Province Allocates $9 Million to Québec Tech Amid Criticism of Government Spending

As the Québec government continues to implement its five-year innovation plan, some players within the ecosystem are questioning the financial strategy, criticizing it as a spendthrift approach. This criticism follows a recent $9 million direct support allocation to the non-profit organization Québec Tech, awarded on December 12 by the Ministry of the Economy, Innovation, and Energy (MEIE). The announcement capped off a tumultuous year for the MEIE, which saw the premature departure of Minister Pierre Fitzgibbon and staff layoffs at Investissement Québec (IQ).

Minister Christopher Skeete, who took over the innovation portfolio after Fitzgibbon's resignation, defended the financial aid, emphasizing the importance of government support for startups. "What scares [me] the most is not helping companies with government money, but instead taking Québec’s position in the world for granted," Skeete remarked.The $9 million funding is intended to support Québec Tech's mission of scaling up local startups and expanding their presence in international markets.

Québec Tech, previously known as Startup Montréal, has selected the first five startups to benefit from its Stage V initiative, which will provide both financial and operational assistance. The funds will be distributed through three main streams: trade missions in collaboration with IQ International, service contracts such as market intelligence reports, and specialized human resources support.

This funding, along with Québec Tech's rebranding and its new export-focused mission, is part of the provincial government's broader innovation strategy, which is pegged at $22.5 million. The initiative, originally introduced under Minister Fitzgibbon, aims to position Québec’s startups for international competition. Skeete took to LinkedIn to defend his ministry’s approach, emphasizing that Québec companies cannot compete on a global scale without substantial government backing.

“To be a world-class company, you must have the best technology. How could a Québec-based company rival a foreign company that produces more, for less money, at a global scale? The answer is it cannot, without help,” Skeete stated in a French-language post, stressing the necessity of governmental support to ensure local businesses can compete internationally.The amount of provincial aid provided to startups and small business support programs in Québec has significantly increased under Premier François Legault, with over $15 billion allocated in loans, subsidies, and direct investments since he took office in 2018, according to a recent analysis by Journal de Montréal.

This figure represents a 67-percent increase compared to the previous government. However, the bulk of this funding has gone to large corporations, particularly through direct equity investments and subsidies, rather than programs focused on aiding small businesses or early-stage startups. This shift in focus has drawn attention, with some founders on LinkedIn pointing out that at least five key government programs supporting small businesses, such as the Impulsion PME investment-matching program, were reduced this year.

Richard Chénier, a startup founder, acknowledged the government's role in supporting the ecosystem but questioned whether the level of investment was sufficient. “Is the amount invested by our government sufficient for our ecosystem? Probably not, but it would be anemic without them so it does make a difference,” he said, emphasizing that while the funding may not fully meet the ecosystem's needs, it is crucial for its survival and growth.

Some founders, like UFrost CEO Julien Michalk, strongly support direct government funding, especially for hardtech companies that face high costs in the early prototyping stages. Michalk noted that government programs have become "mandatory" in the absence of robust private sector participation in local innovation. He and Chénier both pointed out that the lack of private investment in Québec’s innovation chain has placed much of the burden on the government to support startups through their early phases.

On the other hand, some members of the tech industry, like Eric Boyko, founder and CEO of Stingray Music, suggest that a more business-friendly approach could be an alternative. Boyko, although ambivalent on the matter, argued that a "capitalist libertarian" approach would involve eliminating subsidies and cutting taxes for businesses, encouraging entrepreneurship through reduced government intervention rather than direct financial support.

In response to growing discussions about government aid to businesses, Innovation Minister Christopher Skeete defended the Ministry of the Economy, Innovation, and Energy's (MEIE) financial support for companies in a recent LinkedIn post. He emphasized that international competition is a primary reason for this support, noting that without government intervention, many companies could fail, leading to job losses and economic downturns in certain regions. However, Skeete stressed that the government must exercise "prudence and respect" when spending taxpayer money while ensuring Québec remains competitive on the global stage.

David Bordeleau, CPO and CTO at Eugeria, voiced concerns in a LinkedIn comment about the practicality of government aid programs. While a wide array of programs exists, Bordeleau pointed out that they often offer small amounts of funding but require substantial paperwork. He noted that entrepreneurs could spend considerable time navigating various incubators, accelerators, and municipal, provincial, and federal programs. "Not to mention that some programs shut down during the process or an innovation falls through the cracks of the criteria," Bordeleau wrote, highlighting inefficiencies that could hinder startups from securing the support they need.

In a November interview with BetaKit, Skeete acknowledged the need to increase private-sector investment to better commercialize research developments and enhance Québec's productivity. Data from Réseau Capital revealed that Québec’s funding landscape is "bimodal," with both public and private investment increasing, although the province has historically relied more on public funding compared to other provinces. This reliance on public investment was reflected in the decline of Québec’s share of private investment, which dropped from 60 percent to 52 percent in 2023. This shift, according to Réseau Capital, is tied to a downturn in overall funding levels.