The economic well-being of Atlantic Canada has depended on natural resources for decades. Forestry, fishing, mining and oil refining have created thousands of jobs, launched many businesses and built communities.
A number of experts suggest an economic shift is now unfolding on Canada’s East Coast.
Former telecommunications executive Gerry Pond is one of many people investing in the region’s burgeoning technology industry. In the past 10 years, the sector has created hundreds of high-paying jobs and dozens of companies. It has also attracted a regional venture capital fund.
“This is all about getting better,” Mr. Pond says.
Halifax-based Build Ventures launched on May 14, fuelled by investments from the Government of Nova Scotia ($15 million), the Government of New Brunswick ($15 million), the Government of Prince Edward Island ($2.5 million), BDC Venture Capital ($10 million), Moncton-based Technology Venture Corp. ($5 million), and even its fund managers ($1 million). Build Ventures will focus on series A investments – the first significant round of funding – for companies operating in information technology, clean technology, life sciences and other high-growth sectors. Investments in each venture will be between $1 million and $5 million.
“There’s really good opportunity for the fund to generate good financial return for investors,” Build Ventures partner Patrick Keefe points out.
Mr. Keefe says the East Coast is benefiting from skilled professionals, investment dollars and entrepreneur-led efforts to help the community, including New Brunswick-based startup accelerator Launch36, and Nova Scotia-based startup house Volta Labs.
“It’s really energized the community.” Mr. Keefe adds.
Since starting in early 2012, Launch36 has accepted 20 startups into its programs, where it offers them mentorship, workspace when required, and access to funding options. Eighteen of the companies raised a total of $5-million in investment, they continue to operate, and they have created 74 jobs. Fifteen are earning revenue.
“There is still much work ahead for the industry,” says Trevor MacAusland, executive director of Launch36. “We are getting much better at startups, but the next step is to create a group of scalable and sustainable startups. There’s a lot of concern about Canada’s inability to spin out the next Google, Nortel, RIM or OpenText. I am confident we will figure it out, but it is going to take some time to get there.”
Mr. Pond’s earlier bet on a young Radian6 paid a handsome cash-out when the Fredericton-based company was sold to Salesforce.com in 2011, for $276-million (U.S.) in cash and $50-million in stock. The multimillion-dollar sale of another New Brunswick company, Q1 Labs, to IBM, as well as Nova Scotia-based GoInstant to Salesforce.com soon followed. The nearly $1-billion proceeds from these exit deals created international headlines for the region and roughly 50 millionaires.
“That brings a lot of attention and attention brings people looking,” Mr. Pond says.
He adds investors are now eager to know what Atlantic Canada has to offer. The interest, combined with new investment dollars and successful technology entrepreneurs looking for new opportunities, has created a renewed boost of confidence in the region, Mr. Pond adds.
“Success brings success,” he says, adding Atlantic Canada is on its way to becoming a tech hub.
Industry data confirms Mr. Pond’s point of view. Statistics from Atlantic Canada investment portal Entrevestor.com show the number of East Coast companies funded in 2012 soared to 65 compared with 26 the year before. Total funding also rose to $59.1 million compared with $55.9 million in 2011. Many of the companies attracted investment from outside of Atlantic Canada from investors ranging from Silicon Valley funds to billionaire Dallas Mavericks basketball team owner Mark Cuban.
“There’s huge opportunity here,” Mr. Pond says, adding Atlantic Canada’s next coming of age will likely lead to more significant exits.
New entrepreneurs and new businesses are also bringing more jobs. Saint John-based East Valley Ventures, an organization Mr. Pond helped found, has 26 young companies in its portfolio. These businesses have created employment for dozens of people.
“They are all going to do well,” Mr. Pond predicts.
He points to a number of companies worth watching, such as Introhive and Userevents. They already boast experienced teams, promising markets, and have millions in investment.
OneLobby founder and CEO Jordan Smith understands the value of experience. The young entrepreneur teamed up with Radian6 co-founder Brian Dunphy and regional tech titan Todd Murphy to start the collaborative event management company in 2012.
“Our wealth is in our community and ecosystem”, Mr Smith says. “By nature, Atlantic Canadians are helpful and most of us check the ego at the door. Everyone helps each other, whether it’s with landing investors, customers, introductions or any other opportunity. Atlantic Canadian mentors are world class.
“We have had $1-billion worth of exits from this region in recent years and all that knowledge and experience gets funnelled right back into our ecosystem. It takes a community to build a company and we have the best one in Canada.”
Milan Vrekic, executive director of Nova Scotia’s recently launched Volta Labs Inc., an incubator for technology companies, says he hopes the success will trickle down to the younger generation. “We need to get kids exposed to computer science at an earlier age. We have self-educated kids selling their tech companies for millions of dollars even before they get any formal training through school. This must change.”
Mr. MacAusland, for his part, likes what Build Ventures is offering, and Mr. Pond, who helped found Launch36, agrees: “This is very good for us.”
He says young companies in Atlantic Canada need capital for when the time comes to make the often-risky move from startup to revenue generating business.