Oxford Properties Group and technology startup accelerator OneEleven are aiming to turn Toronto into the next San Francisco with Union Park, a long-term redevelopment of Front Street meant to transform it into a downtown innovation cluster.
The linchpin in the plan is the official reopening in May of 325 Front Street West, a cavernous 250,000-square-foot space that used to serve as an RBC data centre. The five-storey building, currently in the midst of renovations, will eventually house hundreds of high-growth startups and development labs for blue-chip companies.
“It’s a catalyst for the innovation community,” said Oxford Properties executive vice-president Michael Turner. “We think we can bring all of it together to do something that is totally unique to this city.”
The plan has already allowed OneEleven, which moved into the building in January, to significantly expand its operations. The accelerator provides support services and office space to post-seed-level startups, or those that have already raised between $1-million and $5-million in funding.
In its previous 15,000-square-foot space, OneEleven was able to accommodate up to 14 companies at a time. With 50,000 square feet of newly renovated offices so far, it has 26 companies, and expects to have 50 by the third quarter of this year.
Participating startups, which pay membership fees rather than give up equity stakes, typically range from a few employees to up to 40, and stay with the accelerator between 18 to 24 months.
Current companies include corporate benefits facilitator Humi, courtroom case predictor Blue J Legal and sales software provider Nudge. Graduates include fast-growing startups such as point-of-sale software provider Tulip Retail, online lending marketplace Borrowell and law firm management tool maker Clio.
OneEleven expects to add one net new company every month for the next 12 months.
“We are completely amazed at how many incredible companies are out there that fit our model and our criteria,” managing director Bilal Khan said.
Clustering companies into a singular hub is the best way to take Toronto’s vibrant startup scene to the next level, he added. Putting them together will allow them to share advice and resources, including talent and customer leads.
The centralized location can also serve as a one-stop-shop for out-of-town investors, who can meet with a number of startups when visiting, rather than just one or two companies.
Paul Teshima, co-founder and chief executive of Nudge, said clustering can also deliver intangible benefits.
“If you’re a small team and you’re working hard or working late, it’s sometimes lonely. When you have a hundred people in the office, it’s way less lonely. You feed off that energy.”
Outside observers are also fans of the strategy.
Technology hubs can act as talent magnets because they reduce the risk for employees of working for unsuccessful companies, according to Ajay Agrawal, the Peter Munk professor of entrepreneurship at the University of Toronto’s Rotman School of Management.
With the demand for tech talent being so high, workers can easily walk across the hall at a hub and get a job with a new company if the one that hired them goes out of business.
“You don’t have to move and get a new parking spot and get a new day-care place for your kids,” he said. “They decouple the risk to the worker from the risk to the company.”
The other floors in 325 Front Street will eventually house companies that outgrow OneEleven’s accelerator, Mr. Khan said, as well as those that secure larger series B and C funding. OneEleven is also receiving interest from large corporations, including banks, that want to locate their innovation labs in the building.
Many such operations are currently scattered throughout Toronto and adjoining municipalities, and they, too, will likely benefit from the centralization of talent, he added.
OneEleven sold Oxford Properties on the cluster plan via their mutual relationship with the Ontario Municipal Employees Retirement System. The fund counts Oxford as one of its major investment divisions, while OneEleven is also a key partner.
Oxford, which owns 13 acres of property along the south side of Front Street, sees the Union Park tech hub expanding eastward toward Simcoe Street. The company is working with the Metro Toronto Convention Centre, which sits right in the middle of that corridor, to see how it could potentially benefit from the plan as well.
The Front Street hub will also act as a pipeline of new tenants for Oxford, Mr. Khan said, since graduates will inevitably seek out new office space as they outgrow OneEleven.
“They see the long-term and overall benefit to doing this.”
The 2017 Globe and Mail Small Business Summit is a one-day conference of insightful sessions, proven business growth strategies and innovative ideas from the country’s brightest business leaders. Full details at globesummits.ca.