By Emil Savov

Canada’s entrepreneurial ecosystem is bursting with potential and its innovators are developing groundbreaking ideas that could shape the future. Yet, despite our reputation for fostering talent, research and innovation, one critical piece of the puzzle remains missing: a sufficient pool of patient venture-capital investors.

Patient venture capital (VC) — the kind that allows startups the time to scale sustainably and globally — is not just a luxury; it is a necessity for Canada’s economic growth. Without it, we risk losing our most promising companies to foreign buyers, falling behind in critical industries and stifling the entrepreneurial spirit of our best minds.

Venture capital, by its nature, is risky and often requires a long investment horizon. However, driven by fundraising needs and other ecosystem dynamics, many Canadian VC investors feel compelled to prioritize shorter-term gains and tend to place their bets on technologies and business models that are more likely to produce quicker exits, typically in the software sub-sector.

For example, several climate-tech founders have said investors had encouraged them to turn their businesses into software product-oriented companies, according to a recent survey.

This has been understandable in years past, given the relatively small size and incomplete maturity of the Canadian VC ecosystem. The 2008 global financial crisis didn’t help either. Canadian VCs have spent the years since then focusing on surer bets and quicker exits.

To their credit, the federal and provincial governments stepped in and contributed to the rebuilding of the industry. As a result of these programs and other industry-led initiatives, many Canadian VC firms have indeed rebuilt and prospered.

Now that they’re more mature and established, they can afford to take longer-term bets. The time for patient investing is now.

Global competitiveness is increasingly being shaped by valuable intellectual property rooted in hard tech, also known as deep tech. It’s not easy to accomplish and can take a long time to develop. But the commensurate benefits are immense.

Taiwan is a great example. It began pouring effort into semiconductor research and development — the core of computing power — decades ago and is now reaping the rewards. Estimates peg the country’s global share of the market at north of 60 per cent.

That success brings to mind the lost opportunity of ATI Technologies Inc., a homegrown Canadian semiconductor company. ATI was the global market share leader in graphics chips with more than 30 per cent of the market before being acquired by United States-based Advanced Micro Devices Inc. (AMD) in 2006, a time when Nvidia Corp. was just an upstart.

ATI now represents the growth engine of AMD, which has since become the third most valuable semiconductor firm in the United States after Nvidia and Broadcom Inc.

A similar story is now unfolding with artificial intelligence. Despite Canadian innovators leading global research over the past few decades, the technology’s commercialization and benefits are now largely being realized elsewhere.

Talent mobility is an unavoidable global phenomenon that is beneficial to countries that know how to properly manage it. Canada is doing a great job of educating leading-edge scientists from all over the world, but our challenge is to retain them and create the conditions necessary to channel their innovative energies to develop world-class commercial products and sustainable Canadian-based businesses.

At the MaRS Investment Accelerator Fund (IAF), an important part of our mandate is to invest in early-stage companies that have the potential to become industry leaders in hard tech. But the problem we’re encountering is a shortage of like-minded co-investors and next-stage investors. The solution requires an entire ecosystem effort.

Patient investing in hard tech requires expertise and understanding of the underlying technologies. One of the best ways to accomplish that is to establish connections and relationships with universities and centres where leading-edge research is taking place.

As a recent report on hard tech finds, ventures and funders alike point to the importance of engaging individuals with deep scientific expertise who can understand the proposed technologies, gauge their viability and explain the potential impact if commercialized and scaled.

The IAF works closely with several partners, including leading universities in Ontario and the National Research Council Canada, to deepen our understanding of current hard-tech trends and to identify promising investment opportunities.

These connections have led us to invest in firms such as Toronto-based ForceN Inc., which is developing tactile technology for robotics; Nfinite Nanotechnology Inc., a Waterloo, Ont.-based company that is working on advanced packaging materials using nano-coating technologies; and Enurgen Inc., a University of Ottawa spinoff that is developing leading-edge solutions for the solar power-generation industry.

We believe companies such as these are creating valuable IP through hard tech that will translate into hard value. The Canadian VC ecosystem needs to create the conditions for more patient bets on such harder tech because it will ultimately provide defensible IP with sustained growth and value.

As individual companies and Canada in general establish leadership in these areas, they will be able to keep — and benefit from it — for a long time.

Emil Savov is the managing director of the MaRS Investment Accelerator Fund.

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