Federal government names winners of $950-million ‘supercluster’ funding

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The federal government unveiled the winners of its flagship innovation funding program on Thursday, committing $950-million to five industry consortiums drawn from hundreds of companies, research institutions and industry groups that don't typically collaborate but that Ottawa hopes will create economic growth by combining forces.

Innovation Minister Navdeep Bains said the goal was to create "a made-in-Canada Silicon Valley" that will add billions of dollars to the GDP and get businesses to invest heavily in research and development – and create 50,000 jobs. The winners represented a broad cross-section of industry and academic players, which Mr. Bains said was the government's intent. "This was about seeing how the private sector can step up," he said in an interview. "We wanted to see more collaboration … more ambition" on the part of Canadian industry.

There was one winning bid from each of the country's main five regions, winnowed down from a list of 50 letters-of-intent submissions last summer: Atlantic Canada, Quebec, Ontario, the Prairies and British Columbia. Some notable regional powerhouse industries, including aerospace in Quebec and oil and gas in Alberta, were not represented among the winners.

An "ocean supercluster" co-led by energy company Emera Inc. and Clearwater Seafoods Inc., and also involving Irving Shipbuilding, Cisco Systems and the main universities in Atlantic Canada promised to use digital technologies to help develop Canada's off-shore industries, which contribute less than 1 per cent of Canada's GDP and should be doing far better, said Rob Orr, who manages an investment fund from Halifax on behalf of Walmart heiress Christy Walton and co-led the bid.

An "AI-powered supply chain" supercluster led by Quebec City tech firm Optel Group and backed by such Quebec corporate heavyweights as BCE Inc., Alimentation Couche-Tard, Montreal's Institute for Data Valorisation as well as the University of Waterloo, intends to use artificial intelligence and other cutting-edge technologies to improve business processes in retail, manufacturing and infrastructure sectors. "It was quite impressive to see people's openness to collaborate," Optel chief executive Louis Roy said.

The Ontario bid brought together the rival tech hub organizations of Waterloo and Toronto, Communitech and MaRS Discovery District, as well as large industrial companies ranging from car parts maker Linamar Corp. to Maple Leaf Foods Inc. along with some of leading tech startups from the region.

"We've got a unique advantage globally here in Ontario in that we have such a strong manufacturing sector and such a strong technology sector, and that if we bring the two of them together, we can be developing products and processes for the future that will absolutely impact the economy," Linamar CEO Linda Hasenfratz said in an interview.

B.C.'s "digital technology supercluster" bid was a regional huddle of more than 200 companies and 25 universities, research institutions and postsecondary institutes that brought together resource giants such as Canfor Corp. and Teck Resources Ltd., Microsoft Corp., Telus Corp. and local biotech success Stemcell Technologies. The consortium promised to invest more than $500-million alongside its government money to use technology to help create personalized gene-based cancer treatments, to improve geological data use to improve resource sector projects and to create a "teaching hospital for advanced manufacturing" according to the bid document, through use of virtual reality.

Finally, a "protein innovations" supercluster from Saskatchewan led by agriculture giants including Ag-West Bio Inc., Alliance Grain Traders Inc. and U.S. giant DowDuPont Inc. will look at ways to dramatically increase Canada's share of the growing global market for plant-based proteins, primarily by increasing the processing capacity for canola – a crop whose protein component is often overlooked in favour of its oil and grain output – and pulses such as chickpeas. "Let's not just export the grains and material, let's export the finished product," said Ron Styles, acting president of Protein Industries of Canada, whose group is proposing to spend $430-million, including $150-million to fund startups. "It's an enormous market and we're not taking advantage of it."

Together, Mr. Bains said the five bidding groups committed $1.5-billion to match government's $950-million. How much each group will receive is subject to negotiations in the coming months; Mr. Bains said the range would be $150-million to $250-million a bid.

There is also more work to be done within some of the consortiums, where tricky issues remain to be sorted out, including establishing governance structures of the non-profit organizations that will run each supercluster, how to select what projects get funded and how to share the spoils of intellectual property (IP) development that emerges from that work, Mr. Orr said.

"There's a lot we don't know," he said. "There's a lot of excitement here today. The real work starts tomorrow." Some critics have questioned the effectiveness of supercluster funding strategies, while on Twitter, venture capitalist Christian Lassonde suggested the program was driven by the same kind of regional parity considerations that have driven past politically minded federal government megaprojects.

University of Ottawa law professor Michael Geist said the federal government seemed to be using "a bit more strategic thinking" than with past government innovation strategies. "It's pretty clear in terms of the sectors they've identified and the dollars they're putting in this isn't just an attempt to say 'Hey, we're doing something about innovation,' but to think a bit deeper about how you can actually succeed."

McGill University law professor Richard Gold pointed out no country has successfully built up its innovation sector "without a government being proactive, so I'm glad to see they are." But he cautioned the government still had to deliver on other parts of its innovation strategy and cautioned that commercialization of IP developed within the clusters could become an issue, particularly given the involvement of foreign companies that typically shift IP developed in Canada to other jurisdictions. "If IP becomes a fighting issue between [supercluster participants] that means it's going to be hard to enter into an agreement" he said.

Conservative science critic Matt Jeneroux said in a statement it was "not right" for government to give money to superclusters when it was raising taxes on local businesses, arguing "the Liberals' economic policies are making it more expensive to operate a business in Canada and making us uncompetitive."

The superclusters funding initiative was originally unveiled as an $800-million program in the Liberal government's first budget two years ago but was upsized in last year's budget.

The idea behind the program is to draw together broad-based industry groups that commit their own money and in-kind contributions alongside government funding to work collectively to advance high-potential areas of the economy and make Canada more competitive. The government encouraged the nine finalists to lay out more ambitious job creation plans in their final bids and encouraged also-rans to join up with other bids. For example, an agriculture-focused bid from Winnipeg that did not make the shortlist teamed up with the winning protein bid.

The Liberals under Justin Trudeau have positioned themselves as an innovation-friendly government and have also made funds available for venture capital, cleantech and artificial intelligence and launched a procurement program to help startups sell their wares to government.