throwing money at any moribund dinosaur that can still shout, I say any effort to direct funds to the innovative sector through the existing channels should be encouraged and supported. Certainly, reducing taxes and removing regulatory barriers to all forms of investment is needed (making it easier for US VCs to invest here is a definite need!), but it does not prevent other initiatives that leverage the power of targeted incentive towards sectors of strategic importance for our collective future.

Shame on you, Canadian Business, for popularizing half-baked arguments on the Green Energy and Green Economy Act and Ontario’s Emerging Technologies Fund. You couldn’t serve the purpose of traditional corporate money-grabbers any better, at a time when the job-creating innovative economy is in dire need of your support.

PS. And while I’m on Canadian Business, what is it with its choice for the “25 most influential people in business“? All white male except for one woman! The magazine might want to drink a bit of its own medicine, see their last-page article “Women wanted“, as I doubt there aren’t more females or visible minorities in the top 25…

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