Everyone wants to play in the NHL
Playing in the NHL and winning the Stanley Cup (the elite of the elite) is the dream of every Canadian youngster playing hockey from St John’s to Victoria. We are a nation whose single minded sports obsession is hockey, hockey, hockey. For a relatively small country in the global scheme of things Canada hits well above our weight in terms of excellence in hockey. The hockey ecosystem and development of talent are world leading. I think there are a lot of similarities between how Canada has developed into a hockey superpower and how businesses go from idea to IPO.
The hockey analogy explained
I first introduced the hockey analogy back in 2008 as a way to compare the relative skill level of professional athletes with founders of startups. Since then I have chatted with a lot of really smart people regarding the concept and it has evolved and continuously improved. The principle theory behind the hockey analogy is that elite entrepreneurs possess a set of skills in the business domain comparable to the skills of professional athletes. You can think of the talent pyramid for business skills as a very similar distribution to the talent pyramid for professional sports.
Winning the Stanley Cup is the greatest achievement in the sport of hockey, which would be roughly equivalent to going IPO for a startup. Playing in the NHL or taking a company from idea to IPO are remarkable accomplishments and the number of people that can play a leadership role at that calibre of “game” are very few and far between. In 2013 there were 679 North American players in the NHL from a population pool of approximately 350,000,000 (those that play hockey would be a subset of the 350M but, you get the picture). The odds you will play in the NHL or be the CEO of a company that goes from idea to IPO are incredibly remote.
Playing in the NHL and high growth startups
Canadian business policy, innovation policy and government supports are provided for the elite levels of play through the Canadian Venture Capital Access Program and Canadian Accelerator Incubator Program which have a “money and mentor” type accelerator model for the more advanced startups. These initiatives are intended to move talent from Elite to Super Elite. The movement of teams up the skills development pyramid is an important and essential dynamic (Talent Flow) that warrants support.
What about the base of the pyramid or the incubator farm teams?
What about the average entrepreneur that wants to move from the base level of the entrepreneurial pyramid (hobbyist or part-time) to competitive (full-time)? Access to working capital for the majority of entrepreneurs entering or looking to start a business is much more limited. In terms of broad based access to working capital there are very few options (IRAP and SRED for tech startups are excellent programs) for micro businesses or entrepreneurs at the base of the skill pyramid that want to step up their game to the next level. A broader, richer base of the skills pyramid improves talent flow for all levels of play. Currently there are very few options for entrepreneurs looking to move from hobbyist to professional entrepreneur.
Ecosystems are built from the bottom up
If you are not broadening the base of the skills pyramid then the entire ecosystem will suffer. At the higher levels of play talent flow up the pyramid is key to success. There are advantages to have more and deeper talent pools in the lower levels of the pyramid. A narrow base on a skill level translates into less deal flow and fewer opportunities for the more competitive levels. To build a deep and sustainable skills pyramid and ecosystem means there are lots of new entrants moving into each level of play and up the skills pyramid from each level to strengthen the more competitive levels of play above them.
Building the base of the skills pyramid
There are two policy initiatives I have been promoting that help provide better access to working capital for early stage entrepreneurs; primarily the ones looking to move from the hobbyist to professional level of play:
1) Tax free cashing of RRSP by founders to fund their business.
2) A CSBFL (Canadian Small Business Financing Loan) like program for broader access to working capital.
Building the base of the skills pyramid requires more accessible options for entrepreneurs to fund their business at the competitive level and better access to working capital. The broader the base, the deeper the talent pool at each skill level. This translates into a better, deeper, talent rich and more competitive entrepreneurial ecosystem for Canada.
– Ian Graham