Time to Transform Our Economy
Big challenges require innovative ideas and decisive action. The Covid-19 pandemic is barrelling down on our economy and while we don’t know how this crisis will play out, there are a number of immediate concerns that we should be talking about now.
All across the country, small and emerging startups are trying to do the right thing for the health and well being of all us – sending employees home, cancelling events, delaying projects and social distancing. Every delayed meeting or cancelled event is a significant loss – tipping off balance the fine line they are walking between high-potential success and huge financial risk. If there isn’t a concerted effort to support these nascent companies right now, many will go bankrupt or be so delayed in getting their technology to market that whatever advantage Canada has carved in the cleantech industry will be lost.
While every at-risk startup should have access to tools and resources to manage through these uncertain times, we believe that now is the time for us to double down and ensure the innovators and entrepreneurs that represent the future of our global green economies and livelihoods are supported.
In Foresight’s CORE Cluster project, we identify key stakeholders in cleantech as the “Helix 5” – industry, SMEs, government, investors and academia. In this crisis, the first part of the helix, the SMEs, are in acute trouble, particularly pre-seed or pre-revenue companies striving to build and commercialize promising cleantech solutions, and companies that have commercialized but are extended financially in the process of scaling their operations.
These innovators are vulnerable. As pre-revenue companies, they often don’t qualify for debt financing or traditional bank loans. They rely on financing from angel investors, venture capital and strategics – money that often dries up in times of economic uncertainty. For companies that may have revenue, but are investing in scaling, they face a significant risk of customers pulling contracts or delaying expected purchase orders – situations that can put their whole operation at risk.
And of particular concern in the cleantech sector, many have longer timelines to commercialize. A fundamental characteristic of a cleantech economy is that it requires a larger up-front investment. This means difficult refinancings may echo into the years ahead. Many of these companies are mid-way through multi-year, capital intensive projects. We can not turn back the clock on the progress they are making.
These companies are innovators and mavericks, creating new and unproven business models, taking on unique technology challenges, and pushing the boundaries of risk in order to have the greatest impact on a global carbon crisis.
The paradox of a crisis like this is that nestled within the fear, chaos, and heartbreak, there is an opportunity, a silver lining of hope.
In this case, as the double-edged challenge of health versus economics plays out, I have hope that we can act fast together to kickstart a transition to a green economy. With many people working from home and travel restricted or cancelled, we are seeing reduced emissions and consumption. Perhaps with the temporary respite from the daily commute, and the cleaner air, the public will see that we can return from this crisis with a new type of economy – one that prioritizes the types of markets, innovations and opportunities that clean technology delivers on.
Cleantech is the Future Economy of Canada
The cleantech industry in Canada is valued at $7.8 billion and the federal government has a target to reach $20 billion in export revenue by 2025. This is significant growth in an industry at a crossroads. The stakes are high.
The aim is that by maximizing support for the most vulnerable stakeholder in the cleantech ecosystem, the entire structure of the sector is strengthened. The cleantech industry is complex, and the challenges they are facing with the Covid-19 outbreak will impact all aspects of their businesses, including finance, sales, human resources, operations, and R&D. This crisis puts them in a fragile situation – it is hard enough to navigate these complexities, but with the outbreak of Covid-19 wreaking havoc on carefully constructed business plans and cash flow expectations, it is crucial that these companies are fully supported by the rest of the ecosystem.
To put it bluntly, we must invest in these game-changing companies now, so that we can prosper together and position Canada as a global leader in clean technology solutions as the global economy recovers.
Rising Together: The Green Recovery
The best recovery plan would not only provide short-term stimulus but also long-term prosperity in the form of a carbon-neutral economy. Once Covid-19 is conquered, then what? Do we go back to the same carbon-intensive economy or do we wake up to something new – not a sunset economy based on old values, but a new one that delivers on both long term prosperity and a liveable climate?
The Global Commission on the Economy and Climate found that bold climate action could deliver at least $26 trillion in economic benefits through 2030. And just as this crisis hits, Canada was poised to be a leader in the development and deployment of the businesses and technologies that will bring those benefits to this country. We are truly in a ‘use it or lose it’ historic moment for our economic future. It would be a mistake to underestimate the benefits of pivoting to a cleantech-based economy – the fiscal and social benefits are huge.
The Covid-19 crisis is global, and many countries around the world are announcing billions of dollars worth of stimulus packages in multiple sectors. The sheer size of these global investments and the choices and strategies behind them will change the global economy. We must seize the moment, pay attention to where the money is going and choose wisely.
Move Into Fast, Strategic Action & Investment
In 2017, the Government of Canada set aside $2.4 billion in funding for cleantech companies, and the funds have not been fully deployed. There has also been a commitment from the government to invest in green infrastructure and to be a leader in the procurement of clean technologies. The Government of Canada has the fiscal capacity necessary to enact measures to protect SMEs and mitigate the financial effects of this crisis.
Let’s work to get that capital deployed quickly with a longer lead time on payback periods, and ensure an application and assessment process that reflects the urgency of the situation. It is encouraging to see announcements being made by the Government of Canada about initiatives to support entrepreneurs impacted by the coronavirus through the Business Development Bank of Canada and Export Development Canada.
Accelerators and ecosystem builders like Foresight are in a unique position to accelerate this process and work closely with government partners to accelerate investment opportunities through these and other programs such as Sustainable Development Technology Canada. The time to step up and advocate for SMEs in the cleantech ecosystem is now and that is what we will do. Canada’s future economy depends on us not losing ground in the cleantech-powered sprint toward sustainable prosperity that has been our focus since Foresight was founded in 2013.
Private Funding: The Time is Now and Don’t Lose Sight of the Goal
For the investors in the tightly-connected helix of cleantech, I encourage you to not let deal-flow dry up. If you are sitting at home self-isolating, pick up the phone and connect with a cleantech company. If you were meant to be at a pitch event that was cancelled, encourage the organizers to go digital, keep showing up and listening to these entrepreneurs. This crisis is big, but it is an unanticipated health crisis that is impacting the economy, rather than a failure of financial or economic fundamentals. Let optimism reign over fear.
Tax Policy & Tools
Doubling down on the support offered to cleantech SMEs also means fully deploying tax policies and tools in strategic ways. The path toward the future of Canada as a global leader in climate change technology innovation and adoption involves the smart deployment of policy tools and tax mechanisms. Ideas and programs such as flow-through tax credits, capital gains exemptions for cleantech, increased IRAP funding, acceleration of SR&ED rebates, loan payment holidays, grants, purchase order financing, government purchasing policies, financial policies supporting ‘green bonds’ and innovative financing – these are not just investments in single companies – they are investments in our collective future.
So, to our government partners: Hold true to your values, but be bold. Be the port in the storm that these promising SMEs need right now.
Keep the Momentum Going
We have an opportunity to advance Canada’s position as a global cleantech leader and come back stronger than ever. Let’s ensure these companies continue to provide groundbreaking technologies to a global market, keep the momentum going on the work and projects in progress. Let’s not let fear paralyze us.
How to Unleash the Most Important Economic Recovery in the History of Canada
Over 250 years ago, industrialization spread across the globe as production by hand was replaced by the modern industry. It changed everything and led to economic prosperity and everything that comes with that – increased wealth, meaningful employment and (eventually) better health and social conditions.
An economic recovery model centred on the transition to a circular, cleantech-focused economy is the biggest opportunity for transforming how we organize production and consumption since the dawn of the Industrial Revolution 250 years ago.
Canada can drive that opportunity. Canada is not only home to game-changing innovators and leaders who want to make a positive climate impact, we also have an ecosystem of accelerators, technology incubators, innovation and research centres with their fingers on the pulse of the cleantech startup world. Canada’s cleantech ecosystem is ready to invest in, support and drive these promising SMEs forward. Use these highly networked organizations to guide this transformation – many of them have already doubled-down on their support of cleantech and a liveable, prosperous planet. The green recovery needs the collaborative action and leadership these organizations can provide.
The future prosperity and livability of our country depend on the choices we make today. Canada must work together, act decisively and lead the transformation.
Upcoming Webinar for Foresight Companies: Resources and Discussion on COVID-19
In these times, it is important that we stay together and share available resources to the network. That is why we are preparing a webinar to discuss all available support and encourage an open discussion on key items and steps forward. Please join us:
Date: March 24, 2020
Time: 2:30 PM – 3:30 PM PST
Click HERE to register.
About the Author
CEO of Foresight Cleantech Accelerator
Jeanette is an experienced CEO, entrepreneur and business strategist with broad-based experience in technology, business development, marketing and operations. She is the CEO of Foresight, Western Canada’s largest clean technology accelerator. Since taking on the role, Jeanette has led the organization to secure funding for two new programs around technology development and scale up for member companies. She looks forward to collaborating with all partners from government to industry to investors to secure Canada’s position as a global leader in the cleantech sector.