Cut adrift: B.C.’s tech sector sees government support dry up

In a Gastown studio filled with virtual-reality gaming startups, LlamaZOO is doing something different. Using tools developed for computer gaming, it is developing services for the resource industry, replacing graphs and maps with 3-D visualization. The firm’s customers include some of British Columbia’s biggest names in mining and forestry, who see the opportunity to speed up permit applications, or reduce the cost of road surveying.

LlamaZOO is one of 20 tenants of the Cube, a business incubator for startup companies specializing in computer-generated simulated environments. And like everyone else in the studio, it is about to lose the support that has helped it get ready to grow.

The BC Tech Association says it is shutting down the Cube in May, blaming the B.C. government’s decision not to pitch in with Ottawa to fund it. Meantime, this month, Ontario’s high-tech association celebrated a $52-million investment from the federal government with another $41-million promised.

“This is a hit to the industry, it’s a step backward,” LlamaZOO’s co-founder, Charles Lavigne, said in an interview. He’s hoping to find alternate funding to keep the collective alive.

In the fall of 2017, B.C.’s Jobs Minister Bruce Ralston cut a virtual ribbon at the grand opening of the Cube. The provincial government was keen to secure B.C.'s status as a global leader in augmented-, virtual- and mixed-reality technology, by helping these startups grow with studio space tailored to their industry, along with the human connections that are key to innovation.

The province’s tech industry employs more than 114,000 people and generates nearly $15.7-billion for the B.C. economy. That is more than double the number of jobs in the mining, forestry, fishing and oil and gas sectors combined.

But even as the tenants were moving into the new studio space, cracks were starting to appear in the province’s tech sector. In 2017, some of the biggest success stories – Hootsuite, BuildDirect and Shoes.com – were in various stages of contraction.

B.C. tech leaders say since 2017, Ontario has muscled its way into leading tech growth in Canada, while provinces such as Alberta are aggressively wooing the sector.

The federal investment promises a significant payback for Ontario: It is expected to launch 30 new companies worth $100-million or more in revenues in the next five years, creating 18,000 skilled jobs.

At the same time that Prime Minister Justin Trudeau was in Kitchener, Ont., announcing his government’s investment in the Scale-Up Platform, the BC Tech Association made the difficult decision to shut down the Cube, putting 20 tenant companies on the street by the middle of May.

The association maintains the Cube and the BC Tech Hub – which focuses on helping accelerate companies that are ready for growth. The association gets 60 per cent of its funding from the private sector and, until this year, the balance came from federal coffers under a now-expired program.

But under the new funding regime, Ottawa was looking for provinces willing to share the investment. The B.C. government would not make a financial commitment, and Ottawa walked away.

“The consequences were clear. Everyone was aware in the absence of government funding, we’d have to close the Cube, to let people go and tell all these thriving companies that they are going to be disrupted,” BC Tech Association president Jill Tipping said in an interview.

For a commitment of $2-million a year, Ms. Tipping believes B.C. could have kept the federal government in the game in British Columbia.

Mr. Ralston said the closure of the Cube is “regrettable” and acknowledged that his government does need to do a better job of leveraging federal funding.

He insisted the sector is in good shape. “I disagree that B.C. is losing momentum,” he said in an interview. He noted that B.C. is attracting new tech headquarters and expansions, including retail-giant Amazon, and Microsoft. “We are poised for growth.”

But for startups, getting across the “valley of death" – which in the tech industry means developing an innovation into a commercial success – is getting easier in Ontario, and just got harder in B.C.

“It should have been us,” said Ray Walia, co-founder of the Launch Academy, a privately funded startup incubator in Vancouver.

In 2017, British Columbia was poised to be a world leader in the tech sector. But Mr. Walia said the province hasn’t nurtured growth because there isn’t the same public funding other jurisdictions offer to build the foundations needed to grow the sector in the current, competitive climate.

“There are so many things going in our favour here in British Columbia," he said. "But the NDP government has decided they have focused their resources and energy on other things. … It is taking a step backward, where other parts of the world are stepping on the gas.”

Having a great idea for innovation is one thing, but successfully crossing the valley of death is more likely when there are mentors willing to help navigate the way.

Alexandra Greenhill is the head of Careteam, which offers a digital health platform to co-ordinate complex medical care.

Her company was a recent tenant in the BC Tech Hub and is now, she hopes, on its way to commercial success, with major health clients now in B.C. and Ontario. In less than three years, the company has developed a functional product and revenue. She says that’s thanks to programs she was able to tap into - incubators that foster startups and accelerators that help small companies grow - that provided expertise in aspects of the business that are outside of her experience as a physician.

The next step for Careteam is expansion – scaling up – but Dr. Greenhill doesn’t see the support in B.C. that the industry needs. “We are in that moment where the ecosystem around us really matters,” she said. “We’re in a fragile place.”

The BC Green caucus insisted on an innovation commitment as part of its agreement to support the minority NDP government. But Green Party Leader Andrew Weaver said it is evident that the New Democrats don’t understand how to nurture the tech sector.

“The valley of death is a real issue in B.C. and there is a role – as other jurisdictions out there do – for government to create the centres, the hubs, to assist companies that are growing fast, to get across the valley of death," he said.

Jeff Booth warns that the B.C. government cannot take growth for granted.

Mr. Booth made his name in the B.C. tech sector as co-founder of BuildDirect, an online marketplace for home-improvement products, which at its peak was doing $120-million in annual sales. Mr. Booth learned a hard lesson in scaling up when the company’s expansion ambitions overreached. It has only recently emerged from creditor protection.

Today, he is immersed in the tech “ecosystem” as a mentor and angel investor. He sees incubators and accelerators as critical to building the sector in a sustainable way.

“Right now, B.C. could lead the way in virtual reality, in the whole new platform that is going to emerge in gaming, and we are going to give that up unless we invest in that sector," he said.

“B.C. needs to match what Ontario is doing. For a return on investment, I can’t imagine better money spent.”