New report card puts B.C. tech sector at the top of the Canadian class, but talent and scale challenges remain

The latest British Columbia technology report card contains plenty of good news for the province's tech sector, but there is room for improvement

Credit: Courtesy of the BC Tech Association

BC Tech Association president and CEO Jill Tipping

As the BC Tech Association seeks to help companies grow, president and CEO Jill Tipping wants technology businesses that sell to hold out for a higher price

Waiting for a report card can be stressful—especially when it takes two years. But as it turns out, the latest British Columbia technology report card contains mostly good news for the province’s tech sector.

Professional services firm KPMG and the BC Tech Association have joined forces to present the biennial survey, whose fourth edition is subtitled From growth to scale, since 2012. Once again KPMG gives our tech sector an A for economic performance compared to other B.C. sectors—and, for the first time, versus its counterparts across the country, too. For the latter, that’s a big gain from a B in 2016 and a C+ in 2014.

But as with so many report cards, there’s room for improvement. When it comes to so-called sector input indicators—talent, patents, capital, and research and development spending—B.C. tech gets a B– compared to its peers in other provinces, the same mark as in 2016. The combined grades relative to other B.C. sectors and its fellow Canadian tech sectors: A and B, respectively.

A question of talent
“The reasons for the B on inputs are quite a few different things, but the biggest one is the talent shortage,” says Jill Tipping, president and CEO of the BC Tech Association. “Whether you’re a startup or a medium-sized company or a really huge company, nobody’s able to get as much talent as they’d like as quickly as they’d like it.”

To help solve that problem, B.C. must “put more funding into post-secondary education for tech-relevant degrees, which includes but isn’t limited to computer science or engineering,” Tipping says. “It’s making sure that we’ve got computational thinking and technology awareness in all sorts of qualifications,” from sales and operations to supply chain and finance, she adds. The means “quite a lot more work around both funding the right numbers of places and the right kinds of skills, and making sure that the skills that people are trained with are really relevant to the industrial needs.”

Anchor companies needed
As the report card points out, the B.C. tech sector consists of more than 10,000 companies generating some 106,000 jobs in the province and more than $17 billion in gross domestic product. On average, those jobs deliver annual pay about 84 percent higher than the provincial average. Although the vast majority of B.C. tech companies have fewer than 10 employees, 2014–16 saw 19-percent growth in the number of medium-sized businesses, those with 20 to 49 staff.

That’s an encouraging sign, but the sector must address its lack of so-called anchor companies—big players like Vancouver-based Stemcell Technologies. The report card shows that the B.C. tech sector has a relatively low rate of patent applications and investment in R&D, partly because the province is home to so many small businesses, Tipping says.

“Small companies struggle to invest as much in R&D as large companies,” she explains. “It’s only by creating larger-scaled companies that we’ll actually start to be in a position where the tech ecosystem is strong and thriving, but also that we’ve got companies with the capacity to buy technology solutions and invest in R&D.”

From HyperGrowth to HyperScale
B.C. does a great job of creating incentives for small and startup companies, Tipping says. “But there’s some things that we do that don’t create an incentive to grow,” she notes. “Some tax credits that you stop qualifying for once you get to a certain stage, or certain grants that you stop qualifying for if you have more than 100 employees—that kind of thing. So we’ve got some policy recommendations where we’re saying, Why are we putting a cap like that on it? Is that the biggest we want anyone to get?

BC Tech, whose policy platform is slated for release at the end of January, runs a program called HyperGrowth that helps early-stage startups grow to late-stage ones. In January, it’s launching a pilot of HyperScale, which will assist companies aiming to expand from $10 million to $100 million in revenue, Tipping says.

To that end, BC Tech is seeking federal and provincial funding to make it a provincewide effort, she adds. “We’re fairly excited that that will help us both provide direct services to a small number of companies, and a larger number of companies if we can roll the program out more fully. But also it’ll really help us learn about what are the real barriers to scale and what are the solutions.”

Scale before you sell
B.C.’s tech sector ranks first in the country for economic expansion over the past five years, with a 7.3-percent compound annual growth rate, double the national average. But in absolute terms, it posts lower revenue than its Ontario and Quebec counterparts, the report card observes.

“We’re not too bad relative to the size of our economy, but it’s this piece around what’s the typical size of a tech company,” Tipping says. For her, the question is how to help B.C. tech businesses scale and create value before the owners cash out. “Take that risk and embrace that challenge, because the products are good enough—that’s why people want to buy you,” she says. “I’ll never tell someone they shouldn’t sell their company, but I’m frustrated at the price at which we sell.”

In a world where every company is now a tech business in some way, Tipping wants the sector to empower others. “We’ve always been the voice of the tech industry,” she says of BC Tech, which is celebrating its 25th anniversary this year. “Increasingly we want to focus our attention on the economy as a whole and help every industry understand how technology can help them improve their business.”