An advisory board set up to review plans from MaRS Discovery District to build a technology innovation hub with the University of Calgary has raised concerns around partnering with the Toronto-based organization, citing its “chequered” reputation from its early days when it was slow to produce results, and the possibility that MaRS might be given public funding that could otherwise help local organizations.

In a memo dated Nov. 25, 2020 and addressed to UCalgary vice-president of research William Ghali, members of the MaRS West advisory board acknowledged that MaRS had the potential to help the local tech sector grow, but urged caution in moving forward with a partnership. “The possible addition of MaRS West offers the potential to add a unique and valuable component to the local ecosystem…” the memo reads, “On the other hand, it also has the potential to be disruptive and to detract from the ecosystem if it does not have a clear mandate and is not designed to operate … collaboratively with established entities.” 

“Our outreach has been extensive and the robust and frank discussions over the last few months have enabled us to develop a mutual understanding of the strengths and gaps in the innovation economy,” said Cory Mulvihill, vice-president of ecosystem development at MaRS, in an email to The Logic. “We are continually refining the areas of proposed work based on these conversations.” 

The Logic first reported in September 2020 that Toronto-based MaRS, Canada’s largest innovation hub, was planning to build a $60-million tech accelerator in Calgary in partnership with the university. The proposed expansion includes a $25-million seed-stage venture capital fund, which MaRS would deploy over a five-year mandate term. The organization also planned to spend $5 million a year for startup venture services including “advice on capital, sales, marketing, talent and recruitment, and regulation,” according to draft plans obtained by The Logic. 

UCalgary began discussing the partnership with MaRS in May 2020. But nearly a year later, the school views the initiative with some skepticism, according to a UCalgary source with direct knowledge of the plans. “The perspective now from the university is: ‘Why would we advocate for this money to go to MaRS rather than one of our many entrepreneurial entities that are more local?’” said the source, whom The Logic has agreed not to name because they were not authorized to speak on the record.

The source said MaRS is seeking substantial funding from the provincial government—between $50 million and $100 million—which the organization needs to move forward with the plan. “What got it to launch in Ontario was a significant investment from the government. Whether the Alberta government will follow suit is up in the air, but now potential partners, such as the University of Calgary, are second-guessing whether this makes the most sense, or would that investment be better spent to support the infrastructure we have to support the innovation ecosystem, rather than try to bring MaRS out west?” 

Mulvihill said the local community “has expressed enthusiastic support” for MaRS West. “We will continue to work with key Alberta leaders to drive MaRS West—a project that will include government but be managed by Alberta leaders.”

Lobbying records show representatives for the organization, including MaRS CEO Yung Wu, registered to lobby provincial government officials in August and September 2020 to discuss “support for entrepreneurs, growing technology and innovation-focused companies.” 

Alberta’s Innovation Minister Doug Schweitzer did not answer The Logic’s question on how much funding MaRS had requested from the province. “Currently we have no plan to provide funding to the project, however we are willing to consider doing so in the future,” said Schweitzer’s press secretary Justin Brattinga. The province is set to table its budget on Thursday.

MaRS’s proposed westward expansion comes amid a new focus from Alberta on technology and innovation as drivers of its economic recovery in the face of COVID-19 and the downturn in the oil sector. Local startup organizations are targeting more than threefold growth in Calgary’s tech sector between now and 2030, from about 700 companies incorporated in the city to 3,300. 

Even if MaRS does secure government support, the advisory board’s memo to Ghali echoes the UCalgary source’s concerns about the organization’s potential to overshadow local initiatives. The university already partners with a slate of startup-accelerator programs, including local initiatives Platform Calgary and the Hunter Hub, as well as a franchise of the Creative Destruction Lab, which grew out of the University of Toronto. “A lot of community-minded people have spent countless hours and considerable dollars to build the ecosystem that we have and it would not be helpful to have a new entrant arrive to consume public money if they did not fill a gap in the tech ecosystem and work collaboratively with existing local entities,” the memo reads, adding, “MaRS has acknowledged this and committed to local governance.”

The advisory board also questioned whether MaRS had any special ability to attract public funding, or whether existing players could be just as effective in securing government funding themselves. 

On top of practical considerations of whether the community needs MaRS’ services and experience to help boost Calgary’s younger tech sector, the university’s advisors were conflicted on whether the optics of working with the Toronto organization would help or hurt the local ecosystem. “While MaRS has invested millions of dollars in developing programs and has an aptitude for storytelling, it does not have a track record of unblemished success,” they noted. “The [advisory board] could not reach agreement as to whether MaRS’s reputation was on balance positive or negative. For example, there is little dispute that in its early days, MaRS was responsible for the consumption of enormous quantities of government money through its real estate adventures and that its support for pre-seed stage companies was slow to produce results. In contrast, recently it seems to have earned an improved reputation with its ‘Growth Services’ and ‘Momentum’ programs which are targeted at more mature companies that are in-market and revenue generating. In sum, reviews are mixed.” 

The advisors recommended the university continue exploring the partnership, but they outlined requirements they believed MaRS should have to meet to gain entry into the local market. For example, they noted that MaRS’s proposed VC fund could receive money from the Alberta Enterprise Corporation, a fund-of-funds that aims to attract new investments to the region, but that the organization must take equity in firms they support to help sustain the program. The memo also underscored the need to focus on seed-stage companies, rather than pre-seed, and that bringing private capital into their investments “would be a strong selling feature, as would an emphasis on Alberta-incorporated businesses.” 

The group also stressed giving Platform enough time to move into a new facility that’s currently being built, “and stabilize its tenant base before facing incremental competition from MaRS.” MaRS, which would move into an existing building rather than construct a new facility, has agreed not to establish a downtown space until at least a year after Platform has settled in, according to the memo, and it “may in fact rent space from Platform in the early days.”

“A number of Alberta stakeholders, including the University of Calgary, are still evaluating a possible partnership with MaRS,” said UCalgary president Edward McCauley in an email to The Logic. “An evaluation of this nature inherently includes all parties reviewing proposals against: institutional objectives; alternative ways to meet those objectives; and other budget priorities. Such evaluations also [include] partners performing due diligence on each other and refinement of project scope.”

MaRS was among several Ontario incubators that had their provincial funding cut by about 30 per cent in 2019. The federal government subsequently committed more than $17.5 million over five years, to help support the hub. Lobbying records show MaRS received about $21.5 million in public funding in the 12 months prior to Sept. 24, 2020. 

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.