A Conversation with the National Director of the XPRIZE Canada Hub
Sarah McCullough shares her thoughts on finding challenges worth solving and the roles of push and pull funding in directing innovation
Today’s interview is the third of a thematically connected series on purposeful research that explores the tools that we have at our disposal to identify research and innovation worth funding.
The first one explored the question from the perspective of a research funding agency trying to find ways to connect their work to downstream impact, using public funds to “push” research toward impact. The second entry provided the perspective of someone working at the interface of regulation, policy, research, and commercialization, and using economic analysis tools to situate nascent healthcare technologies in the broader context of Canada’s healthcare system.
This time, I sat down with Sarah McCullough, National Director for the newly established XPRIZE Canada Hub, to discuss the role of “pull” funding in directing Canada’s investment in research and innovation. The XPRIZE model is conceptually simple: identify a problem worth solving, create a set of target metrics through which a candidate solution will be judged, and create a prize pot for anyone who can meet those targets.
Sarah’s insights, grounded in a career path that spans startups, government, and innovation ecosystem development both in Canada and abroad, cover the rationale behind establishing a physical presence in Canada, how the XPRIZE model needs to adapt from its American origins to be effective here, the role of pull-based funding within the broader context of Canada’s innovation funding landscape, and more.
Your email client will probably truncate this post. My key takeaways are presented at the end, so be sure to read the web version if you want to get the whole story. Many thanks to Sarah for taking the time to share her insights.
Interviewer’s note: Sarah McCullough and the XPRIZE Canada Hub team approved the final version of the section entitled “Interview with Sarah McCullough” and had editorial input on that section, with the option to rephrase and expand on the ideas discussed in the interview without changing or removing any intended meaning. The key takeaways presented at the end are my own commentary, and do not necessarily represent the views of Sarah McCullough or the XPRIZE Canada Hub.
Interview with Sarah McCullough
KB: Tell us a little bit about who you are and how you got to where you are today.
SM: I’m currently the National Director for the XPRIZE Canada Hub hosted at the University of Calgary, which is the very first hub in what will be a network of global hubs around the world to support advancing the scale and impact of XPRIZE competitions.
I was reflecting on my journey before this conversation and thinking that I’ve always somehow ended up being in and around supporting builders and trying to understand what it takes to scale a technology company, whether that’s software or hardware, from multiple angles. I’ve had a lot of great opportunities to see it from multiple perspectives. I’ve had the opportunity to be inside really early stage, venture backed startups in the US and the early stages of what is now commercial AI. I’ve also been able to support, in Canada, founders exploring, growing, and developing tech startups, mostly on the software side, and those wanting to move here and grow and scale their company.
In between all of that, I’ve gotten to work in the provincial and federal economic development departments, trying to design these flourishing economic innovation ecosystems that for me drive inclusivity and sustainability in the area of economic growth.
Through all that, I keep coming back to this interesting challenge: we have great talent and we have abundant resources and we care about solving challenges and we want to build and grow companies, and yet when it comes to translating that research into innovation through the investments or the mechanisms that we have or the way the economic incentives and structures are set up, we often miss the value capture at the end. So we might start a lot of great companies, we have a lot of great R&D, but the ability to translate that into applicable solutions that solve challenges for us or being able to scale those solutions to the value capture stage in Canada really becomes a core challenge. This commercialization piece we see other economies do really well, including one just to the south of us.
When the opportunity came to lead the XPRIZE Canada Hub, I saw it as this great way to help solve this challenge by augmenting what we already have in the Canadian ecosystem and using this challenge-based innovation model and ultimately these global networks and pathways that have really been shown to know how to de-risk technology and also de-risk the market at the earlier stages so that you can really solve important and impactful problems, but you can also mobilize capital around those challenges and mobilize talent at the same time. My job ends up now being focused on working out how I can get more Canadian founders, creators, innovators opting in to solve those massive challenges and helping them understand and really build a local ecosystem behind them that’s moving along the direction with them so that they ultimately either have a pathway to win or stay in the competition as long as possible to capture the value of that in terms of de-risking the technology in the market, and then having really well-defined pathways for either pilot deployment or scale.
This is a challenge I’ve always been really fascinated with. My background’s in psychology and I’ve done a lot of work on customer development, product market fit, and I just find it fascinating that pathways to market are something we don’t talk about as deeply as access to capital, when it’s still a core challenge that we have in Canada.
KB: Tell us about the history and mechanics of the XPRIZE.
SM: It’s just over 30 years old, founded in 1996 with just one prize: the $10 million Ansari Space XPRIZE. It was based on this idea that we want to solve a big challenge and to do that, we have to incentivize innovators from around the world to come together with a particular prize purse or a cash prize at the end to make that happen. It was also based on the idea that ultimately, we do our best work in competition.
They’ve shown this by creating really structured challenge statement, by setting really well-defined milestones and metrics of what success looks like, and then working through what the prize purse or cash prize at the end needs to be to ultimately incentivize individuals across the globe to get excited and to dedicate their time and energy to trying to solve that challenge. You can actually end some of these problems and challenges that once were thought not to be possible.
XPRIZE has really built a well-functioning, what I call “de-risk and validation model,” which is really their process. It starts with a well-defined challenge, and they source individuals from around the world and across different domain areas and expertise to come together and help identify the root causes or barriers to progression in a particular industry or market. That focus and energy allows them to ensure that people going to market or focusing on that challenge are going to tackle the primary blocker that’s holding the market or industry or society back. They’ve done a really great job of defining success and ultimately being able to raise funds to support the incentives along the way.
The thing that I find the most interesting in terms of how the model now operates and some of the work they’ve done in understanding the impact and scale is that in these areas where you first thought you couldn’t solve a challenge, now at the end, you somehow have this collection of ventures or teams that have solutions to this unsolvable challenge. You also have market signals from XPRIZE’s model that show this technology and market is de-risked enough, and you start to see naturally both talent and capital galvanize around teams. Not just winners do well: semi-finalists to finalists go on to find pathways to market and ways to bring their solutions into society.
KB: This differs from traditional “demand-driven” or “purposeful” research in that in those cases it is usually a public funding agency that puts money in upfront and pushes towards a solution. XPRIZE flips this around, making the prize a post solution reward, and lets the market figure out how to get there: pull instead of push. In what circumstances or for what class of problems do you see that pull mechanism being more effective than more traditional research funding push mechanism?
SM: Push funding is obviously foundational. I do want to be clear: I think we need a nice product mix of funding opportunities and structures across Canada to continue to drive innovation and scientific discovery.
Pull has been shown to be really effective where you might need rapid or real world deployment, or when a problem is pretty clear, but the pathway to the solution is really not known. It’s when we really don’t understand the methodology required to get there through which we can align funding metrics and milestones or activities along that pathway that you’d see in traditional push funding or grants.
With pull funding, we have no idea how we’re really going to get there, but we know that this is a problem, we know how to define what a solution needs to be able to do, and we’d like to put some resources behind it. The pull models have worked really well there.
I think one of the reasons it works really well, and what research shows, is because you have a clear metric of what success looks like and you have a lot of people focused on how to solve that, it allows you to focus on finding the best solution, just the way an early stage tech company would. You focus on the problem, you co-develop along with customers. Early stage investors aren’t that concerned with how you get there, they just want you to find the best fit for the market so you can be competitive.
Innovation competitions and prize challenge-based innovation works very similarly: we really understand there’s a challenge here, and while we don’t exactly know what the mixture of success looks like or what a viable solution is, if you work alongside the market, we’ll reward you for that should you meet the criteria for success. You typically see better pathways to market, better uptake, and better solution deployment, than you would see necessarily in starting with a solution.
You could argue, although I have no research currently or data in front of me to back this up, but you could argue it’s more resource-efficient, as well, in those use cases where a problem is well understood. Where a problem isn’t well understood, some push funding could be quite valuable in just helping people understand what the root causes are
KB: A lot of work goes into defining the problems and in articulating the metrics that a solution has to satisfy. Tell me about the process of identifying problems worth solving and of designing one of these prizes.
SM: XPRIZE has definitely honed this process, and it’s the part that I get the most excited about. We’ll talk through in this conversation about how this applies in Canada and how we really leverage what this means.
The overall process is referred to as “global visioneering” . It’s a multi-stage year-round process that’s definitely not an internal decision. What makes XPRIZE challenges and competitions so successful is the fact that they source ideas, understanding, and barriers from across the globe. They bring together individuals from across various domains. So the mix could include business consultants, or perhaps sci-fi writers, or deep experts in, let’s just say, vaccines.
We have a vision for 2040, which is set by the domain lead at XPRIZE, organized by domains. For example, one domain is health. If they have a vision for what in 2040, an abundant and equitable future looks like in relation to health, we might identify a number of different tracks we want to explore where we think there’s some paradigm shifts that we can drive or opportunities for the evolution of society and technology, and from there, they’ll go out and source individuals.
So if they’re looking at something like cancer vaccines and we think that’s the next stage, they might bring in some vaccine experts and then you might bring in people from across other areas that can get together and challenge each other on what the core root causes are and what makes an XPRIZE viable. They go through this rigorous design process where they ideate, and then they do a series of what you could imagine as design sprints, both in-person and virtual.
They then accumulate that by bringing some of those top concepts where they think there’s both good market potential and value as an area of focus, and where there might be alignment with individuals in philanthropic funding or other areas that might want to fund and support the development and launch of these prizes, and they’ll take them out to that community.
That process starts with what they call their “brain trust workshops”. Now that we have the XPRIZE Canada Hub here, we’ve been able to host the brain trust workshops in Canada, both in 2025 and in 2026, first in Calgary, and then this past year in Montreal. Being able to bring over a hundred experts, both from within Canada and from across the globe, to Canada to talk about what the future is and where XPRIZE should be focusing on has been a very beautiful benefit of having a regional hub and a regional team here, as well as being able to source some of the brain trust experts that they’re looking for.
They ultimately start that process and then they’ll move to a lot of virtual work and then it’ll culminate in a global visioneering summit, which is where they bring those ideas and concepts to their benefactor communities. If any of those get taken up (which we would call “moving on to prize design) then they’ll go through a more primary and secondary research process to really define the right metrics of success and the right fit of the cash prize to incentivize individuals across the globe to really tackle this issue.
KB: Are XPRIZEs usually philanthropically funded, or do you get funding from other sources as well?
SM: We (prizes) are funded by both private dollars and private philanthropy, but you see a mixture and it really is challenge or prize dependent. Sometimes you see family offices, you see other philanthropic groups or high net worth individuals where a challenge really aligns with something that they care about or something that they want to reinvest in. But there’s also arms-length governments. For example, the Water Scarcity Prize is a more government-orientated prize because that’s a huge regional challenge, and they think this is another way to augment work that they’re doing and ways they’re trying to find solutions to these global challenges.
KB: XPRIZE is clearly a globally-scoped effort, both in terms of the expertise that goes into the design and the intended impact of the challenges. Given that global focus, what’s the value of the regional hub?
SM: There’s a couple of key points, but it really started a number of years ago when the CEO of XPRIZE was starting to think that now that we have this methodology and we’ve really seen what the impact of an XPRIZE competition can be on creating emerging markets, de-risking technology, de-risking markets, and enabling growth and scale for particular businesses or ventures and teams that have gone through the competitions, they started to just ask the question of where are competitors coming from and what is the impact post-competition.
At that time, XPRIZE did not necessarily have any impact support following a competition. Typically it is simply that the winner wins the money and then everyone moves on to the next challenge. They looked at it and they saw although they are primarily based in the US and so they have great reach there, there were a significant number of competitors coming out of other regions like Canada and Europe, and actually those teams were winning at a higher rate than some of the US-based teams. So they were very curious to explore what the incentive model looked like and how these competitions were showing up in other regions.
The other thought, and really what led to beginning to build out regional hubs is that at the end of the day, the goal is to end a challenge. The more people you get and the more creators, builders, and innovators are turning their time and energy towards developing a solution for a set challenge, the greater chance you have of solving that, and potentially the more viable solutions you have at the end. The thought for the hubs is if you had a small regional team that was self-funded, self-managed, and very well-connected, could they actually enhance the number of teams and individuals recruited into competitions? Ultimately, could they improve their chances of moving through the competition to get to a viable state, or to some solution with applicability in the market, by developing strategic partnerships around those teams in challenge areas.
Again, at the end of a challenge, the problem might be solved, but the application and scale isn’t really solved in any of those competitions, because it is still at a really early stage. It’s really in that zero to one area. So, how could a regional hub improve pathways to market so you see more pilots, more deployment, and ultimately more scale of the impact of the solution? It is nice to talk about the fact that we solved it, but are we actually applying it in the market on a regular basis?
That’s the core idea behind the regional hubs, and I’m really excited to have an opportunity to see how we can build out that blueprint so that it actually works in the way that it’s been envisioned.
KB: In the relatively short time that the Canada hub has been operating, has that hypothesis been born out? What lessons have you learned from the Canadian expansion so far?
SM: I feel like every day we are definitely learning a ton. I think particularly it’s interesting to think about how to recruit across challenges. Often competitions are somewhat similar, but custom designed for the challenge. Depending on where it starts, what the prize purse is, and what we’re incentivizing individuals to do, how can we create a repeatable scalable model or a process workflow that you could apply to every challenge, so that the resource management within the hub is effective and we can be as impactful as we want with as small and nimble of a team as we have, while still prioritizing maybe not every competition, but definitely those that are strategically impactful for regional and national priorities in Canada.
For example, you could think of the application of destructive wildfires. Obviously, some of the solutions coming out of that competition are very interesting to Canada, and a lot of funding and resources are heading towards that direction. There’s other things like ovarian health, prizes in the pipeline that I think would also be interesting, things like energy efficient AI and thinking about how we reduce energy expenditure across that technology development. All areas I think Canada really wants to play in. So for me, the big thing has just been defining how you can not treat each challenge as a custom approach, but rather identifying the processes, scalability, and foundation we are building within the hub that can be replicated. From there, with that in mind, also considering what pieces of that could translate to other global regions: what stays stable and repeatable and, ultimately, what assets need rebuilding, that we can share with other global hubs so that they start ahead of the game without having to rebuild everything from scratch.
That’s the biggest thing I think about on a daily basis beyond just making sure that this augments what already exists. Obviously every region that a hub will go into will have a different set of ecosystem players, a different set of financial and capital mobilization available, potentially different market opportunities or applications. And are we adding value without being duplicative? Are we connecting within the other prize networks and institutes that exist?
Luckily, challenge-based innovation isn’t new to Canada, it hasn’t previously been that mainstream. We talked to groups like Impact Canada about their model, how they’ve supported prizes, how we partner with them when it comes to using some of the regulatory sandboxes they have to make sure that there’s opportunities for teams. We really think a lot about that partnership, what that looks like, and how we’re additive and not duplicative.
KB: Many of the challenges you mentioned have a very strong regional component: regulatory frameworks differ, and there are considerations relating to engagement with Indigenous groups, among other regionally-specific challenges. On the other hand, the XPRIZE is global in scope. To what extent are prize metrics and problem definitions taking these regional considerations into account upfront versus handling them after a general solution has been proposed to the core problem?
SM: This is my favorite part. I think it’s a really strong example of why regional hubs can be quite impactful.
On the long-term horizon, having a hub means that we get to source experts to support prize design. So you ultimately are building in Canadian perspectives, Canadian understanding of regulatory, the complexity of the multi-nation network we have with Indigenous groups, and all of this feeds into the front end of prize design. Competitions naturally will have some of those global considerations and that’s the idea when you have other hubs too: they’re also putting forward experts, there’s better understanding of who’s doing the work because we have this regional team that just is more active and obviously more aware of the individuals in various groups and can also support that through prize design.
In the short and medium term, there are things that no matter what you do in the prize design area, as you start to move through testing, as you start to move through really understanding how this is going to operate and apply, even with the set metrics in place of what a successful technology or solution would look like, challenges come up.
The Wildfire prize is interesting as an example because with Wildfire, they realized that we can’t just start fires for testing. We have to work with regulatory groups, and we’ll have to find areas where we could do this in partnership with cities.
So we think a lot about, as prizes are prepping to launch now, how we want to be involved? Can we be a partner in competition testing? Is there a way we can build that in? This helps not only position Canada to build capacity in emerging markets and opportunities, but it will also attract global competitors to Canada or at least raise awareness of our people and their capabilities. For example, we’ve been exploring this in a prize that has yet to launch – the Ovarian Health Prize. Because it’s at that right stage to be thinking about looking at testing partners and starting to think about what solutions could integrate with the public healthcare system in Canada, which is obviously quite different from a private one or others globally.
The biggest thing though, and what is our absolute focus at this point in time, is no different than how you think about developing a product with a customer along the way. We just have a few more stakeholders and a lot more ecosystem partners to bring to bear, but we imagine being able to wrap partners around teams and competitions and challenges areas that then allow various types of individuals to be providing real time insight to teams that are developing in the markets in which they plan to potentially deploy or pilot their initial solutions.
Ultimately, even if their solution isn’t directly related to the structure and focus of an express competition within the market, if the solution has application, they’ll have maybe had a city of Calgary or a city of Ottawa individual giving them guidance on things they need to be thinking about, early relationships and partnerships they should be thinking about if they want to pilot a solution. Hopefully, we’ll be able to play a role in facilitating some of those discussions, because again, we’re all moving towards the same de-risking metrics.
KB: In the US, there’s lots of risk tolerant capital available to fund the early stages of an attempt to solve ambitious problems. In Canada, not so much. How are you adapting the XPRIZE model to take into account the availability of resources for the first steps?
SM: I’ll talk about two different levels. At the XPRIZE level, have definitely, over the last few years, started redesigning prizes with milestone payments. So to your point, it used to be all for nothing. If you’re the winner, great. If not, we’re glad you came along for the ride. The prize is solely for first place.
Now they have it built out where in various prizes, depending on the technology development or the risk tolerances (required in development), there will be milestone payments at various points. So for example, in the HealthSpan XPRIZE, they’re about to award the top 10 teams. Each of those teams will get a million dollar payout for the next phase of development, which includes a clinical trial. A million is not likely to even get them through their clinical trial, but it’s meant to help advance and galvanize other grants towards that end.
They’ve also added on an impact year. So a year of support is a mixture of introductions to capital allocators, access to customer’ resources, and introductions for teams everywhere from semi-finalists upwards that are still working in the solution area or around that challenge. So at an XPRIZE level, that is what they’re trying to do to level out global access.
At a regional hub level, we’re not specifically at this time looking at any additional funding support or funding through the hub itself. We’ve thought about venture philanthropy, syndicates, and other opportunities unique in the ecosystem where there’s maybe people coming together and at various milestones they get an injection of cash to allow them to stay in the competition or if they want to progress that potential solution.
But at this time, we’re really focused on the macro level, there is capital available, but to your point, it’s risk averse. It’s a little less risk tolerant. It can be administratively challenging to access. But if you bring those groups around teams from day one, or at various points of interest, you can show funders the metrics to prove it’s actually de-risked. So we’re trying to give people the same framework and model that you’d see in a venture capital approach and help them understand where the de-risking moments are so that we can mobilize more capital.
I think there is capital, but to your point, it just sometimes doesn’t show up. We really want to figure out ways in which we can leverage the validation and de-risking that comes in participating in a competition and being a part of a global challenge and the XPRIZE network and all of the resources that come with it to enable more capital to feel comfortable coming to the table.
KB: Is XPRIZE actively involved with these teams during the development process?
SM: At XPRIZE, they always have a couple of individuals on a prize team. So when a prize team gets set up, they always have someone who’s leading the prize operations in terms of what the flow and experience of the prize will be. They always have someone who’s liaising with all the teams to follow progress, help address challenges that might pop up, and answer questions they might have. So XPRIZE is very focused on ensuring that teams feel supported and that they have a key point of contact within XPRIZE.
Of course, many things happen over the course of a prize for an individual team. Some are in research institutes, some are within universities, some are in startups, some are in corporate innovation teams, they really come from everywhere.
Then they typically have a technical prize lead within a prize as well. So someone who really understands the technical aspects. So they might have been in emissions reduction in the past and now they’re supporting the Carbon XPRIZEor the Carbon Removal XPRIZE.
So they’re at a broad base of what support they can provide to the team as a whole. XPRIZE always wants to run a fair and transparent competition. They don’t get involved in the judging. They bring in an external panel of judges, and they work on what can be accessible to all teams. They do at various points, depending on the competition, bring in other supports. So they might run a mini accelerator in partnership with, for example, CDL or Avatar Innovation.
When it comes to thinking about other regions, we are now considering what it looks like for regional hubs to support teams in a fair and transparent way. That process is being built in real time in terms of how we are aware of Canadian teams that are opting into competitions. Right now the thought is that we want to create a local and active supportive community. What we’ve heard from alumni who’ve competed is that, as much as the competition added a lot of value through the structure of the process, being in a community of other people who are solving the same challenge, but probably from a very different angle, was one of the most valuable parts of the experience. We very much want to engage with teams by continuing to surround them with the right people at the right time. We’ll be working very closely with prize teams to understand who’s involved, who’s opted in in Canada, where are they located, and maybe there are ways in which we can have meetups, community events, or even activate our ecosystem to make sure that they’re connected with the startup and innovation communities.
If it’s their first time ever thinking about taking research or their work into the market, they might not be aware of all the communities and supports that already exist.
KB: As you’re observing the teams entering the Canadian hub, are you seeing particular structural challenges that are faced by teams from different regions? What do you think needs to change in order to be able to address those differences?
SM: Within the time frame of the hub, it’s been a lot more active competition. When I joined to set up the hub last August, they hadn’t yet launched, they only recently launched a couple of new competitions and they’re actually smaller ones. I feel like we’re very much in the active stages of understanding what some of the structural differences might be.
What we learned or heard from alumni is that sometimes there is capital available at various points and then it, but it doesn’t really flow through the entire process.
So for example, there’s a couple of companies that have come out of the Carbon XPRIZE that are still active in Canada and they were able to get through the first barrier of deployment and implementation, and now they’re experiencing a gap in the funding for scale.
There’s still huge opportunities, I think, to bring people along and help them understand the value of investing and understanding what metrics or criteria they would need to de-risk the investment on their side, and communicating the market opportunity.
One of the things we’ve been thinking a lot about is the question of what it looks like to tell the stories and help communicate the impact of competitions, the impact that’s already been created in Canada, and ultimately how we’d like to grow that. What is then needed for us to come together as an ecosystem? That’s including governments, that’s including funding agencies, that’s including individual institutions and how they allocate capital within their research groups, to make sure that if we all say we want more startups and we all say we want more economic impact, and we want companies to stay here and grow, well then we also have to ensure that they have access to markets and they have access to capital at those particular periods of time.
We’re really early in understanding where exactly, but I am fairly certain that a good amount of the storytelling and support and helping amplify some of the work that’s being done by other individuals in this space is a benefit that we can help provide to adjust and maybe move capital to places where it needs to be.
I’m a big proponent of the idea that we don’t have to play in every space, because that would be pretty risky, but maybe there are areas in which Canada has growing challenges, or we know this is an area that we want to really be leading in, where we can help push for a little bit more risk capital to be allocated there and have a strategy that allows for that across a commercialization spectrum. That’s a reasonable thing: to be able to hold public funders accountable and for them to feel like it’s politically and financially safe for them to do that.
KB: Do you have prizes currently in construction that you can tell me about?
SM: There are some prizes in development. The most I can say is that XPRIZE is hoping to launch three to four prizes over the next four to five months. One I can say will be in interspecies communication, thinking about how technology might be able to advance the communication and understanding of other species here. Another will definitely be around AI energy efficiency. The others I say are probably too early to confirm.
We’re also really focused on understanding ways in which we can recruit and support teams throughout the Build with Gemini XPRIZE, which is active right now. It’s a 90 day hackathon focused on building a viable, sustainable, AI driven company in 90 days with revenue and potential for scale. We’re really excited to see how that turns out for us, and which of those we can convert into our recruitment process.
You will absolutely see a real focus on understanding how we bring together people who are curious that are builders, creators, innovators. How do we bring them together early on and start creating those natural collisions and helping them understand what the value of a competition could be or like what it looks like. We’re hoping to bring even some alumni to the table that are continuing to work in the commercialization space in these emerging markets and impact areas to help communicate that value. You’ll also see us across Canada this fall and winter very actively sharing how the Hub can support you and how we’re working with stakeholders and ultimately starting to bring the ecosystem together just so people are aware of the competitions and so that the first time they hear from us they understand what XPRIZE is, understand its potential, and of course then they know who they can contact if they have any questions.
Sometimes just joining a competition can have a huge amount of benefit like in the build with Gemini you get access to all these free tools, there’s some credits, there’s the ecosystem. Every week they’re running like a customer discovery workshop with an expert. If you’re already in the space and curious, there can be just sometimes a ton of benefits to joining a competition that are just wrapped around you.
KB: Is there anything you wish I had asked you but didn’t?
SM: Why an XPRIZE Canada hub and why does it exist in Canada? Canadians have never been excluded from XPRIZE competitions, so why do we really need a hub?
I think we’ve highlighted a lot of unique things in the economic structure of Canada that are very different and create very different incentives for technology development and commercialization or that are very structurally different from the US in terms of how capital could be allocated, the risk tolerance that exists, our interest in even starting ventures and growing and developing them versus maybe working inside of a research institution and optimizing for early stage discovery.
I’m someone who really believes there is an opportunity to merge business and technology to solve really important challenges. Something that really always resonated with me years ago when I heard it, was that some of the biggest market challenges are some of the biggest market opportunities. Often there’s a lot of resources at what’s very tangible and ready, where the market already is, but what is driving the creation of our next medium and long-term markets and ultimately driving Canada’s economic future?
I think XPRIZE competitions show what is possible, but without bringing people along the stages of commercialization in a challenge, it’s hard for them to opt in and it’s hard for them to justify the risk, or to see how it’s being de-risked. I think there’s a huge opportunity for us to help build those pathways to market so that we do see some of these solutions that are developed here actually being applied and that we have the capacity to improve our lives and our communities, and also feel like we have great economic opportunities. I know many people who consider moving to other countries, other regions when they’re interested in commercialization versus thinking about doing that here in Canada. And I’d love to see the hub play a role in changing that.
Key Takeaways
Push and pull
Most of the discourse around funding for innovation in Canada revolves around push funding: money that is given upfront with the intention of delivering some goal. In the case of research, that usually means publicly funded grants being used to advance whatever was written in the grant application, for example.
XPRIZE (mostly) flips the model around: instead of providing funding upfront, money is given after the target has been achieved. Importantly, the reward is for a solution, any solution, which satisfies the metrics. The precise form that solution takes is (mostly) irrelevant. It just has to work.
Both types of funding are necessary, and which one is needed at which stage of delivering innovation depends largely on the kind of problem being solved. As Sarah puts it:
“Push funding is obviously foundational. […] [W]e need a nice product mix of funding opportunities and structures across Canada to continue to drive innovation and scientific discovery.
Pull has been shown to be really effective where you might need rapid or real world deployment, or when a problem is pretty clear, but the pathway to the solution is really not known. […] [W]e have no idea how we’re really going to get there, but we know that this is a problem, [and] we know how to define what a solution needs to be able to do […].”
Pull funding is less prevalent in Canada to date than push funding. There is a reason for this, and it boils down to context. The gaps in Canada’s innovation funding pipeline mean that it is much harder to deliver the process that leads to success in Canada than in an ecosystem like the US, where risk-tolerant capital is relatively abundant. In other words, without funding for the process, there can be no chance of successfully delivering the end goal.
Sarah is cognizant of this. XPRIZE Canada has started to build prize programs that involve partial funding for milestone achievements en route to a solution, creating a sort of hybrid model that is probably necessary for pull funding effective in Canada, given aforementioned risk capital access issues. The fact that this hybrid approach is necessary tells an important story about Canada’s innovation ecosystem and reinforces the need to accept the risk involved in funding the process if we are to benefit from whatever we build at the end.
Focus on the problem
As with all of the previous interviews on this theme, the key question to be asked is how to identify problems worth solving. Unlike (most) grants, where it is often a single panel making a funding decision based on the plausibility of the path to the solution, XPRIZE convenes a multidisciplinary panel that goes beyond just traditional subject matter experts, allowing them to pitch ambitious problems in need of solutions, rather than the other way around.
Their “visioneering” process seeks to articulate exactly what it means to solve the problem, rather than evaluating the plausibility of a particular proposed path to the solution.
What makes XPRIZE challenges and competitions so successful is the fact that they source ideas, understanding, and barriers from across the globe. They bring together individuals from across various domains. So the mix could include business consultants, or perhaps sci-fi writers, or deep experts in, let’s just say, vaccines.
A critical element of the difference between pull funding and push funding is that in its purest form, pull funding does not care at all how a solution is delivered. All that matters is that it solves the problem, by some (ideally) well-defined measure of “solved”. Per Sarah:
[W]hat research shows, is because you have a clear metric of what success looks like and you have a lot of people focused on how to solve that, it allows you to focus on finding the best solution, just the way an early stage tech company would. You focus on the problem, you co-develop along with customers. Early stage investors aren’t that concerned with how you get there, they just want you to find the best fit for the market so you can be competitive.
[Y]ou typically see better pathways to market, better uptake, and better solution deployment, than you would see necessarily in starting with a solution.
This is a critical lesson, and it generalizes to another critical area of innovation policy and Canadian paths to market, an area that suffers from precisely the problem that problem-focused pull funding is designed to solve: public procurement.
While procurement is pull funding in principle, the Canadian approach to it is overly prescriptive, prescribing the exact solution to be purchased rather than defining the problem that the solution seeks to address. The success of the XPRIZE to date at delivering solutions to audacious challenges should be used as a blueprint for procurement, refocusing on defining problems and the metrics against which we will measure solutions, rather than prescribing the solutions themselves.
Derisking the path to market
To be effective, purposeful research policies must consider paths to market: explicit mechanisms for market de-risking, regulatory integration, and local adoption. Sarah’s thoughts on the ecosystem echo my own experience:
“[…] I just find it fascinating that pathways to market are something we don’t talk about as deeply as access to capital, when it’s still a core challenge that we have in Canada.
[W]e have great talent and we have abundant resources and we care about solving challenges and we want to build and grow companies, and yet when it comes to translating that research into innovation through the investments or the mechanisms that we have or the way the economic incentives and structures are set up, we often miss the value capture at the end.
For-profit capital follows de-risked market pathways and moves into areas where risk-adjusted returns are sufficient to justify it, and a key part of de-risking innovation is in the work that XPRIZE does to include ecosystem partners (cities, public health systems, regulators) around teams early so that pathways to adoption exist when the technology is proven.
“I think there is capital, but […] it just sometimes doesn’t show up. We really want to figure out ways in which we can leverage the validation and de-risking […] to enable more capital to feel comfortable coming to the table.”
Lessons for Canada
There are three key lessons in the XPRIZE approach that can be generalized to other areas of Canadian innovation.
Where purposeful research is concerned, the fact that we have necessarily identified a societal problem opens the door to changing how we evaluate success, shifting from input metrics (patents filed, papers published, students trained, etc.) to output metrics (problems solved) or concrete milestones that demonstrate progress toward solutions. While not all research fits this approach, Sarah’s commentary above makes clear when pull funding is appropriate, and that both push and pull funding must be part of an effective innovation ecosystem’s toolkit.
We must consider paths to market (or more broadly, paths to purpose) in all types of innovation funding. At present, Canada invests in research and expects (with decades of evidence to the contrary) that economic development will follow. It will not, unless we are thoughtful and deliberate about connecting the people building solutions to the people who actually have the problem and ensuring that we are working to de-risk adoption pathways to the point that it makes sense for the private sector to take over.
As has been the theme of countless other articles on this blog, we have to make strategic risk-taking safe politically. This means establishing clear governance frameworks that evaluate success at the portfolio level rather than the project level, allowing public funders to concentrate public capital on well-defined national priorities (e.g., wildfire mitigation, healthcare system sustainability, energy-efficient computing) without fear of administrative penalty for project-level failures.
Last word to Sarah:
“I’m a big proponent of the idea that we don’t have to play in every space, because that would be pretty risky, but maybe there are areas in which Canada has growing challenges, or we know this is an area that we want to really be leading in, where we can help push for a little bit more risk capital to be allocated there and have a strategy that allows for that across a commercialization spectrum. That’s a reasonable thing: to be able to hold public funders accountable and for them to feel like it’s politically and financially safe for them to do that.”