Opinion: Our capital markets need to start looking for Canadian SpaceX’s

SpaceX has rewarded those who believed in big ideas. Canada is full of such ideas right now, too. Our lenders should not be watching from the sidelines. Photo by ANGELA WEISS/AFP via Getty Images

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The most important thing to be gleaned from the SpaceX moment we’re living through is not the supposed injustice of finance. It’s to understand how this series of mega-transactions reveals where value actually lives in the modern economy.

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The assets that compound fastest today are not oil, real estate or factories full of machinery. The fastest-compounding asset is intellectual property, which is based on the capacity to imagine something that does not yet exist, protect it and build an enterprise around it. The future belongs to whoever stops considering the present as the ceiling.

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The real question worth asking is not why SpaceX’s founders have made so much money. It is: what are we doing to make sure the next chapter of this story can grow in Canada and stay here as it grows?

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Canada’s investment culture has been slow to absorb this insight. Unlike American lenders, who are willing to put a stake in a future trip to Mars, ours remain more comfortable lending against a warehouse or funding the extraction of a physical resource instead of the development of an intellectual one.

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The result is that founders building important new companies in this country are systematically starved of the growth capital they need at precisely the moment their assets are most valuable. Foreign investors see this. We lament that our founders look to the south for investors, but often they don’t have much choice.

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Our domestic investment community has not yet updated its lens for the economy it is actually operating in. Foreign investors have. Canadian ones need to do the same.

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As a country, we need to shift our focus from envy to opportunity. This doesn’t mean pouring taxpayers’ money into new-economy companies. The companies generating world-class ideas in artificial intelligence, health technology, clean energy and data platforms are not charity cases requiring government handouts or guidance. They are long-term assets that — in this country’s capital markets at least — are systematically undervalued.

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SpaceX will have its ups and downs (no pun intended) but right now it has rewarded the people who believed in big ideas before the rest of the world caught up. Canada is full of such ideas right now, too. Our lenders should not be watching from the sidelines.

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Our problem is not at the startup stage. The companies that need greater support are at scale-up stage — firms with $10 million to $100 million in revenue that are too large for startup programs and too asset-light for traditional bank lending. We need private finance to step up and take a risk.

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I write from experience. Over 25 years I built two technology companies in Canada — AskingCanadians and Methodify — without relying on venture capital. But in 2021, after we had reached a certain size, I sold both to a U.S. buyer. There was no comparable alternative available in Canada that would enable our companies to scale up and grow.

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The IP left. The compounding value left. And many of the jobs left, eventually following the capital. I did well. But in a big way, I feel that Canada deserved better.

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I wasn’t alone. Between 1998 and 2017, the share of Canadian patents transferred to foreign entities climbed from 18 per cent to 45 per cent. It has only accelerated since then.