Searching for Narwhals in Edmonton

Delwin Graham - Oct 21, 2019
Narwhals seem especially rare. Kik Interactive is the last Canadian tech company to attain narwhal status – that was in 2015.

Americans have their “unicorns”, that is, private technology companies that are valued at US$1 billion or more (Airbnb, Wework, Palantir). We have our “narwhals”, private Canadian tech companies worth CDN$1 Billion or more (Hootsuite, Kik Interactive). Both are rare and elusive.

Narwhals seem especially rare. Kik Interactive is the last Canadian tech company to attain narwhal status – that was in 2015. Since that time, 19 American companies were founded and have become unicorns. What’s the hold up? The Narwhal Project, an examination of the factors that lead to the creation of successful technology companies, has found that despite billions of dollars in government spending to improve Canada’s innovation economy over the past 50 years, a crucial challenge remains: our inability to scale companies to world-class size. The failure rate for startups here hovers around 85 percent (Cf., Joe Canavan, “It takes the Power of Three for Canada’s Startups to Thrive”, The Globe and Mail, October 17, 2019, p. B4).

It takes a village to raise a child. Similarly, Joe Canavan argues that a “startup ecosystem” must work to nurture a technological enterprise from start-up to scale-up to self-sufficiency. Entrepreneurs have specific needs as they grow into successful businesses: funding and financing, networking access to market, marketing plans and business strategies. Canavan stresses that we must strengthen the collaborative ecosystem provided by governments, corporations and “accelerators”, that is, programs that help startups with business processes, to create “world-class winners” (Cf., Canavan, “Power of Three”).

Of course, there is nothing new in this call to action. The Province of Alberta has charged Alberta Innovates (AI), the province’s largest research and innovation agency, with developing this startup ecosystem for Alberta. In 2016, AI set up the Regional Innovation Network (RIN) to support the collaboration of the startup communities within eight regions including Edmonton, Calgary, Red Deer, Medicine Hat, Lloydminster, Grande Prairie, Lethbridge and Fort McMurray. The idea was to support the unique circumstances within a specific community and avoid a cookie-cutter approach.

The Edmonton Regional Innovation Network (E-RIN) was a coalition of three local agencies: TEC Edmonton, the Northern Alberta Business Incubator (NABI) and NAIT. Under E-RIN, the three received $1.4 million a year, or $4.2 million total over three years. E-RIN’s job was to administer programs for entrepreneurs and related organizations in the Edmonton region and to help others access this funding. However, there were complaints that the organization was not inclusive of other entities, like Edmonton Economic Development, and did not fulfill its community-based function. As a result, the Edmonton Regional Innovation was the only RIN in the province to be denied funding for the following three-year cycle beginning in April 2019, and it was ultimately dissolved. Alberta Innovates says that the $4.2 million in funding is still available, but any subsequent proposal must benefit Edmonton’s entire tech ecosystem (Cf., Breanna Mroczek, “Edmonton Denied $4.2M in Tech Innovation Funding”, www.taprootedmonton.ca; May 17, 2019).

The City of Edmonton is similarly challenged to support an inclusive tech ecosystem. In 2018, Innovate Edmonton (the startup support venture of the city’s Edmonton Economic Development Corporation) drew up a plan for a new “innovation hub” in the downtown that would offer workspace for entrepreneurs starting or scaling up companies, as well as event space and other options for programming. Members of the startup business community complained that they were not properly consulted and that a real estate investment by the EEDC wasn’t what the industry needed. In response, the EEDC went back to the drawing board and formed an independent advisory council to consult more widely with the startup community (Cf., Paige Parsons, “High Tech Hopes: When a ‘Big Bet’ goes Belly Up,” www.edmontonjournal.com, March 28, 2019).

Everyone wants to be involved in mapping out this tech ecosystem because a lot is at stake. We are looking at a world that is becoming increasingly hostile to the energy industry. Alberta, as a whole and Edmonton along with it, has talked about the need to break its dependence on an economy fueled by oil and gas for decades. However, Edmonton has spawned very few early-stage technology companies. According to a valuation by Startup Genome (www.startupgenome.com), an organization that works with tech startup communities in cities around the world, Edmonton’s startup ecosystem is worth US$77 million. Of course, that pales in comparison to the top performer in the world, Silicon Valley, at US$619 billion. When ranked against the biggest tech markets in the world, Edmonton’s few startups are getting US$60,000 on average in early funding, a quarter of the global average of US$252,000. Closer to home, Edmonton is lagging Calgary which is averaging US$173,000 in early funding (Cf., Parsons, “High Tech Hopes”).

What to do? As an “ecosystem”, support for the tech community in Edmonton must be fluid enough to take advantage of opportunities in an incredibly fast-paced business; it cannot be siloed through institutions. However, there seems to be several obvious means of support. Governments should enact policies that encourage innovators to startup and scaleup, perhaps by implementing a tax policy that encourages risk-taking and rewards success. There should also be a strong regulatory environment that supports intellectual property commercialization. Corporations should look to partner with startup tech companies to solve problems, improve efficiencies and provide markets. Business accelerators and incubators should be committed to working in the local ecosystem to provide the programs, mentorship and funding to help startup enterprises flourish. Whether by doing or supporting, we all have a role to play in securing Edmonton’s tech future.