Sense of optimism

Start-up growth in Atlantic Canada highest in decades

There is a lot of activity in the start-up community across Atlantic Canada, a lot more than most people realize.

Indeed, Entrevestor’s recently released annual report that follows nearly 800 startups across the region reported new investments of more than $600 million in these companies in 2021.

The growth of start-up businesses is at its highest levels in decades and is being strongly facilitated by a variety of public and private organizations collectively known as accelerators and incubators. Some also provide early-stage venture funding for start-up companies.

Over the last few months, David Campbell and I have had the opportunity to talk with many of the leaders of these organizations on our Insights Podcast. These conversations have been both enlightening and encouraging and left us both with a renewed sense of optimism about the future of the region.

PRIVATE SECTOR ACCELERATORS

Let’s start with a look at private sector lead organizations supporting the start-up sector across the region.

One of the best-known organizations in this regard is New Brunswick-based Propel, led by CEO Kathryn Lockhart. Propel was founded in 2003. by Gerry Pond, the so-called Code Father and well-known entrepreneur, and Jeff White, CEO of the New Brunswick Innovation Foundation.

Propel is Atlantic Canada’s accelerator for tech start-ups and is working with a hundred businesses across the region and has worked virtually since 2018 with its client companies.

The Verschuren Centre for Sustainability in Energy and the Environment in Sydney was founded to help facilitate the transition to a green economy through innovative clean technology, especially in the biotech sector. Dr. Beth Mason, the centre’s CEO, recently talked with us about their efforts to provide large batch incubator services to their clients and the federal government recently announced an expansion of its bioreactor facility to become a national biomanufacturing centre in Canada.

Volta is another private sector-led accelerator located in Halifax co-founded by Jevon MacDonald of GoInstant fame and three others in 2013. Volta is an innovation hub focused on co-work sharing space, mentorship and acceleration programming and according to their Interim CEO Matt Cooper is currently working with about fifty companies. Volta also offers a semi-annual Cohort Pitch event where up to five companies receive $25,000 in investment for their pitch ideas.

In Prince Edward Island, the PEI Bio-Alliance led by CEO Rory Francis has been busy building an impressive bioscience cluster on the island that represents 60 companies employing 2,000 workers and contributing $400 million of export-driven revenue to the island’s economy. I recently wrote about BioVectra’s announcement to build an RHna vaccine manufacturing facility on the island that will further grow this cluster. The Bio-Alliance is a private, sector-led not-for-profit that provides both acceleration and incubation services and was responsible for establishing CASTL, an innovative talent development initiative.

In Newfoundland and Labrador, Energy NL (formerly NOIA) led by CEO Charlene Johnson is a private sector industry association focused on the transition of the energy industry to a more sustainable future. As a membershipdriven organization, its focus is more about advocacy and networking than support of start-ups but is playing an important role in helping the province transition to a more sustainable energy future.

PUBLIC SECTOR ACCELERATORS

In New Brunswick, NBIF (New Brunswick Innovation Foundation) was established in 2003 and has invested over $100 million in venture funding across a variety of sectors and funded nearly 500 applied research projects and helped create more than a hundred companies since its inception. Jeff White, NBIF’s CEO, recently told us the Foundation has achieved an annualized return of 6.5 per cent on its investments, which is one of the metrics used to measure its performance.

Innovacorp, Nova Scotia’s Crown corporation focused on the start-up community, is perhaps the most comprehensive organization of its kind in the region, combining venture capital funding, acceleration services and incubation facilities (The Labs, the Bays and COVE).

In a recent conversation, Malcolm Fraser, Innovacorp’s CEO, indicated its return on investment portfolio that has hit 22 per cent, largely as a result of its investment in META Materials that provided a 35 times return of its investment last year and for which Innovacorp received the prestigious 2022 Venture Capital Deal of the Year.

UNICORN COMPANY

By the way, META Materials was Innovacorp’s first unicorn (a company to achieve $1 billion in capital value). Innovacorp is working and providing venture capital with 60 clients, with a prospect list of over 200 companies in the pipeline. Some of Innovacorp’s client companies to watch include Planetary Technologies, Graphite, Dash Hudson and CarbonCure Technologies.

The Genesis Centre, led by CEO Michelle Simms, is Newfoundland and Labrador’s innovation hub at Memorial University. Genesis develops and supports technology entrepreneurs and features its flagship Enterprise Program, a three-year incubator program that began 25 years ago. Genesis companies have raised more than $600 million, generate more than $200 million revenue annually and employ more than 2,500 people.

Verafin was one of Genesis’s clients, a company that was sold to Nasdaq in November 2020 for US$2.75 billion, the largest buyout yet for Atlantic Canada. The company has developed fraud detection technology and anti-laundering software for the banking sector. Importantly, the company continues to be headquartered in St. John’s where it employs 900 workers. Genesis does not take a stake in the companies it supports financially, but rather uses a unique royalty approach to recover its investment once its Enterprise clients achieve certain revenue thresholds and such royalties are further reinvested in new start-ups.

THE ROAD AHEAD

One thing is clear. There are increasing levels of collaboration among those organizations supporting start-ups across Atlantic Canada. One example is the Ocean Startup Project, a co-funded, pan Atlantic collaboration that includes Canada’s Ocean Supercluster and founding partners Genesis, Innovacorp, NFIB, PEI BioAlliance, the Creative Destruction Lab and Springboard Atlantic.

Many of the start-up activities are being supported by those who have successfully sold their businesses and who are re-investing in new companies in the region. There is growing evidence of the impact on start-ups from the immigrant community who appear less risk-averse than their Canadian-born counterparts. The impact of universities and community colleges is becoming increasingly important as a source of new ideas and innovation for start-up companies.

This augurs well for the future economic prosperity of the region which for too long has been under-represented proportionally in terms of the size of its private sector relative to the rest of the country and too reliant on public sector jobs. This could be a turning point that might even lead to eventually no longer being labelled a “have not” region. Fingers crossed.