aboriginal business accelerator graduates its first...

SEPTEMBER 2016 • VOLUME 5 , ISSUE 4LAUNCHING AND SCALING

Accelerating Revenues 3 Youth Retention 13 Tax Credits 14

Aboriginal Business Accelerator Graduates its First Cohort

Build Cohort @VennCentre• GoBumpFree• IronflowTechnologiesInc.• MasterControl• StayGoldenApparel

Halifax Launch Cohort @VoltaLabs• MoveTheMedianBusinessConsulting• UvisorWealth• TheHiveMarket• SufataSoftwareSolutions,Inc.• Labfundr• NovaSpectrumAnalytics• Orchard• swifty(formerlyPairNPark)

New Brunswick Launch Cohort @PlanetHatch• Flowat• FollowMeCareApp• FMICo.• MOWABEInc.• rayZenInnovationsInc.• WEnTechSolutionsInc.• BlueSuitInc.

St. John’s Launch Cohort @CommonGroundNL• Fitfoods• SassyTunaStudio• FridgeFriend• Weaver• Vitalitics• MetricsFlow• HelpMeOrder• CreativeMaple

Charlottetown Launch Cohort @ StartUpZone• AdBlockingAware• RemoteVision• RabbitHoleStudios• AlphaTechBusinessandTechnologyInc.• TheTnTFoodExperience• TopFeed• Contacts-DB

35 Companies. 12 Weeks. 1 Demo Day.

Propel ICT introduces the Fall 2016 cohort. Next Demo Day 29th November 2016.

Are you ready for Atlantic Canada’s future?

Applications for Spring 2017 will open December 2016

APPLY-www.propelict.com/apply

GET IN [email protected]

CONTACT - @propelict

September2016•Volume5,Issue4EntrevestorIntelligence3

By Peter Moreira

Thischartsaysall youneed toknowabout revenuegrowthatAtlanticCanadianstartupsinthelastthreeyears.

Revenuegrowthattheregion’sstartupsisaccelerating.It’snotjustthatthey’reincreasingsaleseachyear.It’sthatineachofthelastthreeyearsthese innovative companies have improved on the growth rates fromthe previous year. And it is already having a bigger economic impact,increasingtheamountofexportsattributabletostartupsand leadingtoemploymentgrowth.

AndthemainreasonfortheaccelerationisthatEastCoaststartupsaregettingbigger.

ThedatathatEntrevestorcollectedfor2015hasrevealedtwoimportanttrends. First, we’re moving from a community of small experimentalcompanies to a group that includes several high-growth corporationswithinternationalreach.Asthesecompaniesgrowinsize,theydevelopstronger sales teams and refine their products to better meet marketdemand. We estimate there are now more than 130 startups (locallyownedcompaniescommercializingproprietary innovation for theglobalmarket)intheregionthathavemorethan$100,000inannualrevenue.Andofthese,about30havemorethan$2millioninrevenue.

Thatmeansthattheymaintainorevenacceleratetherateatwhichtheyincrease their sales. A company booking its first sales looks great intermsofgrowthforthatcompany.Buttheeconomicimpactisfargreaterwhen thatcompanyboosts itsannual revenues from,say,$500,000 to$1million.

It is theselargercompaniesthatarecreatingthesecondmajorfinding:overall revenue growth is actually accelerating. It increased about 30percentin2013,37percentin2014and66percentin2015.

Entrevestor collects data on startups across the region. (You can findan infographic with our findings on Pages 10 and 11 of this report.)We identified 368 startups at the end of 2015 and surveyed asmanyaswecould.Some152companiesrepliedtothesurvey, including127that provided data on revenue.While we in the media often highlightfundingbystartups,thegrowthinrevenueisthesurest indicatorofthehealth of startups. [When calculating revenue growth, we consideredonlycompaniesthatproducedrevenuein2015.Wedidnotincludepre-revenuecompaniesnorthosethathadfailedin2015.]

Bigger Companies Higher Revenue GrowthIt’s not just that Atlantic Canadian startups are bringing in more and more revenues each year. It’s that the rate of growth is actually accelerating.

Whatwe’refindingisthatstartupsarecomingtobelievethattheyhavetoatleastdoubletheirrevenuestobetakenseriously.“InSiliconValley,yourrevenuesshouldbetriplingoryou’renotgrowingfastenough,”saidSeanFahey, theCEOofMoncton-basedVidcruiter.Headded thathiscompanyis“trendingtowardthatandIdon’tthinkI’manoutlier.”

Few startups reveal their growth data publicly but many indicate thatsalesarerisingstrongly.Halifax’sDashHudson,whichanalyzesdataforInstagramusers,won’trevealrevenuedetails.ButCEOThomasRankinsaidDashHudsonchargesUS$1,000toUS$5,000amonthfortheservice,andithassomecontractsworthUS$125,000ayear.ClientsincludetheCondéNastmediagroup,Revolve clothingandHyattHotelsCorp. “InNovemberwe started to generate revenue on theSaaS (Software-as-a-Service)platformandit’sbeengrowingreallyfast,”saidRankin.

Itwillcomeasnosurprisethatstartupfoundersareremarkablyoptimisticabout revenuegrowth in2016.Overall, the founders thatalreadyhaverevenuesareforecastinggrowthof120percentin2016.Weconductedoursurveymainlyinthesecond-quarter,somanyoftherespondentshad

=

Revenue Growth is Accelerating

2013

30%

2014

37%

2015

66%

4EntrevestorIntelligenceSeptember2016•Volume5,Issue4

Four-Fifths of Sales Are to External Markets

WHAT’S INSIDE

Our Accelerating Sales Growth Our most recent survey reveals that revenues are not just growing at East Coast startups – their growth rate is accelerating dramatically................3

Developing a Sales Culture As revenue growth accelerates at Atlantic Canada’s startups, something is permeating the community that hasn’t been there before – a sales culture..................................................................6

The Startup Review After collecting survey responses from 152 startups in the region, Entrevestor has produced a series of metrics showing how the community is shaping up. Our artist Roxanna Boers used it to produce an awesome infographic....................................................8

The Nation’s First First Nations Accelerator The JEDI Aboriginal Business Accelerator is officially part of a shipbuilding engagement strategy. But the companies coming out of it aim far beyond the defense sector.....................10

Keeping Talented Youth on the East Coast Accelerating growth among East Coast startups is creating more and more employment opportunities – especially for young Atlantic Canadians......................................................13

Why We Need a Federal Tax Credit Peter Moreira argues that the government’s call for a bold plan for innovation should result in Ottawa offering investment tax credits to all investors – in and outside Canada........................14

Entrevestor Intelligence Entrevestor Intelligence is the quarterly publication of Entrevestor, which provides news on the startup and innovation communities in Atlantic Canada. These reports provide a deeper analysis of the startup world than can be delivered in daily news stories. To receive our daily reports, please leave your email address at entrevestor.com.

Cover photo: Melvin Nash and Melissa Lunney were two of the graduates of the first cohort of the JEDI Aboriginal Business Accelerator Program. Read the article starting on Page 10.

Entrevestor Intelligence Design: Roxanna Boers

aprettygoodideaofhowtheyearwasshapingup.Therealitywilllikelyfallshortoftheirexpectationsbuttheimportantpointisthatthereisstrongmomentumforsalesgrowth.

Attheendof2014,founderspredictedtheirrevenuegrowthin2015wouldaverage131percent.Intheend,therevenuegrowthtallycameinat66percent–abouthalftheirexpectationsbutanimpressivenumbernonetheless.

The story ofWellTrack illustrates how startups in the region are honing in on salesstrategyand learning to rampup revenues.TheFrederictoncompany,whoseofficialname is CyberPsyc Software Solutions, has developed online tools to help to treatanxietyanddepression.Andithasfoundareceptivemarketinuniversitiesandcolleges,whichareworriedaboutthehighincidenceofmentalproblemsamongstudents.

Thecompanyposted$120,000inrecurringrevenueinthesecondquarterof2016,andatpresstimewasontracktoincreaseitto$240,000inthethirdquarter.Thegoalistodoubleitagaininthefourthquarter,whichwouldgivethecompanyaneat$1millioninannualrecurringrevenue.

“We’veclosed$100,000to$150,000inthenextfewweeks,whichwouldputusclosetodoublingourrevenuesinthisquarter,justaswedidinthelastone,”saidCOONatashaO’Brieninaninterview.

Overall,thegrowthinsalesisaidingthegrowthinexports.Thesurveyrespondentssaidtheymadeonly19.6percentof theirmoney inAtlanticCanadain2015.Roundedoffto20percent,it’sroughlythesamelevelasthepreviousyear.About19percentoftherevenuescamefromtherestofCanadaand62percentfromoutsidethecountry.

Ifthereisonereasontobeconcernedabouttherevenuepicture,it’sthattheregion’sstartups are far too focused on just two markets – Canada and the U.S. Only fivestartupsof58respondentsdiscussingtheirprimarymarketlistedcountriesotherthanCanadaor theUS.Almost seven in10 startupsmakeall theirmoneyor virtually alltheirmoneyinthesetwocountries.Thisisaconcernbecausethestartupsaremissinghugeopportunitiesinfast-growtheconomies.AndashocktotheU.S.economywouldjeopardizethehealthoftheAtlanticCanadianstartupcommunity.ThecompaniesthatareexportingbeyondNorthAmericaareallreportingmorethan$100,000ayearinsalesandaregrowingquickly.*

Natasha O’Brien says WellTrack’s sales are on track to double each quarter.


By Carol Moreira

AsrevenuegrowthacceleratesatAtlanticCanada’sstartups,somethingispermeatingthecommunitythathasn’tbeentherebefore–asalesculture.

More and more frequently, the discussion in the startup community isconcentratingontheneedtoteachyoungcompaniesandyoungpeoplehow tosell things.Therearenewprograms focusingonsales.There’smountingpressureoncollegesanduniversitiestodevisenewcurriculum.Thereisaneverlouderdebateonhowsalesshouldbetaughtandhowtochangetheimageofsalesasaprofession.

“Salesisdefinitelyapain-pointinoursector,”EmilyBoucher,DirectorofMarketingandResearchatDigitalNovaScotia,saidinarecentinterview.

“We’retryingtohelpfillthegapswecanforthestartupsandSMEs(smalltomedium-sizedbusinesses)amongourmembers.”

DigitalNovaScotiarecentlybeganpilotingasalesdevelopmentprograminHalifaxforSMEs.Theprogramaimstohelpparticipantsfocusonissuessuchasgeneratingcashflow,attractinginvestment,developingstrategicpartners,acceleratingsales,andbuildingprofessionalnetworks.

Bouchersaidthepilotprogram,titledNavigatingNewChannels:ICTSalesStrategyBootcamp, teachesparticipants to consider five keyquestionsassociatedwithchanneldevelopment.Theseare:Whoaretheinfluencers

thatcanhave thegreatest impactonyourbusiness?Wherewillyoufind them?Howwill you leveragethemtogainthebiggestreachwiththe least effort? What trends areyou uncovering that impact yourplan?What can be improved thisweek?

“Ourprogram isaboutexecuting,”Bouchersaid.“Thefocusisontheparticipantsthemselvesusingtheirowncompaniesascasestudies.”

Sales curricula are also enteringbusinessprogramsliketheMastersof Technology, Entrepreneurshipand Innovation at St. Mary’sUniversity. In July, the Universityof New Brunswick at Saint John

added its first sales course in its MBA program. A pilot project, theprogramincludesaspecialcoursecalledSales.Ifstudentsrateithighly,itwillprobablybeofferedagain.Thenine-weekcoursedrawsheavilyonmentorshipfromtheprivatesector,invitingpeoplewithsalesexperienceto discuss the components of sales like negotiation, problem-solving,

communications and emotionalintelligence. It also delves intosalesethics.

“Thepointisnottotrainpeopletobecome sales people,” saidChrisWeir, theEYexecutivewholeadsthe course. “When people leavethiscourse,theywillbearmedwithknowledge and information, notsales skills.What I hope to do isgive the students an appreciationforsales, the importanceof it, theprofessionalnatureofit.”

Courses like this are needed toprepare students for the modernworkforceandhelpthemunderstandtherewardsofacareerinsales.

“Many youth are unaware of sales, and some are intimidated by it.Negativestereotypes,suchastheusedcarsalesman,persist,”ChantalBrine,VicePresident,YouthEmploymentattheHalifax-basedpersonnelsearchfirmVenor,saidinarecentinterview.

SalesisahighrejectionbusinessadmitsBrine’scolleague,TraceyKieley,SeniorConsultantinSalesandMarketingatVenor.

“It’samentalgame,everydaythere’sheadtrash.Thephonecanfeellikeitweighs20poundsandyouhavetopickitupandmakethecall.Tobeagoodsalesperson,youneeddrive,passionandunderstandingofwhatsalesis.”

Whatsalesis,issolvingsomeone’sproblem.

“Whensalespeoplefindtherightcultureandproducttheyflourish,”Kieleysaid.“Beliefinoneselfandtheproductorserviceyouaresellingiskey.”

Brinesaid themillennial generation (thoseborn roughlybetween1980and2000)canfindsalesparticularlyfrustratingbecausetheygrewupwiththeinstantaccessaffordedbytechnology.

“Sales and business development can be hard,” said Brine, who is amillennialherself.“You’regoingtogetrejection…thatandinstantaccessandgratificationdon’tnecessarilyalign.”*

‘Belief in oneself and the product or service you are selling is key.’

– Tracey Kieley, Senior Consultant, Venor

Building a Sales CultureVarious groups, from universities to private consultancies, are

developing programs to teach the basics of selling.

Emily Boucher: ‘We’re trying to help fill the gaps’

Chantal Brine, Vice President, Youth Employment at Venor, and Tracey Kieley, Senior Consultant in Sales and Marketing at Venor.

THE STARTUP REVIEW:Metrics for the Atlantic Canadian startup community in 2015.

We’ve grown into a cluster of HIGH-GROWTH CORPORATIONS, not just experimental startups.

About 30 companies with annual sales above $2 MILLION. About 130 companies with annual sales above $100,000.

THE NUMBER OF STARTUPS INCREASED IN 2015

Companies with more than $50K in revenue increased staff

41%Companies collaborating with post-secondary institutions increased revenues

110%

2015 NOTES

$80.8 2011

$60.5 2012

$63.3 2013

$126.8 2014

$76.5 2015

TOTAL FUNDRAISING by Atlantic Canadian startups (millions)

COMPANIES LAUNCHED IN 2015

COMPANIES LAUNCHED IN 2014

368 NUMBER OF ATLANTIC CANADIAN STARTUPS

29% PERCENTAGE INCREASE OVER 2014

63% GROWTH IN COMPANY LAUNCHES

104 64

STARTUPS

250 IT

63 LIFE SCIENCES

31 ADVANCEDMANUFACTURING

24CLEANTECH

JOBS

81% IT

9% LIFE SCIENCES

5% ADVANCEDMANUFACTURING

5%CLEANTECH

ACCELERATEDJOB GROWTH

2015 25%

2014 14%

SALES GROWTH BY STARTUPS WITH

REVENUES

2015 66%

2014 37%

2013 30%

THE INCREASED DOMINANCE OF IT

This data is drawn from Entrevestor’s survey of Atlantic Canadian startups, supplemented by hundreds of interviews with startup founders and service providers. Some 152 startups responded to the survey for 2015.

Infographic by Roxanna Boers


So JEDI cameupwith a program thatworkedwith various partners tohelp indigenous business people to gain work from the shipbuildingcontracts.Itmentoredparticipants,forexample,onhowtogaintheneededcertificationandrespondtoarequestforproposals.Butsomethingwasstillmissing.Thegroupwasgeneratingsomeinterestingideasforinnovativeproducts, so the organizers decided they needed a vehicle to teachbusinessfundamentalsandproductdevelopment.Theylaunchedthetechacceleratorwiththegoalofteachingentrepreneurshipforthedefenseandaerospacesector.

The surprising part comeswhen youmeet some of the eight teams ofentrepreneurs in the first cohort of the accelerator, which are not yourtypicaldefenseandaerospacecompanies.

ConsiderMelissaLunney,thefounderofastartupcalledAppDiginous.Asthenamesuggests,thecompanyisdevelopingapps.Specifically,Lunneyisworkingonacellphoneappthatwouldhelpdisabledpeopletoopendoors.Manyentriesinpublicspaceshavedoorsthatopenwhensomeonepushesabutton;but the locationof thebuttonoften forcessomeone inawheelchairtoreverseormaneuvertheirwheelchairtogetthroughthedoors. AppDiginous is an app that automatically opens the door whensomeoneapproachesitwiththeircellphone.

OrconsiderMelvinNashfromOromoctoFirstNation.Nashisthefounderof WaterMoc One Power Corp, an Aboriginal-owned business that isdevelopingariverturbinethatcanprovidegreenenergy.Nashhasbeenworkingontheprojectforabouteightyearsandhascomeupwithadesign

The Nation’s First First Nations Accelerator

By Peter Moreira

To truly appreciate the uniqueness of the JEDI Aboriginal BusinessAcceleratorProgram,it’sagoodideatospendtimewithCameronPaul.

Paul is the Economic Development Officer at the Joint EconomicDevelopment Initiative,orJEDI,which fosterseconomicgrowth forFirstNationscommunities.Inthespring,JEDIhostedthe10-weekacceleratorto teach business fundamentals to a group of aboriginal founders.AndPaul,aMaliseetoriginallyfromtheTobiqueFirstNation,stressesthattheprogramwasakeyingredientinhelpingtheentrepreneursfleshouttheirideasanddeveloproadmapstogettomarket.

Butallacceleratorsfulfillsucharole.Inthiscase,thereisaculturalgapbetween the aboriginal and business communities, and the acceleratorbroughtthemtogethertoworkatlaunchingbusinesses.

But there’sevenmoreto it thanthat.Paul,whohasbeenwithJEDI forfouryears,explainedthatpeoplelivingonreservesdonotlegallyowntheirhomes.Thatmeansthatnativeentrepreneurswhoneedcapitalcan’tdrawonequitybuiltupintheirhomes–anoptionthatisopentoCanadianswhodon’tliveonreserves.Thesetypesofimpediments,hesaid,maketheworkofJEDIandtheAboriginalBusinessAcceleratoressential indevelopingFirstNations’entrepreneurs–theseorganizationsunderstanddynamicsthataren’tfamiliartorun-of-the-millaccelerators.

“I think that it’s definitely a revolutionary program,” said Paul. “We’vedefinitelytakenariskintakingonthisprogram,butwehaveestablishedthatthereisaneedforahigh-levelprogramlikethis.”

TheAboriginalBusinessAcceleratoristhefirstacceleratorofitskindinthecountry,andthestoryofhowitallcametogetherinJanuaryofthisyearisrathersurprising.ItisactuallypartofJEDI’sNewBrunswickAboriginalShipbuildingEngagementStrategy,whichwaslaunchedin2014.

GovernedbythefourAboriginalTribalCouncilsinNewBrunswick,JEDIis a not-for-profit that supports Aboriginal participation in the economy.Itworkswithall levelsofgovernmentand theNewBrunswickBusinessCouncil.Afewyearsago,JEDIdecidedthatsomethingshouldbedonetohelpAboriginalbusinessestoparticipateinthemulti-billion-dollarfederalshipbuildingprogramawardedtoIrvingShipbuildingofHalifaxin2011.

The JEDI Aboriginal Business Accelerator is officially part of a shipbuilding engagement strategy. But the companies coming out of it aim far beyond the defense sector.

`We’ve definitely taken a risk in taking on this program, but we have established that there is a need for a

high-level program like this.’

– Cameron Paul, JEDI Economic Development Officer


foradevicethatfloatsonthewaterandproducesanexponentialgaininpowerthelargertheturbineblade.

“We’rekeepingitinlinewiththegoalofpreventingclimatechange,andit’sthemosteco-friendlydevicethereisbecauseitdoesn’tdestroyanyfish,”hesaid.“Itisaboutasclosetoperfectasanythingoutthere.”

WaterMocOnehasbeencollaboratingwiththelocalresearchersandpost-secondaryinstitutionstooptimizeitstechnologyandcreateaprototypetodemonstratehowitsconceptisastepaheadofanyriverturbinetechnologyonthemarkettoday.Thecompanywillbeconcentratingondevelopingthetechnologysothatitisscalable,greenandeconomical.

JEDIShipbuildingStrategyManagerMarkTayloragreedthesemaynotbetypical “defenseandaerospace”ventures.However,hesaidcompaniesinthedefenseandaerospacefieldhaveavarietyofneeds.AndthenewgovernmentinOttawaisdemandingthattherebeacleantechcomponenttocompaniesdoingbusinesswiththefederalgovernment.

“Ifyoutalktoanyoneinaerospaceanddefensethesedays,they’lltellyouthatahugearea is technologywithmobileplatforms,”saidTaylor.“Andcleantechisheavilydesired.”

Nash,Lunneyandtheotherentrepreneursenteredtheprogramwithplansforwhattheywantedtodo,butnonewasanexperiencedentrepreneur.Nash,forexample,describeshimselfasaninventorwhohasalongcareerinputtinghismechanicalknow-howtoworksolvingsuchproblemsashowtocleancommercialquantitiesoffiddleheads.

Theeight teamsmet regularlyat theNationalResearchCouncilofficesinFredericton,goingthroughaseriesofseminars.Learnsphere,aNewBrunswick-based training organization, facilitated the training and DaleThibodeauofDJThibodeauandAssociateswastheleadinstructor.Thegroup also worked with community partners like the Pond-DeshpandeCentre and business groups like LockheedMartin Canada, Saint JohnRiver Valley Tribal Council and BMO. Each entrepreneur was pairedwithamentorwithsomeexperienceintheirbusinesssector.Lunney,forinstance,was pairedwith Trevor Bernard, an experienced programmerwhohasworkedforthreecompaniesthathavehadsuccessfulexits.

TaylorsaidJEDIisnowputtingtogetherafive-yearplan,theamountoftimeneededtomakesuretheprogramevolves.ItwillincludepartnershipswithotherstartupgroupsintheregionlikePropelICT,theregionalaccelerator.ThenextcohortisalreadybeingplannedtotakeplaceinPlanetHatch,theentrepreneurshipcentreinFredericton.

The entrepreneurs not only want to see their ventures succeed andgenerateprofits.Theyalsohopetheirsuccesswillputtheminapositiontogivebacktotheircommunities.“We’realltryingtofigureoutwaystoincludeFirstNations inourbusinessesbecausethey’reall inneedof revenue,”saidNash.“Andwecandoitinwaysthatallowustogrowresponsibly.”

Eventually, theJEDIorganizershope theprogramwill includea fund tohelpprovideseedfinancingfornativestartups.Thelong-termgoalistoaddthefinancingcomponentontotheprogramthathashelpedentrepreneurslikeNashandLunneytobegintheirentrepreneurialjourneys.

“Theyofferedthiscoursetousandwelearnedsomuch,”saidLunney.“Bythetimeitwasover,I thought,IwishIcouldhavetakenitalongtimeago.”*

Melvin Nash: `We’re all trying to figure out ways to include First Nations in our businesses because they’re all in need of revenue. And we can do it in ways that allow us to grow responsibly.’

Melissa Lunney: ‘By the time it was over, I thought, I wish I could have taken it a long time ago.’

You want to reach The part of the economy that’s growing. Young entrepreneurs in high-growth companies. The Atlantic Canadian Innovation Community.

You want to advertise in Entrevestor – online and in print.

Contact us at [email protected] our free daily reports at entrevestor.com

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By Peter Moreira

Aboutfouryearsago,atrioofgamedeveloperscametogethertoformaBedford-basedgamingstudiocalledAlphaDogGames,andquietlybegantogrow.

The teamstartedwith three founders– twoofwhom,JeffCameronandShawnWoods, are still with the company – and it took on staff as itsproductionincreased.Infact,AlphaDogrecentlyaddedits17themployee.

“Wehavea fewbiggames thatwe’reworkingon, includinga titlecalledMonstroCity that’s now being beta tested in the Philippines,” said CEOCameron in an interview. “We’re planning on a worldwide release for ithopefullylaterthisyear.Wehaveotherhigh-levelideasinthepipeline,butall17peopleareworkingonthatgame.”

ThefactthatthisonecompanyhasalmostsextupleditsstaffinthreeyearstellsyousomethingaboutthestartupcommunityinAtlanticCanada.Someof these tiny young companies are turning intomid-sized ventures, andthey’rehiringinincreasinglylargenumbers.Andmostofthepeoplethey’rehiringareyoung--Cameronsaidhisyoungeststaffmemberisabout20.Theyareattractingandretainingyoungpeople.

AlphaDogisaprimeexampleforanotherreason–itisascalingcompanyratherthanabrandspankingnewstartup.Thegroupofcompaniesthatcallthemselves“startups”includemanyoutfitsthatareseveralyearsold.Andtheonesthatarereallyaddingjobsaretheonesthatarescaling–theyaregrowingbeyond10employeesbecausetheyhaveaproductinthemarketorsoonwill.

Fredericton-basedResson, forexample,planstodouble itsstaff toabout45 by early 2017. The company that collects and analyzes agriculturaldataraisedabout$14millioninnewcapitalthisspring,butitalsoisrapidlygrowingrevenues.

Thedayafter its fundingannouncement,Ressonpostedfour jobsontheEntrevestor JobBoard– for twodevelopers, anoptical engineer andanagronomist.Thepostingforanagronomistisinterestingbecauseitshowsthatstartupsarehiringpeoplefromadiverserangeofdisciplines.

InHalifax,thedataanalyticscompanyAffiniohadninepeopleinNovember2015.Thatincreasedto38bythespringanditplanstoincreaseitsstaffto60byyearend.CEOTimBurkesaiditsrapidexpansionwilllikelycontinuein2017andisgeneratedbystrongrevenuegrowth.

Another Halifax startup, sports medicine technology company KinductTechnologieshad48employeesinMayandexpectstoincreasethenumberto65bytheendoftheyear.

We’reseeingthispatternacrossthestartupcommunityofmedium-sizedcompanies adding employees at ferocious pace. When Entrevestorsurveyedstartupsthisyear,152companiesprovideduswithemploymentdata.Collectively, thesecompaniesemployed792.5people inAtlanticCanadaasofDec.31,2015–up160.5positionsor25percentfromayearearlier.

What was really interesting is that three-quarters of the hiring came atcompanieswithmorethan10employees.Thesecompaniesadded120.5full-time-equivalentpositions,representingagrowthrateof36percent.

Thistrendwilllikelycontinueasthenumberofinnovativecompanieshittingthe10-plusstafflevelsisincreasingeachyear.Andmanycurrentmid-sizedcompanies are growing into bona fide corporations. They are providingchallenging,well-paid jobs toyoungpeople.Theseemployeesget to livetheEastCoastlifestyleandhavethethrillofworkingforgrowingcompanies.

AlphaDogs,forexample,hasalreadyproducedthegameWraithborneandhaspartneredwithaGermanpartnertoputoutMonstroCity.AndCameronnotesthereasonthecompanyisbasedintheHalifaxareaisthequalityoflife in theregion–for thefoundersaswellas thehires.Woods,38,wasworkinginVancouverbeforeco-foundingAlphaDogandCameron,41,wasinNewYork.

“Wetakequalityoflifeseriouslyandwe’vebeentakingonpeoplewhofeelthesameway,”hesaid.“Wecamebackheretomakesurewewereabletoraiseourfamiliesandreallyenjoylife.”*

Keeping Talented Youth on the East Coast

Accelerating growth among East Coast startups is creating more and more employment opportunities – especially for young Atlantic Canadians.

10+ Staff - 120.5 New Jobs 4-9 Staff - 18.5 New Jobs

1-3 Staff - 21.5 New Jobs

18.5 21.5

120.5

Larger companies are hiring more people and growing at a faster rate than smaller firms. Of the 152 companies responding to the Entrevestor Survey, startups with 10 or more employees took on three-quarters of the new employees in 2015 and grew their staffs at an annual rate of 36 percent.

New Jobs by Size of Startup


By Peter Moreira

New Brunswick’s venerable tech investorGerryPondoftenbemoansthefactthathecanreceive a tax incentive to invest in ArkansasbutnotinNovaScotia.

The investmentgroup thatPondchairs,EastValley Ventures, has a portfolio of 26 activecompanies, and Pond could have claimedNewBrunswick’sSmallBusinessInvestorTaxCredit only on the17 that are based inNewBrunswick. His investments in Nova Scotia,Prince Edward Island and British Columbiawouldnothavebeeneligible.

TheproblemisthattheonlyrealCanadiantaxincentives to invest instartupsareofferedbyprovincial governments, and they apply onlywhenbothinvestorandthestartuparebasedintheprovincethatissuesthecredit.

Navdeep Bains, the federal Ministerof Innovation, Science and EconomicDevelopment, needs to change this. TheMinister is nowdevising “abold, coordinatedstrategy on innovation” and the cornerstoneshould be a federal tax credit to encourageinvestmentininnovativestartups.

Canada cannot develop an innovativeeconomy without startups. Pure research isessential for innovation, but innovation thatstaysinalabhasalimitedeconomicimpact.To truly diversify the economy, Canadaneeds companies that produce revolutionaryproductsforindustryandconsumers.Theywillneed tensofbillionsofdollarsof investment,andafederalinvestmenttaxcreditisthebestwaytoensurethatinvestment.

Investment tax credits are now available inroughly seven provinces and 30 Americanstates.Theyreturn to investorsapercentageofthemoneytheyplaceinanewbusinessupto a certain maximum. The New Brunswickprogram is probably the most generous inCanada, offering a credit of 50 percent oninvestmentsofupto$250,000.

ButNewBrunswick companies can only usethe credit to attract investment from 750,000NewBrunswickresidents.TheBritishColumbiaprogramonlyappliestoBCresidents.Ontariodoesn’thaveaprogram.

A federal tax credit would at least allow

Canadian startups to draw investment fromany Canadian taxpayer. I say “at least”becauseOttawa could enhance the programby following the example of such statesas Arkansas and Minnesota, which allowinvestorsfromoutsidethestatetobenefitfromthetaxcredit.

ThebigworryaboutsuchaprogramisthatitwouldbeadrainontheTreasury,eventhoughrepeatedstudies(suchasThomasHellman’s“AnEvaluationoftheVentureCapitalPrograminBritishColumbia”in2010)haveshownthesetax credits actually increase tax revenue. Afederaltaxcreditdoesn’thavetobeanopen-

A Bold Initiative to lead INNOVATION

The time has come for the federal government to adopt a national investment tax credit for innovative companies.

2015$16.7M

2014$22.8M

2013$13.2M

Investment from Individuals 2013-2015

In the last three years, individual investors have sunk at least $52.6 million into Atlantic Canadian startups. A federal investment tax credit could only increase these amounts.


ended drain on the Treasury. Like the B.C.program, the federal government could captheprogrameachyearsoitwouldonlyofferacertainamountoftaxcredits.

Some also worry an investment tax creditwouldbe viewedasagift for thewealthyasmoneyedinvestorswouldbetheonlyonestoclaim the credit. That argument ignores thefactthatstartupsneedcapitalandcanonlygetit frompeopleor institutionswithcapital.Themessage has to be that financing innovativecompanies is essential to our national goals,and the investment taxcredit is thebestwaytodothis.Membersofcabinetknowthisisthecase. Before he became Transport Minister,Marc Garneau said in 2013, “If the rich areencouraged to invest in Canada’s startups,thenitwillbeworthwhile.”

Thereisnowasplendidopportunitytobringinthesetaxcreditsbecausethebestimaginablesalesperson for such a policy is the currentPrimeMinister.JustinTrudeaugetsinnovationandissuperbatdiscussingtechnologyinwaysthatgrabpeople’sattention.Healsohas theearofmanyofthegroupsthatwouldcriticizeaninvestmenttaxcredit.

Sowhatshouldthetaxcreditlooklike?

First off, the maximum allowable investmenthas to be $250,000 or higher, and eachqualifying company should be able to applythecredit to investmentsup to$3millionperyear.HundredsofCanadianstartupsarenowin theirgrowthstagesandneedmulti-million-dollarfundingrounds.Theinvestmentstrategywillfailifthesecompaniesneedtofinddozensof investors to raisemeaningfulmoney. Thehigh threshold would also allow investorsin smaller companies to benefit, so it wouldencouragestartupsofallsizes.

Second, the incentive should be offeredto investors outside Canada. All Canadiangovernments spend gazillions attractingexternalinvestment,butarestrangelyreluctanttoincentivizeforeigninvestorstoputmoneyinour fastest-growing, domestic companies. Byextending the credit to foreigners, investorsfromaroundtheworldwouldbeencouragedtoconsiderbackingsomeofthegreatinnovatorsinCanada.

Third, the government should work withprovincestoreformtheirinvestmenttaxcreditsso theymeshwith the new federal program.This could reduce the immediate cost to the

federal treasuryandamplify thepowerof theprograminluringinvestmentintoinnovation.ItwouldalsoensurethetaxcreditsgotostartupsoutsideMontreal,TorontoandVancouver.

Onewordofwarning:theeconomicimpactofthisinitiativewillbebluntedifthegovernmenttries to channel too much of the investmentinto renewable energy. The pressing needto end the use of fossil fuels is obvious.Butthe conversion to clean energy will requirehundredsofbillionsofdollarsininfrastructurechanges. A tax credit for innovation isn’t theway to finance infrastructure. Our researchat Entrevestor shows the greatest economicpaybackcomeswithinvestmentininformationtechnology. And given the collapse inresourceprices,Canadaneedsinvestment inenterprisesthatwillgrowquickly.

So let’s say that the federal governmentawards a 30 percent tax credit, and will cutoffthespigotafteritawards,say,$2billionoftax credits. And let’s say half the credits areawarded to people living outside Canada.What would the effect be if investorsmaxedoutontheprogram?

First, thenethit tothefederaltreasurywouldbe minimal, and it could even benefit thegovernment’s coffers in the medium term.Second, it wouldmean an equity investmentof$6.7billion in the fastestgrowingsegmentof the Canadian economy. That wouldcomparetothe$2.3billioninvestedbyventure

capital firms inCanada in2015,according toCanada’sVentureCapital andPrivateEquityAssociation.Itwouldbethemosteffectivewaypossibletodevelopinnovationinoureconomy.

Let’s emphasize again: Canadian startupsneed capital, especially at the scaling phaseof their growth. The government shouldencourageprivateinvestment,evenifitcouldbeseenasabenefittowealthyinvestors.Thisis the best way to generate jobs for youngpeopleandtodiversifytheCanadianeconomy.

A federal innovation tax credit would be thetypeof“bold”strategythatMinisterBainshassorightlycalledfor.

This column has been adapted from the author’s submission to Minister Bains as he consults on the government’s innovation strategy.*

Gerry Pond

A federal innovation tax credit would be the type of “bold” strategy that Minister Bains has so

rightly called for.

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