As Silicon Valley Eyes Toronto, Some Worry Tech Boom Could Hurt Canada

Earlier this month, Microsoft Canada announced it is relocating its headquarters to downtown Toronto. Soon after, computer chip giant Intel said it would be opening a graphic-chip engineering lab here. Then Uber revealed plans to build a $200 million software-engineering lab in the city and to expand a research centre for self-driving cars that it opened last year.

Samsung, LG, General Motors and Google's parent company Alphabet have each revealed big projects in Toronto, and the city made the shortlist for Amazon.com's second headquarters.

Toronto added more tech jobs in the past five years than anywhere else in North America, according to a report from the CBRE group, a corporate real estate and investment firm. Asked why Microsoft Canada is making the move from a nearby suburb, President Kevin Peesker pointed to the city's status as a "hotbed of innovation."

But the flurry of announcements is also intensifying a debate about how to ensure Canadian companies can also flourish and become global dynamos.

"Do we want to own something, or do we want to be a branch plant economy?" asked Bruce Croxon, a Canadian entrepreneur and venture capitalist, on Canada's Business News Network. "Let's make up our minds."

Canadian Prime Minister Justin Trudeau campaigned on a promise to leverage the country's position as the home of major pioneering advances in artificial intelligence and machine learning to build up its tech sector, which is still haunted by the ghosts of foundering Canadian firms such as Nortel and BlackBerry.

In 2017, his government earmarked $125 million (roughly Rs. 900 crores) for a Pan-Canadian Artificial Intelligence Strategy. That same year, it set aside nearly $1 billion (roughly Rs. 7,200 crores) for the creation of five innovation "superclusters" - areas of concentrated research and development designed after Silicon Valley - though more than one year later, the funding still hasn't been issued, according to a report from the Logic. It also introduced a two-week, fast-track visa that prioritises highly skilled workers and entrepreneurs.

The visa has been "a great help," said Graeme Moffat, the vice president of regulatory affairs and chief scientist at Interaxon, a Toronto-based company that specializes in high-tech wearables, and a senior fellow in public policy at the University of Toronto's Munk School of Global Affairs and Public Policy. His first hire using the visa system begins next month and is a "world-class" researcher he might not have been able to bring aboard otherwise.

All of this was part of a pitch Trudeau made on a visit to Silicon Valley earlier this year, as part of an effort both to court tech firms and to woo Canada's best and brightest - who have for decades decamped for the lucrative salaries, flowing venture capital and T-shirt weather of Silicon Valley - back home.

As many as one-quarter of Canadian research graduates in science, technology, engineering and math are working outside Canada, primarily in the United States, according to a study released earlier this year.

But Paul Teshima, the co-founder and chief executive officer of Nudge.ai, a Toronto-based start-up, said he has seen the brain drain slowly reverse, especially since 2000, when he co-founded Eloqua, a pioneer in email marketing that was acquired by software giant Oracle for nearly $1 billion in 2012. He doesn't think it's a bad thing.

"You have second- and third-time entrepreneurs sticking around and not going to the Valley, and in some cases, coming back from the Valley and starting their start-ups here" with new skills and impressive business networks, he said.

But many worry that the mere presence of foreign multinationals in Toronto will syphon away the talent from homegrown firms, which will struggle to scale up and end up cashing out to a foreign buyer.

Canada historically has a "mixed" record in "building local successes into global powerhouses," according to a 2018 report from David A. Wolfe, a professor of political science and co-director of the Innovation Policy Lab at the Munk School.

"Promising start-ups all too often end up either moving to the U.S. or being sold to foreign (usually US) investors," the report says.

Even if foreign multinationals poach Canada's top researchers for their Canada-based operations, Canada still misses out, experts say, because it is the foreign firm that retains all of the intellectual property and can commercialise it.

"Canada is very naive on intellectual property," Moffat said. "We have a nice-guy business culture and [intellectual property] is undervalued and underestimated."

Trudeau has noticed, even as he has courted foreign firms. At this year's annual conference for e-commerce giant Shopify, a Canadian success story, he said Canadians should have "a little more swagger" when promoting their innovations, lamenting how susceptible they are to foreign investors.

"We need to do a better job of generating that capital here," he said.

© The Washington Post 2018