The Future of Entrepreneurship | George Rossolatos, Canadian Business Growth Fund

Entrepreneurs are the lifeblood of the Canadian economy, and often we refer to these types of companies as SMEs, which are companies under 500 employees. They represent 99% of all Canadian companies. They represent 90% of all jobs in the private sector. And SMEs accounted for 85% of all net new jobs created in Canada last year. I think entrepreneurship is more important today than it was 10, 15, 20 years ago. I think the percentage of new employment that's created by SMEs is higher. In the past, large corporations seemed to be the ones that were delivering innovation. Now it seems to be the smaller companies. And with social media, and with technology, and with the cost of starting a new firm, the ease of starting a new firm changing quite a bit in the last decade, it seems that a lot of our innovation now is coming from our SMEs. It's really important for starting a firm to be relatively easy in an economy. And not every firm is going to hit and become a success story. And as you know, the failure rate of entrepreneurs and new ventures is quite high. And in fact, the ease of starting a new firm in Canada is one of the highest in the world. And our job at the Canadian Business Growth Fund is to back ones that have scaled. And the ones that can rise to the top of that startup group that now are ready to scale nationally and internationally, those are the companies that we really need to scale in Canada for maximum impact. There's absolutely a gap for our entrepreneurs in scaling their companies. And at the Canadian Business Growth Fund, we see the gap. We call it the growth capital gap, but it has several components. It's not just capital, although capital is an obvious gap that they've got. Patient minority capital that can fund them over the longer term that doesn't need an exit early is really important. Because too often our bright young companies are selling too early. But with that capital, they also need guidance and support and mentorship because a good small company CEO doesn't instantly become a good big company CEO. They need help and mentorship along the way. I think that Canadian companies do need to think bigger. I think there are many that have an opportunity to expand nationally and internationally and don't take that opportunity to do so because of constraints that they perceive. And one of the constraints is capital. They don't believe that they can raise patient minority capital because they don't want to give up control of their company to do it. So often they are bootstrapping their business and not taking outside money because they do not want to give up control. But there are solutions, like what the Canadian Business Growth Fund can provide, that can provide them the capital they need while they still retain control of their company. They often need guidance and support. They're sometimes worried and trepidatious about venturing out to start an international segment to their business without the support. And we try and do that at the Canadian Business Growth Fund and bring them mentorship and guidance and the right advisors at the right time. And I think lastly, they do appreciate a Made in Canada solution that helps them do that because while they are thinking about expanding, whether it's nationally or internationally, they would like a Canadian partner that understands the challenges that they're facing here. The origin of the Canadian Business Growth Fund is quite interesting. The government actually helped form this private sector fund. Back in 2016, the government formed an Economic Advisory Council made up of very high-profile Canadians that had an interest in helping Canada become more competitive, helping Canadian businesses thrive. And they were challenged with the task of coming up with a series of recommendations on what we can do in Canada to accomplish those goals. And one of those recommendations alluded to a growth capital gap, that we were quite good at starting firms, we're quite good at selling firms, but we're not so good at growing them from small to big. One fact that that report alluded to was the number of Canadian global leaders is down 40% in the last quarter century. And we want to solve that as a Canadian Business Growth Fund. And that Economic Council recommended a growth capital solution, and they asked that the Canadian banks come together in an evergreen fund that doesn't have an end, that can back companies for 10, 15 years or longer. Our goal is to find entrepreneurs that have ambition, that have great companies, that have an opportunity to expand them and scale them, and to help them meet their scale-up challenge. And that is with capital, with guidance and support, providing a talent network to them that they didn't otherwise have access to, and bringing the support of our financial institutions, 13 of them to the table, that have a broad reach. The CBGF is investing across the country. We're based in Toronto, we've invested across the country, we've invested in Kelowna, in Victoria, in Saskatoon, in Burlington. We're working on transactions in Halifax, Edmonton, Calgary. Eventually we'd like to have an investment in every province, and we think that we want to distribute entrepreneurship across the country and back great entrepreneurs that we're meeting across every province. We're helping them grow with the capital, with the right advice at the right time, with the Made in Canada solution, and we're bringing partners to the table as they need it. We've placed a chair for one of our companies, we've introduced another one of our companies to a CIO of a major multinational corporation. We can add value, we can help, and I think that if we keep doing this in the form of 8 to 10 investments in great entrepreneurs every single year, year in and year out, in an evergreen format, we're going to make an impact and we're going to see a number of companies that become national and international successes that wouldn't have otherwise been had we not been the investor. And that's our ultimate goal. Canadian Business Growth Fund is a sector agnostic fund. We look at any sector that is growing, whether that growth is 15% or 50%, it's still a growth part of our economy and can be fostered and will create jobs and will create opportunity for people. So I think that we're careful not to only focus on the high-flying companies in Canada. There are companies and industries that are growing at 15% or 20% of the year that are constantly adding and constantly creating, constantly innovating, that I think are underserved. And our goal is to equally serve both ends of that spectrum. When you open the front page of the paper, you see AI, you see certain technologies, you see cryptocurrency, you see cannabis. Those are the companies that are attracting capital, that are the ones that many firms are up here from abroad and domestic that are chasing. But the majority of job creation in our country comes from growth of SMEs that aren't on the front page of the Globe and Mail. And we're investing in all those businesses, from retail to distribution to manufacturing to media to auto collision repair. Those are companies that are growing, that are the lifeblood of our economy. And those SMEs are creating 85% of our jobs and the vast majority of them aren't the ones that you read about every day. A lot of investors in the venture capital world have three to five-year horizons sometimes to take their company from a certain level to the next level and then they sell to a strategic. And often, 80% of the time, venture capital firms are selling to foreign buyers. And with the CBGF, we're an evergreen fund. We don't have that cadence. We never have to force a company to sell in a non-optimal manner. And we'd like to see them grow for 10 years or 15 years and create the next great Canadian companies that stay here, that are headquartered here, that build from here. I think it's important we have Canadian businesses headquartered here. We do not want to be a branch plant economy where decisions are made elsewhere and we have workers reporting to those in other countries. I think having more Canadian companies that grow and scale, where the mind and management is here, where we can attract not entry-level talent but senior-level talent, attract and develop the heads of sales and heads of marketing and CEOs and CLOs. It's easy for someone to say there's a talent gap in Canada, but it's a lot harder to create the right pipeline of people and the capabilities to fill those positions right here in Canada. And the way we do that is keep more companies here longer and have them grow over the longer term. There are many stakeholders that are crucial in helping our small companies get bigger. The obvious ones are the entrepreneurs themselves, investors, advisors, government and the policy that's implemented by government. Obviously there's a government role to be had here, but it's not always the obvious answer. Some companies we meet have a talent shortage. They need to figure out how to attract talent. Obviously some will talk about taxes and some will talk about the ease of starting a new company. Some will talk about red tape. Some will talk about inter-provincial trade. Some will talk about the ease of exporting, ease of importing products and supplies. So I think the important part is to have these SMEs at the table. And often we bring together round tables, we bring together large corporations, we bring together economists and elected officials, but often we're not bringing the SMEs to the table. And because their needs are so diverse and because it's not a catch-all group of needs that they have, I think we need to bring them to the table and listen to what their needs are across the country. As a society we do need to help foster entrepreneurship and often those of us that aren't entrepreneurs are not as supportive of the entrepreneurs as we should be. Being an entrepreneur is very difficult. There are many sleepless nights. The hours are long. There's a lot of uncertainty. Family members can suffer as a result. There's a huge commitment. There's travel. There's fundraising. There's making payroll. And sometimes we don't appreciate what a challenge that is. And I think it's on all of us to foster that and encourage the entrepreneurs we know in our lives to push forward and to work through their challenges and listen to them when they're having issues and encourage them. Not everyone can be an entrepreneur, but everyone can be an entrepreneur thinking about entrepreneurship in their organizations and fostering that spirit of furthering innovation and making ourselves better and making our companies better. So I do think in Canada we need to raise our awareness of the importance of entrepreneurship and raise the level to which we encourage them to pursue their path. I'm George Rosolatos and this is my future economy.