Canadian startups regularly encounter roadblocks with university technology transfer and government procurement processes that are hurting the companies’ ability to grow and stay in Canada, say startup founders and CEOs.

University tech transfer in Canada lacks clarity and standardization while government procurement processes are complex, lengthy and biased toward the lowest bidder, they said during a Council of Canadian Innovators webinar.

“Our experience selling into the public sector in Canada has been a long and frustrating one,” said Adrian Schauer (photo at right), CEO and founder of AlayaCare, which provides software for homecare delivery.

“I would not describe the procurement processes as being very welcoming to younger, growing companies – and in general, not tilted towards local companies,” he said.

Since health care falls under provincial jurisdiction, most of AlayaCare’s sales efforts focus on provincial public health authorities.

“They are very uncoordinated. There are different challenges in different provinces,” Schauer said. “In general, my experience with the public sector is that there has not been a lot of risk appetite.”

The traditional procurement process isn’t oriented toward finding the best solutions for problems, he said. “It’s very much in-the-box, rigid RFPs (requests for proposals).”

“And then even when we succeed in convincing our prospective buyer that we’re the solution they want and there’s ROI (return on investment) to procure, either [the buy is] blocked or there’s a very formal process that if we’re underbid by a dollar, then that low bidder gets the deal regardless of the long-term potential for the partnership.”

There is no transparent pathway to procurement for startups with innovative technologies and there are numerous hurdles along the way, said Dr. Karen Cross (photo at left), innovator in residence at Nova Scotia Health and CEO and co-founder of Toronto-based MIMOSA Diagnostics. The company offers a handheld skin-imaging device that looks beneath the skin to detect injuries not seen with the naked eye.

When it comes to new medical devices, Cross said that hurdles range from a costly process to secure Canadian certification for a new device – even when that device has received international certification – to the inability of university research hospitals and other organizations that supported the technology development to actually buy the solution.

“We’ve got to have standards [and] transparency, but we have to complete the cycle” by enabling organizations to buy the made-in-Canada solution, Cross said.

Academic researchers and medical device startups in Canada face an attitude where “industry is bad, health care is good. [We] have this dichotomy that we have to break down,” she said.

In contrast to the approach in Canada, she pointed to Stanford University where medical students are required to have a commercialization project for academic credits.

Commercializing academic research is valued, she noted. “If you become on staff there, they want your commercialization plan.”

“It’s not just how good you are as a technical person or an academic, it’s ‘What are you going to commercialize and how are you going to benefit society?’”

But in Canada, if a small startup is working with a health authority and finds out it doesn’t meet the authority’s cybersecurity requirements – whether they’re advanced or not – “you might as well just stop [the collaboration] because it’s not going to work,” Cross said.

“But you don’t know that until you start the process and then you’ve wasted a lot of time and engagement” that could have been resources elsewhere, she added.

Multiple and conflicting government standards for medical technologies

Another problem medical/health startups encounter is meeting the various federal and provincial standards, including for certification of medical devices that can be used across provinces.

Cross said her company decided to seek certification for its device from the U.S. Food and Drug Administration (FDA) first before seeking Health Canada’s approval. “We knew the FDA was going to be faster, easier and less expensive with more upside.”

Also, with FDA approval, MIMOSA’s technology would be accepted in many other countries across the world, she said. “We could easily get through a regulatory pathway.”

Despite having FDA certification, MIMOSA was still required to get Canadian Standards Association certification, an add-on process Cross called “not helpful” and which can cost a small startup with no revenue $80,000 to $100,000.

Under the current system, health technology assessments, approval protocols and adoption of health/medical technologies in Canada are notoriously slow. Research shows that even in a best-case scenario, getting a new device from lab to bedside takes more than a year while in practice many devices languish for several years before receiving approval.

“We’ve had a lot of barriers in Canada where [the commercialization and regulatory approval process] was just shut down right [at] the door,” Cross said.

“[With the] young companies that we’re trying to develop, the health system has to understand we are not the big global multinationals,” she said.

Hospitals and other organizations in Canada’s health care sector need a guidance document on what certification is acceptable for new medical devices and other medtech innovations, Cross said.

“Let’s actually look to see what we would accept [for certification] that’s outside our own country as acceptable in the procurement pathway,” she said.

Schauer said having to meet different interoperability standards and certification requirements in different provinces amounts to “just no value-add overhead to our business.” Canada needs national standards that are aligned with international standards, he said.

He credited Health Canada for advancing non-profit Health Level Seven International’s Fast Healthcare Interoperability Resources (FHIR) standard – which is now emerging as the international standard for exchanging health information.

The standard aims to enable the secure and efficient exchange of health data between different computer systems. FHIR uses a modular, resource-based approach, leveraging modern web-based technologies for interoperability. 

“If we’re procuring [based] on an international standard, we’ll get the best possible solutions,” Schauer noted.

Webinar moderator Laurent Carbonneau (photo at right), director of policy and research for the Council of Canadian Innovators (CCI), pointed out that the CCI in its recently released Mandate to Innovate report is calling for recognizing standards as an equivalent layer of governance to regulations, because regulations once in place are rigid and very difficult to change.

When it comes to technology transfer, Cross noted that innovative Canadian companies are among the leaders in changing the way medical imaging is done.

But often the technology transfer process of moving the innovation out of the university lab and into a commercial product doesn’t look at the final outcome, she said, adding “you’re not quite set up at the beginning for success.”

University tech transfer offices need to be standardized, be staffed by people who’ve delivered commercial products in various sectors, and be enabled to come full circle in purchasing the innovative products, Cross said.

“Our technology came out of a university academic health centre, but that centre has no capacity to purchase this technology yet,” she noted.

Schauer said he was involved in a medical device company that was spun out of academic research at the University of Toronto.

“I was negotiating with the tech transfer office there. It was a tough experience,” he said.

Laurent noted that he has heard from innovators that it’s difficult to even get a sense of the tech transfer landscape. “Every university does things differently. Every province does things differently.”

Cross and Schauer both urged Canadian university research hospitals’ tech transfer offices and similar offices at research universities to look at modelling themselves on organizations in the U.S. that do tech transfer effectively and successfully.

Government and health care facilities’ procurement processes are fragmented

One of the biggest problems in Canada’s health care system is procurement processes that are often fragmented across provinces and territories, leading to inefficiencies, duplicative efforts, and inconsistent sourcing strategies, according to an article by Frank Fortino, a principal and managing director at Toronto-based Stratifi, a technology and management consulting firm.

This fragmentation can hinder economies of scale, resulting in higher costs and prolonged lead times for essential supplies.

Despite advancements in technology, many health care facilities in Canada still rely on outdated systems for supply chain management, Fortino said. Legacy software solutions lack the agility and integration capabilities needed to streamline processes, track inventory in real-time, and facilitate data-driven decision-making.

Any new U.S. tariffs or export restrictions could threaten Canada's access to key medical technologies, supplies and components, according to a blog post by PolyUnity. The St. John’s, Nfld.-based company offers a digital platform that enables health care providers to design, access and produce 3D-printed parts and products they need, on-demand.

The U.S. remains Canada's largest supplier of medical devices, accounting for over 42 percent of imports in 2022 – valued at more than US$3.2 billion, PolyUnity said.

“Disruptions to this flow, whether from tariffs or export controls, could significantly affect availability and affordability in Canada,” the blog post said. “These risks further underscore the need to bolster domestic production and diversify procurement strategies.”

“Smaller companies and startups are often seen as risky choices in public healthcare procurement – but the real risk may lie in sticking with the status quo,” according to PolyUnity.

Schauer pointed out that a dollar of investment is just that – a dollar that can be invested. But one dollar of procurement can be leveraged into $10 of investment, he said.

“If there’s a dollar that goes to a Canadian innovator, startup, scale-up, whatever, that dollar is a purchase,” he added. “I can raise money on my growing top line. I can turn that into $10 of equity to help grow my business.”

The CAN Health Network was created to connect health care institutions with Canadian tech companies and help them validate and procure local innovations.

The Ontario government’s 2024 budget also introduced a $12 million Health Technology Accelerator Fund to speed up adoption of new tools from Ontario-based firms.

Cross called CAN Health a great initiative, but one that also struggles with identifying a clear pathway to procurement.

“You might get through a procurement pathway only to discover that your potential purchaser doesn’t have the sufficient budget. It’s really a critical part of what drives the procurement pathway,” she said.

Carbonneau said the Council of Canadian Innovators is advocating for integrating procurement into a national, unified public market. “Procurement can create markets for solving these problems, and markets are really good at solving tangible problems for which there’s a prize at the other end.”

Canadian innovators need access to talent, customers and capital

Carbonneau also pointed out that Canada is the world’s third-largest exporter of inventors after China and India. “We’re losing a lot of our top research talent, our top management talent.”

Canadian innovators need access to talent, customers and capital and be supported by smart regulatory frameworks, he said. “We need to grow high-growth firms here in Canada.”

Cross said Canada needs to do a better job at promoting – both in Canada and abroad – the value of being a Canadian company, innovating in Canada and growing a company in this country.

“What we have [in Canada] is unique and it can bring people here,” she said.

Health care technologies can be applied to other sectors such as the military, both the active military and veterans, Cross said. “In the U.S. I am approached almost every month by someone from the U.S. military who wants to offer me a grant to do X, Y, Z.”

“I’ve never talked to anybody in the Canadian military because it’s [lack of connections] to pathways and how do you get there?,” she said. “In the U.S., they’ve really set themselves up for success in how they grant and buy.”

Schauer said when it comes to policy, there’s a big opportunity for Canada to use its abundant natural resources to ensure more of the value-added activities happen here rather than in other countries.

 Also, the whole narrative around innovators and wealth creators in Canada needs to change to everyone’s benefit, he said. “After a certain level of wealth, people should be applauded for putting the chips back on the table for others to have opportunities.”

Talent and capital are mobile, Schauer pointed out. “If we want Canada to be a destination where entrepreneurs build world-beating tech companies, it has to feel welcoming.”

“I think [of] the celebrating of success that happens in the U.S. that sometimes does not happen in Canada. I think there could be a top-down narrative change that would be very helpful, not only in attracting people here but convincing existing Canadian entrepreneurs not to be tempted to pick up their pail and go play in another sandbox.”

Cross urged more investment and promotion of Canadian entrepreneurs and innovative companies. “You need to invest in your local ‘currency,’ which is your people, your talent and your innovation.”

Given the current trade tensions and geopolitical uncertainties, Cross said, “We have a real opportunity right now [in Canada] to change this story.”

Canada needs to redevelop some of its industrial and innovation capabilities that are going to safeguard national security and protect Canadians' standard of living in the long run, Carbonneau said.

 “Innovation really is the foundation for prosperity and prosperity is really what underlies our security and our sovereignty in the 21^st century,” he said. “You really cannot have a safe, secure and prosperous country if you don’t have an innovative economy.”

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