If you’ve ever had a CT scan you’ve been touched by an innovation hub.
In the 1950s, when physicist Rosalyn Yalow found herself conducting research in the company of Bronx Veterans Hospital physicians, she realized how the physics of radiation could be used to solve puzzles about human physiology and disease. Her work in collaboration with Dr. Solomon Berson led to the creation of our modern-day nuclear medicine. Yalow and Berson were able to create something that didn’t exist before because they crossed physics with medicine. Some say the magic happened because the Nobel Peace Prize winner was lucky enough to be in the right place at the right time.
Today, luck has been taken out of the equation with the creation of innovation hubs. As far back as 15 years ago they might have been referred to as "incubators," where space was provided to cook up and refine new ideas. Today, there are companies, universities, incubators, entrepreneurs and government agencies huddling together across Alberta to share not only ideas and space, but also to take advantage of a vast array of support services and funding designed to nurture innovation ecosystems. They go by different names - tech hubs, innovation hubs, regional innovation networks - but all are built on the premise of providing services (and sometimes space) to guide startups towards technological integration and innovation. Often, they are associated with one or two levels of government.
What's an innovation hub anyway?
Kari Gordon, Director of Startup Calgary, calls them single locations where like-minded people gather to enable collisions to happen: “It allows for new combinations of people to put a fresh stake in the ground, to bring puzzle pieces together that we may not have known belong together.”
She points to Calgary's Beakerhead as an example. It offers programs to bring people together at the crossroads of art, science and engineering with the aim to inspire people to build and exhibit interactive entertainment. In 2018, its year-round activities culminated in a five-day, city-wide spectacle with more than 60 events centred around bizarre engineered installations and artwork that engaged 32,629 students.
Startup Calgary was a stand-alone organization until two years ago, when Calgary Economic Development brought it into the fold to help stoke the city’s diversification fire. Technology is their focus, says Gordon, because it crosses all sectors. Her team offers assistance to startups in dozens of industries, including but not limited to medicine, education, energy, science, and virtual and augmented reality. Gordon has seen startups pursuing everything from online ticketing platforms and drone spaces to sensors for autonomous vehicles. Some 3,000 people a year come through the hub’s doors to access mentorship, workshops and a events.
Over in Edmonton, Tiffany Linke-Boyko, a member of the Canadian Digital Media Network's advisory board and CEO of Startup Edmonton, prefers to call the organization a "tech hub." Linke-Boyko says the term innovation hub is just a trendy, all-encompassing term for a variety of support services offered to the technology community, some of which existed before in the form of accelerators and incubators. She says tech hubs like hers focus on technology because of its huge impact on business. “It’s not just the oil industry turndown,” she says, “but a general realization that if we want to help create innovative tech we need to support it in our communities.”
“It’s not just the oil industry turndown,” she says, “but a general realization that if we want to help create innovative tech we need to support it in our communities.” - Tiffany Linke-Boyko, CEO of Startup Edmonton
Working out of a 14,000 square foot suite in the 100-year old Mercer building in downtown Edmonton, Startup Edmonton attracts enterprising individuals interested in building tech products and companies with mentorships, workshops, funding guidance, shared space and events such as Startup Week, DemoCamp and Launch Party, to showcase Edmonton tech talent. They also support meetups held in their space. Originally the non-profit brain child of capital city entrepreneurs Cam Linke and Ken Bautista in 2009, the hub has been acquired by the Edmonton Economic Development Authority (EEDA) and receives funding from city and provincial coffers, as well as corporate and individual sponsorships.
Success, says Linke-Boyko, is measured by keeping track of members, accessed funding, event attendance and new technologically-linked jobs. Since 2009, more than 70,000 people have interacted with the hub. In 2018, Startup Edmonton worked with 123 companies - which created 133 jobs - and hosted more than 285 events. Her biggest problem is keeping up: “There’s only so much you can do with six people. There are many more opportunities we could be taking advantage of, but we have to pick and choose according to our goals.”
Innovation Hubs as Economic Drivers
Many believe hubs like Startup Edmonton have become a major driver in Alberta’s diversification journey from the crude-stained world of oil and gas to the pristine fields of technology, including entrepreneurs like David Nedohin, Founder and President of Edmonton’s Scope AR. When he came to Startup Edmonton in 2012 he knew he wanted to do something in industrial augmented reality but wasn’t sure how. It was only when his team immersed itself in the tech hub’s huge talent pool on a daily basis that they were able to test out and mature minimally viable products (MVPs). It’s all about sharing feedback, he says. Often when they revealed their prized MVPs to other founders in the Mercer space they’d find out they weren't so wonderful. “That helped us to pivot our thinking,” he says, “which is a big part of innovation.”
Today, Scope AR is a global leader, scaling its products to more Fortune 500 customers than any other augmented reality (AR) company in the world. International players in the aerospace, manufacturing, automotive and energy industries, such as Unilever, Prince Castle and NASA, turn to Scope’s 35 employees, located in Edmonton and throughout the U.S., to build AR programs they can use to deliver AR driven solutions. Lockheed Martin’s space division is using Scope’s AR Worklink platform to support the manufacturing of spacecraft, including NASA’s Orion.
Nedohin credits Startup Edmonton’s classy meeting and boardroom space with helping his team present a professional impression to potential customers and investors: “Having customers come to a home office doesn’t look very good,” he said. His group also benefited from the centre’s advice on where to find seed money from such agencies as the National Research Council’s Industrial Research Assistance Program (IRAP) and TECHTERRA, a non-profit geomatics technology innovation support centre.
Much of the funding that goes to startups like Scope AR comes from Alberta Innovates. The provincial initiative emerged in 2010 and was later consolidated under the banner of Alberta Innovates in 2016. On its website, it describes itself as Alberta’s “integrated innovation powerhouse.” It includes InnoTech Alberta and C-FER Technologies, two applied research subsidiaries that serve public and private sector interests.
Headed up by CEO Laura Kilcrease - who has been credited with directing Austin’s economic diversification from oil and gas to high tech - Alberta Innovates provides technology commercialization advice, mentorship and access to resources like program support, equipment and funding to the province’s technology ecosystem, some of which is funneled through eight regional innovation networks (RINs) run out of Fort McMurray, Grande Prairie, Lloydminster, Edmonton, Olds, Calgary, Lethbridge and Medicine Hat to startups. In addition to accessing capital, RINs can tap into the provincial agency’s technology development advisors for coaching and advice on business and technology to help bring entrepreneurs together with partners and services within their areas.
The Role of Regional Innovation Networks
APEX is one such RIN that is helping startups shake things up in the southeastern Alberta technology community. The creativity starts at home where Tracy Stroud, APEX's Business Development Manager, and her team search for original ways to fund an organization that has a wide reach, but low population base. “Technology is moving faster than ever before,” she explains. “It’s hard to only depend on our resources or that of municipalities to keep up.”
“Technology is moving faster than ever before. It’s hard to only depend on our resources or that of municipalities to keep up.” - Tracy Stroud, Business Development Manager at APEX
Her group focuses much of its work on new industries. “We have the Suffield Base, which has unrestricted airspace for unmanned vehicles, great solar and wind resources for renewable energy companies, a new cannabis facility and even cryptocurrency,” says Stroud.
Just last year, a client approached them with a unique challenge involving testing a new turbine prototype that they wanted to ensure fit with existing regulations. Stroud’s team directed the turbine company to product development resources and worked together with the client and Medicine Hat’s development investment readiness team to help them find the proper process for testing its prototype on the local college’s micro-grid.
APEX also collaborates with partners Community Futures Entre-corp, Medicine Hat College and Alberta Innovates to operate an incubation program. The collective resources of this tripartite partnership enable APEX to offer capital advice and allow nascent entrepreneurs to work closely with experts in everything from business plans, technology and strategic partner pathfinding, to product development, research, market development and exports. Over the last year the agency, which operates under Economic Development Lethbridge (EDL), offered training events for over 600 businesses and held face-to-face meetings with 100 startups.
Renae Barlow, the Vice President or Entrepreneurship and Innovation for Lethbridge’s Tecconnect (the regional innovation network of Southern Alberta called RINSA), joined forces with a local industry to make the most of the area’s geospacial industry. By providing support to BlackBridge, a satellite image provider, the the hub received advice on how to offer encouragement and resources for other entrepreneurs with their eyes on satellite imagery. This includes GPS and land mapping applications used for land direction, to inform farmers about field and flooding and for the military. BlackBridge was acquired by San Francisco-based Planet Labs in 2015.
Another success story involved an accounting firm that came to Tecconnect with a novel idea that would provide customers with real-time financial statements. Barlow’s team found him a programmer and funding from Alberta Innovates enabled him to create software that business customers could use to instantly access information on their investment returns and costs. It wasn’t long before the innovation caught the attention of Intuit, the taxation software company behind Quick Books and Turbo Tax.
Not long after its formation, Tecconnect broadened its scope to incubate technology startups. It rents out its 10,000 square feet to entrepreneurs for a minimal fee. The facility includes 21 offices, meeting rooms for staff or investor meetings, high-speed internet, a meditation room and even a ping pong table all designed to get entrepreneurs talking to each other and accessing coaching support and funding.
Tecconnect/RINSA meets with about 200 entrepreneurs a year and provides training and support from ideation to launch. The hub stays on top of client requirements through regular surveys that ask about their needs and the usefulness of programs. So far, Tecconnect has provided workshops and business advisors to help hatch 16 companies and has another seven incubating. Going into 2019, says Barlow, colleges and universities are creating their own incubators to provide students with a soft-landing space with groups like Tecconnect.
Innovation's Growing Pains
It would seem like innovation hubs would be the ideal fit for a province with risk-taking savvy. But doing things differently inevitably involves growing pains, and unexpected challenges can get in the way of any transformation. A big one for most innovation hubs is funding and access to motivated investors. At Startup Calgary, funding is important to make their services affordable. The organization keeps workshop fees as low as $20 by fine-tuning its offerings based on entrepreneurial input. Every month the group puts out a question of the day that asks, “What keeps you up at night?” or “Where do you see gaps in our services?” Recent results show that they need to advance their programs. “In the last 12-14 months,” she says, “we find clients have done their homework and are ready to upscale their businesses. The community is becoming more mature.”
APEX operates on a lean budget but strives to keep services free for startups whenever possible. “There’s never enough to do all that we’d like to do,” says Stroud. To make the most of its funding and resources, APEX also works with local partners, like Tourism Medicine Hat and local businesses, when it can. Just recently, an area accounting firm pitched in and offered a $50,000 grant to startup companies.
Despite the proliferation of innovation hubs and incubators in Alberta, Kam Nemec, CEO of Edmonton-based GreenGreen, an ewallet developer for cannabis purchases, doesn’t feel enough is being done to support new startups. He feels some hubs waste entrepreneurs’ time with complex and onerous funding procedures that concentrate startup energies in the wrong places. Some applications have to go to as many as seven or eight agencies. This approach, he says, does not align with startup culture, which defies rules and moves fast: “If all you’re doing is sitting in meetings and filling out government documents, you’re not focusing on the right areas.”
It’s as if the hubs and tech startups are working towards different goals, says Nemec.
Government agencies want accountability, while investors want a good return on their investment, he explains: “This leads entrepreneurs to structure funding applications for research instead of for something that will make money for investors or make a huge impact on the consumer.” He also thinks government workers push low hazard ideas to avoid negative optics, which he says is counter to the concept of risk-taking, innovative thinking.
“Let’s face it; what government employee wants to push for an idea that might put teachers or bank employees out of work?” Nemec said. He claims government agencies are unlikely to support high-risk concepts when only one out of a 100 tech startups succeed, but investors are willing to invest, hoping that one will give them a five time return on their total investment.
Startup Calgary is an example of a tech hub that deals with the funding issue by encouraging startups to pursue financing through sweat equity and the “love round,” where entrepreneurs reach out to family and friends, customers and private investors before going after federal funding from such groups as the National Research Council and Industrial Research Assistance programs or Alberta Innovates grants. Says Gordon, “Of course, the best way to finance your business is with revenue.”
Scott Edgar, CTO and co-founder of Edmonton’s Aris MD, a company that provides 3D visualizations of medical data, fully supports the innovation hub concept and applauds Alberta Innovates for its adaptability, but feels the hubs sometimes get in the way. “They have a mandate to build startups but some don’t understand the technological space or have the experience to know what’s involved,” he says. Edgar points to one well-funded group that charges startups exorbitant fees for studies they don’t need, and others that pass judgement on innovators' ideas. He says, “It’s not up to these agencies to pick and choose.”
He feels hubs can sometimes hinder the innovative process by bringing in angel investors who write small cheques in exchange for large equity stakes, seats on boards, first right of refusal on first investments and a whopping 18 per cent interest on convertible debentures without offering enough benefit. He tells the tale of one angel investor that requires startup recruits to to pay $1,500 each for a weekend course and then only ends up investing in two or three of them. Edgar, who has experience running his company partly out of California, says “One of the rules in Silicon Valley is that if someone wants you to pay to pitch your idea, you’re in the wrong room.”
Linke-Boyko recruits mentors from specific areas to support companies in their early stages of development at Startup Edmonton. Her tech hub also offers space and programs that support foundational skills, such as its Preflight program, which teaches startups how to refine and prove markets, build and launch their tech products, prepare to pitch to investors and sell to customers. Nemec likes this approach. He feels hubs should be educating startups on standard bread-and-butter procedures common to all tech companies by offering examples of such things as incorporation, payroll planning documents and safe note agreements. “That keeps the startups focused on building their products and on attracting investor interest,” says Nemec.
And, although most innovation hubs boast of the shared spaces they provide, Chandra Devam, CEO and co-founder of Aris MD, has doubts about whether physical space is even needed to cross-pollinate ideas. She thinks it happens on its own in industry through social media and at big events, where startups meet industry representatives who will call them back.
“I work with people all over the world that way,” she said. To get fast advice on how to start up a tech company, she suggests calling a Silicon Valley lawyer that doesn’t charge for the first 30 minutes. Nemec says everything startups need can be found on the internet. For example, he uses a website called Y Combinator, which offers free resources online that deal with everything from how to create a capitalization table and raise money, to marketing and best practices.
Most Alberta entrepreneurs think hubs should be committing a good part of their resources to educating startups about what the competition will require of them as well as to connecting them with funding sources that will put them on the international stage. Says Nemec, “It’s all about putting rich and smart people together. Innovation hubs can take you to a conference and put you in a room with investors, but then it’s up to the startups to close the deal.”
Tecconnect is one hub that has tried this approach. Barlow says it all started when some local students approached her about building a company to produce a biotech device that would measure oxytocin levels in real time. Alberta Innovates provided the travel funding and Tecconnect’s group of advisors coached the students on how to safeguard their intellectual property while talking to large companies at Medica, the world’s largest pharmaceutical conference in Germany.
Devam figures it costs Aris MD a minimum of $15,000 up front to present the company’s ideas on a global stage and says if companies can’t afford to present their ideas internationally they can’t make contacts or attract investors. “Then how are companies like mine going to bring money back to Canada?” she asks. She’s not alone. A 2016 Deal Flow Study by Alberta Enterprise Corp. found 62 per cent of companies surveyed are concerned about their ability to access capital.
A 2016 Deal Flow Study by Alberta Enterprise Corp. found 62 per cent of companies surveyed are concerned about their ability to access capital.
Nemec adds, there’s nothing that will scare off an investor faster than a startup that can’t afford to invest in this kind of exposure.
Part of the problem, says Nedohin, is that Alberta’s tech investment community is young, and its members don’t understand how to provide capital in a way that makes it easy for entrepreneurs. “We’re a square peg in a round hole,” he says. “The mechanism we use to invest through for a technology startup is very different from that you would use for an oil and gas venture.”
The Alberta Government's Efforts to Support Startups
The Alberta government has heard the call for increased promotion of the province’s technology sector. Last September, the province awarded a three-year, $90,000 contract to the San Francisco-based Connection Silicon Valley and Alberta-based JPC Corp. to liaise with California’s Silicon Valley. In a recent Calgary Herald interview, Connection Silicon Valley CEO Joanne Fedeyko discussed establishing Alberta's technology industry in Silicon Valley, but it’s early in the game. She felt Alberta investors’ risk-aversion mindset is probably what is hampering the growth of the ecosystem. According to Fedeyko, Canadian investors tend to avoid startups in the early stages when they need the money and wait until they’ve reached the $1 million mark in revenues, a point at which they already have traction and the ability to scale.
Despite these efforts, Alberta’s investment in information and communications technology (ICT) per GDP is low compared to the rest of the country. (Investments that are considered an ICT investment include software, IT and communications equipment). A 2018 Conference Board of Canada report on ICT investment showed the province lags behind Ontario and New Brunswick with an ICT investment of only 2.29 per cent of GDP. Plus, the report only gives the three top provinces a grade of C. This despite Alberta Innovates’ $298 million budget, of which over 60 per cent, or $182 million, is given out in grants, according to its most recent March 2017 annual report.
Lower ICT investment levels per GDP could account for Alberta’s low ICT output contribution. A 2017 report by the Information and Communications Technology Council reported an ICT output contribution for Alberta of $9.1 billion in 2017. That puts Alberta in fourth place in Canada for annual growth. Alberta Enterprise’s Deal Flow Study recorded 1,373 technology companies in 2016. Some 95 per cent of those are located the province’s two largest cities with over 60 per cent based in Calgary.
Alberta Enterprise’s Deal Flow Study recorded 1,373 technology companies in 2016. Some 95 per cent of those are located the province’s two largest cities with over 60 per cent based in Calgary.
The Crunch to Attract Top Talent
Another big concern is securing a steady supply of tech talent that stays in the province. Edgar says he sees University of Alberta computing science students being hired by American companies before they even graduate. APEX’s Stroud is calling for more training programs to prepare tech students for jobs in new industries like cannabis.
Nedohin says Startup Edmonton’s awareness building events like Demo Camp have done a great job at promoting the city’s tech community, which helps him to attract top talent. “We’ve been able to attract people from Montreal and Seattle because they recognize our community as being fostered and growing,” he adds.
A 2016 State of Alberta Digital Infrastructure Report published by Cybera estimated a projected shortage of ICT workers for certain ICT roles of more than 400 per cent between 2015 and 2021. The report, conducted by a non-profit agency charged with accelerating Alberta tech adoption (and funded in part by Alberta Innovation and Advanced Education) stated that finding skilled labour, or qualified IT trainers, would be an ongoing issue.
Nemec, who has had to hire staff in Denver and as far away as the Netherlands and Ukraine, says Alberta has great schools and talent, but is losing many because small startups can’t match the salaries offered by larger companies, many of which are in the U.S. To keep our talent in Alberta, he figures we need to ensure there are enough startups to offer new graduates something interesting to work on and that the companies have the resources to pay them well. Nedohin says Alberta’s universities are graduating world-class computer science engineers and local firms like Bioware are bringing tech expertise to the city, but there is a shortage of mid-to-senior level technology workers.
To this end, the Alberta government announced in August 2018 that it would be funding more than 400 new post-secondary seats for training to boost the province’s growing tech sector. Their goal is to add at least 3,000 tech-related seats to post-secondary institutions across the province by 2023 and they have set up a Talent Advisory Council on Technology that will advise them on how best to arm Albertans with the training they’ll need to succeed in a tech-focused future economy. The Alberta government has also allocated a total of $50 million to support the spaces, $7 million of which goes to scholarships.
Are Albertans fully committed to innovation?
Part of the problem with fostering innovation in Alberta is (still) getting Albertans to let go of the idea that the oil and gas industry is all they have. A 2018 Queen’s University Smith School of Business poll of 802 Calgarians showed only 31 per cent of workers from the energy field would like to land a job or set up a new business in the technology/fintech sector. Nemec thinks Albertans may be hesitant to leave oil and gas because they’ve invested their lives and resources into hoping the industry will recover. “It may or may not,” he says, “but if your entire strategy is built around this hope, you will never fully commit to innovation,” he said.
Yet, the same Queen’s survey reported that 78 per cent of respondents believe Calgary has the potential to become a national innovation hub. The city was also identified as a top city for technology investment in Price Waterhouse’s Q2 2018 Money Tree Canada report. The city was considered a top market with eight deals transacted in that quarter worth $99 million. As a result, Queen’s business school set up a Calgary chapter to boost the province’s innovation, collaboration and idea generation.
“It’s definitely doable,” says Nemec. He points to Stockholm as a good example of a small country that has a robust innovation ecosystem and to Austin’s success in diversifying its oil and gas economy with technology. They’ve made it, he says, because government agencies are more aligned with what startups are trying to accomplish and have an internationalist mentality.
In her interview with the Calagary Herald, Connection Silicon Valley CEO Joanne Fedeyko commended the Alberta government for funding and fostering diversification but pointed out the obvious. The use of taxpayer money invites criticism: “What I’d say is where’s everybody else?” She’d like to see a group of oil executives come together and put their money into creating something like a $10 million angel fund. She added that if government funding is the only thing the province has, and there’s nobody else stepping up, that’s a problem.