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MaRS Discovery District plans $60-million innovation hub with UCalgary

A sign for MaRS Discovery District in Toronto in July 2018. JHVEPhoto/Shutterstock
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Canada’s largest innovation hub is planning a $60-million tech accelerator in Calgary, in partnership with the University of Calgary, The Logic has learned. The proposed expansion, dubbed MaRS West, would be the first facility outside Toronto. 

Local entrepreneurs, however, worry the hub will divert resources from several other initiatives already in place to support Calgary- and Alberta-based startups. 

“MaRS West will be focussed on propelling the growth of novel technology-based companies from the seed stage to scaling firms with $100 million+ in annual revenue,” reads a draft of the plan obtained by The Logic.

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Talking Point

The planned expansion is contingent on funding commitments for a five-year mandate, which includes launching a seed-stage venture capital fund, offering startups resources like mentorship, as well as a physical space for entrepreneurs to work and access programming. A source from UCalgary said discussions around the initiative have been complicated by the university’s ownership stake in Platform, a local tech hub that spun out of Innovate Calgary, a UCalgary-based accelerator. If the plan goes through, Platform would effectively be competing with MaRS for funding and resources from local governments and the university.

The planned expansion is contingent on funding commitments for a five-year mandate, which includes launching a seed-stage venture capital fund, offering startups resources like mentorship, as well as a physical space for entrepreneurs to work and access programming. 

“MaRS sees its role as being a catalyst to increasing the size and success of the growing ecosystem. The emerging technology companies in the city and province are vital to the growth of Alberta’s knowledge-based economy — which is critical to its economic future,” reads the draft plan, which is dated September 12. 

The Logic approached MaRS for comment on the draft plan on Wednesday morning. It responded by issuing a press release announcing its intention to expand west. A story appeared on tech news site BetaKit at roughly the same time as MaRS sent its response. 

“MaRS has been developing its innovation model for more than 15 years. Today, as one of the largest startup ecosystems in the world, we’re able to take this playbook and apply it to accelerate innovation across the country,” MaRS CEO Yung Wu said in the release.

MaRS began pitching the Calgary expansion plan to the provincial government and entrepreneurs in the city last September, according to a University of Calgary source. In May, it approached the university and asked if it would partner with MaRS on the hub, said the source, whom The Logic agreed not to name because they were not authorized to speak on the record.  

A source from the University of Calgary said discussions around the initiative have been complicated by the university’s ownership stake in Platform, a non-profit local tech hub that spun out of Innovate Calgary, a UCalgary-based accelerator. If the plan goes through, Platform would effectively be competing with MaRS for funding and resources from local governments and the university. “It would be a real conflict for us to create MaRS West and still be a one-third shareholder of Platform,” said the source, who said the university is exploring ways to sever ties with the local accelerator. “However, if the university leaves Platform, it’s going to completely implode.”

Platform CEO Terry Rock said he wasn’t aware that UCalgary was considering revoking its ownership in the hub he oversees in favour of working with MaRS. “I don’t see this as a mutually exclusive scenario,” he said, noting that the university has partnerships with other accelerators, including the Creative Destruction Lab and the Hunter Hub. Rock said he thinks MaRS could contribute to the region’s growing tech hub, rather than replace existing players. “I think Calgary is one of the most collaborative ecosystems in the country, so it seems natural for us to be seeking partnerships to grow our innovation ecosystem.” 

William Ghali, vice-president of research at UCalgary, said the university would continue to partner with Platform regardless of its relationship with MaRS, “but how that’s structured and how that works, that’s the kind of thing we’re trying to sort out,” he said. “The MaRS discussions have sped up the sorting out how the university [and Platform] interact.”

According to the draft plan, the tech hub plans to create a $25-million regionally focused venture capital fund modelled after the existing MaRS Investment Accelerator Fund (MaRS IAF). “Funding would be provided on a restricted grant basis to enable the investment managers to make investments within a seed stage risk framework and to recycle investment returns into an evergreen fund model,” the document reads. The fund would invest about $5 million a year across eight to 10 deals, and would require a $1-million annual management fee, the draft plan says. 

MaRS also plans to spend $5 million a year for startup venture services that include “advice on capital, sales, marketing, talent and recruitment, and regulation,” according to the plan. “We will also establish venture support networks between Toronto and Calgary nodes for 1:1 expert mentorship, connections to investors, customers and partners; and media and public relations support.” MaRS West would deliver programming and events from a physical hub in the city “to be funded with an upfront $10 million commitment [plus] revenues generated from tenancies and other fees.” 

In its press release, MaRS said it does not plan to build a physical site in Calgary.

MaRS is seeking funding from the provincial and federal governments, the City of Calgary’s $100-million Opportunity Calgary Investment Fund, as well as philanthropists. The accelerator said it could launch its Western outpost as soon as it secures funding, though warned that the proposed model could change significantly “as discussions evolve with the University of Calgary and potential funders.”

Alberta Innovation Minister Doug Schweitzer did not answer The Logic’s question of whether the government is planning to fund the initiative. “From Silicon Valley to Toronto, we’re starting to see increased interest from tech and innovation platforms in coming to Alberta. MaRS is just one of them,” he said by email. 

Calgary Economic Development said it “does not comment on applications, or potential applications, to the Opportunity Calgary Investment Fund for confidentiality reasons.” 

The proposed plan comes as Alberta places new focus on technology and innovation in driving its economic recovery, as the combined impact of COVID-19 and the oil recession is expected to drive the province’s real GDP down 8.7 per cent by year’s end, according to an RBC analysis. 

Last month, Premier Jason Kenney appointed Doug Schweitzer as the minister of jobs, economy and innovation, adding “innovation” to the title for the first time. In June, the province announced $175 million in new funding for the Alberta Enterprise Corporation, a fund-of-funds that aims to attract new investments to the region. In July, it unveiled details of an innovation tax-credit program that will cover up to 20 per cent of startups’ research and development costs. And last week, Schweitzer announced $75 million over three years for the new Investment and Growth Strategy, a plan to grow jobs, diversify the economy, “and highlight why the province is one of the best places in the world to do business,” Schweitzer said at a press conference following the announcement.

The draft plan notes that MaRS currently supports 31 Alberta-based startups, including those in the cleantech, medical-device and transportation spaces. The partnerships “have given us early insight into the potential of expanding our work in Alberta,” the document reads. 

Cory Janssen, co-CEO of Edmonton-based AI firm AltaML and member of the Council of Canadian Innovators Alberta chapter, said there’s potential for MaRS to help Calgary’s tech sector connect with firms in the Toronto area. But he warned that there’s a “fine line between building bridges with the rest of the country and burning down what we’ve already built.”

“We’ve had a number of benefactors come in and make significant bets on the ecosystem—before there was anything here,” said Janssen. “The worst case scenario would be that all of a sudden a bunch of these organizations get funding pulled because of this.” 

Now 20 years old, MaRS has become a sprawling hub at a junction of universities and hospitals in downtown Toronto. Its original mandate was to generate economic returns for innovators by taking research from Toronto’s universities and hospitals and creating companies with commercializable products. In more recent years, it’s attracted criticism over whether the economic output derived from its services justifies the millions it receives in government support. The provincial government has spent $48.5 million on the organization since 2010, according to its most recent audited annual financial statement. MaRS received more than $6 million from the federal government from January 2016 to the end of March 2019. MaRS posted a net loss of about $1.9 million for fiscal 2020, down from about $2.3 million in losses the year before. 

MaRS was among several Ontario incubators that had their provincial funding cut by about 30 per cent last year. The federal government has since committed more than $17.5 million over five years, ending in Dec. 31, 2023, to help support the hub.

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The UCalgary source noted that MaRS West will likely require substantial funding from the provincial government, based on its funding structure in Ontario. The arrangement may not sit well with tech entrepreneurs who have seen scarce public funds compared to peers in Ontario, Quebec and B.C. “If the Alberta government is now prepared to invest a significant amount of money to launch MaRS here in Calgary, people would feel uncomfortable with that,” the source said. 

According to its own reports, MaRS-supported companies have contributed $11.6 billion to Canada’s GDP since 2008. In 2018, its ventures generated $1.3 billion in revenue, raised $1.5 billion in capital and employed more than 17,000 people, according to its draft plan for MaRS West.

Correction: This article has been updated to correct MaRS’ losses for fiscal years 2020 and 2019.