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Ottawa suspends $24-million investment in North following mass layoffs

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The federal government is suspending its $24-million investment in North, a Waterloo-based smart-glasses company, following mass layoffs at the company on Thursday.

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“Our government’s investment in North remains a repayable contribution and all future payments have been suspended. We are currently in discussions with the company to establish the best path to repayment, while protecting existing jobs,” said Innovation Minister Navdeep Bains in a statement to The Logic.

On Friday, The Verge first reported that the company laid off 150 employees out of a total of about 400 people. The layoffs follow a cut in its smart-glasses price earlier in February from US$999 to US$599.

“We decided to lay off a number of employees yesterday in order to focus our resources and ensure we have sufficient runway to execute on our upcoming milestones over the next 18-24 months,” North CEO and co-founder Stephen Lake said in a statement. “This was a difficult decision, but a necessary one to ensure long-term success.” North declined to confirm the number of people or which departments were affected, but Lake said the company will continue to be headquartered and manufacture in Kitchener-Waterloo.

A source with knowledge of the company told The Logic that North continues to make progress on the next version of Focals, and that most of the restructuring is to support that. The source also said the layoffs were not the result of a cash flow issue, and that North continues to have runway.

The federal government announced financial support for the company in November 2018 through its Strategic Innovation Fund, an investment it said would “secure 629 jobs.” Bains said the government is “concerned and disappointed” by the layoffs, “and our thoughts are with the workers and their families.”

Asked about its SIF funding, North said it was “in talks with the government” but did not provide further details.

North’s smart glasses have been on sale since January, but they can only be purchased in physical locations. The company only has two permanent stores—one in Toronto, the other Brooklyn—though it’s also bringing pop-up stores to Seattle and San Francisco.

The $2.41 billion SIF backs businesses investing in research and development and scaling Canadian firms. The funding isn’t handed over up front—companies pay the costs of their project, and are then reimbursed by the government. The program’s funding agreements also require firms to make commitments around jobs, intellectual property and gender diversity action plans, and report on their progress annually.

Bains did not directly answer questions about what job guarantees the government received from North, or how much of the funding has been paid out to the company so far. “Due diligence for each and every single SIF project is thorough and rigorous, and conditions are binding,” he said.

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