RJCCQ study | Young Quebec shoots mistreated

Two-thirds of Quebec seedlings will die before reaching five years of existence, twice as many as in the rest of Canada. Mostly faced with financing difficulties, with little international presence, they urgently need a government boost, concludes an unpublished study by the Regroupement des jeunes chambres de commerce du Québec (RJCCQ) which will be published this Thursday.

This study was conducted last fall with 28 start-up Quebecers who find themselves in what is considered “the valley of death”, the period between two and five years after the foundation. While 75.4% of new businesses in Quebec survive their first year, only 35% after five years, compared to 67.9% in the rest of Canada.

More than half of young Quebec businesses, or 53.8%, admitted having difficulty obtaining financing. Barely 30.8% make international sales. And they rely much more on their own means, their sales as the main source of income in 53.8% of cases, than on subsidies (15.4%) or bank loans (11.5%).

“Dreadful Cocktail”

The weather is not good for young Quebec shoots, says Pierre Graff, CEO of the RJCCQ. “I have never seen so much concern in my discussions with entrepreneurs. Their prospects have completely collapsed. He notes that “for the first time”, according to a Mentoring Network survey released in March 2022, intentions to go into business are at their historic low, at 15%, while the polls usually gave double.

The 28 companies that answered the survey questions reported average revenues of $395,331 and costs of $354,838; 70% of them have less than five employees and 43% are in the manufacturing sector. Not all of them are necessarily techno companies, but considered to be invested in “sectors of the future”.

Sign that the ecosystem in place is still satisfactory, the most important support they name are the accelerators, incubators or support organizations to which they have access.

“In Quebec, we managed to develop a start-up ecosystem, funding programs, especially in the first two years,” says Mr. Graff. On the other hand, between two and five years, it is more difficult. There is clearly an issue there. »

Special measure

The RJCCQ study was accompanied by a proposal: what would they do with additional non-refundable funding of $100,000? The largest share, 37.6%, would go to investments in machinery, research and development and infrastructure; 29.1% would use it for hiring staff, training or improving working conditions; 17.9% would be invested to develop international trade; and 11%, in debts.

This sum of $100,000, indicates Mr. Graff, is only an average according to the very variable size of the companies consulted; 92% of them believe that the government should offer such a program.

“We talk to entrepreneurs and they are often in a situation where they no longer want to invest. The only solutions we see are that we take exceptional measures, interest holidays, that we allow repayments to be delayed to allow for short-term expenses. »

These measures are essential given the lack of desire of young entrepreneurs to go into business, he believes. “It’s not a request that is ‘cowboy’. We want to create the business of tomorrow, in clean technologies, medtech, manufacturing 5.0 […] Special measures are going to be needed to ensure that young companies dare to invest. »