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Mike Bot, left, and Matthew Sheridan of Nix test the companys colour sensor in their lab space at McMasters Innovation Park in Hamilton on Friday April 15, 2016.

Glenn Lowson/The Globe and Mail

This is part of an occasional series on Canada's economy and its shift away from resources.

Josh Lombardo rounds the corner in his black Ford truck, the vehicle sporting the decal of GoWrench, the mobile auto-repair business he started in Hamilton last year. A Honda Civic with a jammed lock is waiting for him in a driveway on this street in the Hamilton Mountain neighbourhood.

This is the second time Bernadette Jalsevac, the Honda's owner, has used GoWrench.

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"It's so much easier to get them to do the repair right here. I hate taking the car in," she said.

Mr. Lombardo, a 29-year-old entrepreneur, is providing a profitable alternative to one of the most inconvenient tasks of modern life – taking the car to a garage for repairs. But to propel his business to a national franchise as he would like to do, Mr. Lombardo knows he needs a long-term business plan, sales advice and mentoring.

So he has become a member of the Forge, an entrepreneurship centre primarily targeted to young grads of McMaster University and Mohawk College.

Financed with money from the university and city and provincial governments, it's housed in a former factory that less than a decade ago was turning out fridges, stoves, washers and dryers. Now the building has been converted to space for a city innovation centre and dozens of startups alongside the Forge.

Like many former industrial or manufacturing towns or regions facing possible decline, from Southwestern Ontario to Nova Scotia, Hamilton is turning to the entrepreneurial economy for its future. New companies headed by young university and college students and graduates are seen as playing a key part. The hope is that a new generation starting up businesses will choose to stay in these regions.

"We're giving students a bit of money where they will be able to take off," said Sean Van Koughnett, the dean of students and associate vice-president of students and learning at McMaster University. "And we said, 'Let's do it in Hamilton, so we are more likely to keep students who can contribute to the economy here.'"

Over the past five years, Hamilton's economy has been steadily diversifying. According to numbers provided by the city, manufacturing grew by 1 per cent, while jobs in education, finance, health and professional services increased by as much as 47 per cent. (And steel is alive: ArcelorMittal will be hiring 1,000 workers in the next three years.)

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Students can move that further.

"Even if we can do 10 per cent of students on campus starting up a business, that's huge numbers, there's 24,000 students here," Mr. Van Koughnett said.

But creating an entrepreneurially driven economy is still more art than science. Multiple studies suggest the recipe relies on finding people with the right mindset and throwing them together.

Mr. Van Koughnett used that formula to start up Waterloo's Velocity Residence. The space, targeted to students who wanted to become entrepreneurs, grew into the university-wide Velocity centre, a launchpad for Kik, Thalmic Labs and Pebble, among other companies with global reach. Now Velocity is recognized as an important element of the Kitchener-Waterloo technology region.

"When you think about how innovation happens, you have to capture the serendipity. What better way to do that than people who are living together 24/7?" Mr. Van Koughnett said.

He hopes to have an entrepreneurially focused residence at McMaster in the coming years, but until then, the Forge offers grads a desk, connections to each other and mentoring. Many new entrepreneurs are surprised by how tough the mentoring process can be.

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"So many people come in, and they tell us an idea and they're like, 'There, there's the idea,'" said David Carter, leaning back in his chair at Lake Road Restaurant, one of several new places that are giving Hamilton a reputation as a culinary destination. "And we say, 'Okay, but you're a very small part of the distance on this long journey.'"

Mr. Carter is a key mentor for young founders at the Forge and the executive director of the Innovation Factory, a centre for Hamilton businesses. His philosophy is to push young entrepreneurs to take their idea to market as quickly as possible.

"You will learn a lot by trying to go and sell it, because the things that are wrong with it may not even be things customers care about and you're better off knowing that sooner rather than later," he said.

He came to the Innovation Factory after more than a decade running a social-media and content-distribution company that he had expanded to Boston from his hometown in Burlington. Drawing on his own experience, Mr. Carter tells new entrepreneurs to think of Hamilton as a base from where they can reach the world while keeping costs down.

"People come in and say, 'I want to sell to Hamilton and McMaster.' I tell them, 'Your target market is the world,'" Mr. Carter said.

One of the Forge's most successful companies is doing just that. Taking up 3,500 square feet on the fourth floor of the same building as the Forge, Nix Sensor Ltd. makes a pocket-sized colour scanner that costs a fraction of the price of current technology. The invention has earned them deals with L'Oréal and DSM, a Netherlands-based food-industry company.

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"Just last week, the head of L'Oréal's innovation came to see us. He sat right on that couch in there," said Matt Sheridan, the founder and CEO, pointing to a meeting room the size of a walk-in closet.

The next step in the evolution of the Forge will be to make more Hamilton residents and businesses aware of the small enterprises it's turning out. Recently, it opened a downtown location, home to a math-enrichment program and to Start the Cycle, a bicycle-share startup, among others.

It's on a mixed strip: Across the street, a green smoothie bar jousts with the Reggina Social Club, an Italian establishment dating back decades.

"The more we invest and the further along we get the entrepreneurs in Hamilton, the more likely they are to leave a piece here," Mr. Carter said. "Versus Google hires a student out of university and they move to Silicon Valley. Then nothing makes its way to Canada."

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