The Big Read

Discovering MaRS: The untold story of Canada’s largest and most controversial innovation hub

Illustration by John Hemminger

Dr. John Evans was curled up on a wooden bench in Chicago’s O’Hare airport, resting his long, wiry limbs as he waited for the snowstorm outside to pass. He and Dr. Calvin Stiller were returning to Toronto from a meeting in Salt Lake City in 1999 when their flight was cancelled on account of the weather. With Toronto-bound planes grounded until the next day, the two resolved to spend the night in the airport. Stiller recalls watching Evans, “an Abe Lincoln-looking character,” blink his eyes open after a short nap and unfurl from the too-short bench. “OK,” he said, “It’s time for us to get to work.” Evans got a pen and paper and began writing down his dreams.

He wrote about the convergence of science and business, and the translation of discoveries into products and medicines and how that would create wealth in Canada.

Inspired by Boston’s Kendall Square—then the most concentrated cluster of biotechnology in the world—the innovation hub Evans envisioned would be a junction for universities, hospitals, financial institutions and government; where ideas born in laboratories would collide with business and churn out globally-competitive companies.

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It was a novel idea at the time, and one that was easy to support, at least on principle. In 1999, Ottawa alone funnelled $17.2 billion (close to two per cent of GDP) into research and development, yet there was little of commercial value to show in return, it seemed. Those who did spin innovation into businesses were doing so with much less success than their U.S. peers, whose dollar value per capita of IPOs was double that of Canada’s. “We just couldn’t get people to invest,” says Stiller, who, at the time, was chair of the Ontario Research and Development Challenge Fund and CEO of the Canadian Medical Discoveries Fund (CMDF).

Nearly twenty years later, a version of Evans’ dream has materialized in the heart of Canada’s biggest city as a towering structure whose existence is as divisive as whether to colonize Mars. The building, which shares the planet’s name, is an elegant hybrid of heritage brick and gleaming towers of steel and glass. Physically, its appeal is hard to deny, but opinions clash on the question of its value.  

In the years since its launch, MaRS Discovery District, which at one point stood for Medical and Related Sciences, has benefitted from provincial funds in the ballpark of $500 million, and at least another $100 million in federal and private funding, based on select financials that have been made public over the years (MaRS does not disclose all their funding sources). But quantifying the return on that investment is tricky. MaRS does not keep track of every startup that leaves its incubator, so there’s no telling how many of them have achieved that coveted commercial status. More crucially, though, the problem that Evans, who passed away in 2015, set out to solve—creating a clear path from research to innovation to market—still exists today. “We haven’t achieved that,” Stiller concedes. “We will, but we haven’t.”

Talking Point

The MaRS story is, in many ways, the Canadian story when it comes to the innovation and commercialization of scientific research. What began with a civic-minded vision to create a life-sciences hub, able to compete with Boston’s Kendall Square in commercializing world-class research, has become a polarizing force at the centre of Toronto’s innovation efforts. Meanwhile, the original goal—turning research into high-growth companies—remains mostly elusive.

Evans solidified his legacy as one of Canada’s great civic leaders well before he started MaRS. A cardiologist by training, he co-founded McMaster University’s transformative medical school program, a model built on problem-based learning that’s now emulated internationally. He served as the president of the University of Toronto and the founding director of the World Bank’s population, health and nutrition department. He was chairman of the Rockefeller Foundation, a Rhodes Scholar and an Order of Canada recipient. People who knew Evans, though, seldom mention his accolades. Rather, they focus on his character. They remark on his humility, compassion and drive; his instinct to listen before speaking; his respect for everyone, which, in turn, earned him universal respect. “John was one of the most beautiful human beings you would ever meet,” says Ken Knox, a founding member of MaRS. Several people I spoke with describe him as “the greatest Canadian” they’d ever known.

Evans was retirement-age when he began MaRS, but his family wasn’t surprised he took on what would be a career-defining job for anyone else. “This is a man who was never going to retire or play golf or do any of those retirement things,” says Gill Evans, one of Evans’ six children. “He just kept thinking, ‘What’s another way to do this?’ He was always, in his head, innovating ways to do things better.”

John Evans looks over a model of McMaster University Medical Centre, the school he founded as Dean. (1969) McMaster University’s Faculty of Health Sciences

MaRS was indeed the civic-minded dream of a man with insatiable ambition. But Evans had a personal agenda for creating it, too.

One of his many endeavors was serving as chair of Allelix Biopharmaceuticals, a drug and device developer formed in 1981 and one of Canada’s first biotech companies. Stiller, acclaimed for his part in developing the drug to prevent organ transplant rejection, had invested in Allelix through the Canadian Medical Discoveries Fund in the late ‘90s, but the company was in trouble. “[Allelix] had a wonderful technology, but didn’t have any money,” says Stiller. “We just couldn’t raise the money in biotechnology in Canada.

In 1999, Allelix merged with Utah-based NPS Pharmaceuticals. The goal was to move the conglomerate’s headquarters to Toronto, but there was little incentive for NPS to leave the States. “We lamented the fact that we didn’t have our own centre in Toronto or Canada that was like Silicon Valley or Kendall Square,” says Stiller.

So, like any good entrepreneur, they set out to build one themselves.

Evans and Stiller were joined early on by Knox, the retiring deputy minister of energy, science and technology for Ontario and soon president of the Innovation Institute of Ontario and its funding programs, one of which Stiller chaired. Knox brought on board Nina Gazzola, No.1 employee at MaRS, who had worked as a summer student for Knox at the Ontario government.

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“These were people at the centre of granting money to [Canadian] researchers and research projects. And they said, ‘If we don’t do a better job commercializing this, it’ll be tougher politically to support basic research in the province and country down the road,’” says John Cook, who joined MaRS in 2001 at the request of Evans, his neighbour, and stayed on as president until 2005.

The small team quickly attracted some of the country’s top changemakers to the cause. Among them: Lawrence Bloomberg, former director of the National Bank; Joe Rotman, the late financier after whom the University of Toronto’s business school is named; Dale Martin, a Toronto city councillor and Heather Munroe-Blum, an RBC board member and later principal and vice-chancellor of McGill.

Despite their stunning reputation and wealth, the original board struggled, like any startup, to launch. Their first challenge: securing the coveted land on which MaRS stands today

Everybody said they would be a supporter, and they thought it was a great vision, but they couldn’t be the ones to step forward.

Stiller was uncommonly nervous the day he stood before the University Health Network (UNH) board of directors in 2000 and explained why they should sell 5.2 acres of prime real estate to his then-unnamed organization for a fraction of what condo developers were offering to pay. Paraphrasing the 18-year-old speech from memory, he says: “When Queen Victoria deeded this property to her subjects in Canada, she never dreamt that one day the people who owned the land would sell it for condominiums, bowling alleys and massage parlors. It is inconceivable,” he stresses, “that this land can be used for anything but bettering Toronto by taking discoveries and creating wealth in health.”

At the time, he sensed the board was unimpressed by the remarks. “But the fact of the matter is they sold it to us,” he says, his voice straining with astonishment when he tells the story, all these years later.

Before buying the UHN land, the group suggested the hospital network partner with MaRS on the build instead of selling the property. When that didn’t pan out, they appealed to the teaching hospitals across Ontario for seed funding, five of which pledged $50,000 each: enough to pay Gazzola’s salary, as most of the others were volunteering, and to cover some market research and other expenses.

The founders knew they needed significant public funding to support MaRS, but their piddling resources didn’t give the federal and Ontario governments confidence in the project’s success. “Everybody said they would be a supporter, and they thought it was a great vision, but they couldn’t be the ones to step forward,” says Gazzola. “There was a moment then where the group said, ‘What if we raise the money ourselves?’” Several founding members, including Evans, Rotman, Bloomberg, Arthur Labatt and Peter Munk, pitched in no less than $1 million of their own money, and convinced others in their networks to do the same. Within a few weeks, by December 2000, the group had $11 million pledged. Finally, UHN was convinced. As part of the deal, MaRS would oversee the construction of a UHN research centre on the land. “We’d worked so hard for that,” says Stiller. “It was like a dog chasing a car and catching it.” Keeping up with the speeding vehicle, however, was another story.

By April 2001, with no official business plan and roughly $2 million at their disposal, the group had locked themselves into the $29-million swath of land and, more critically, the promise to build a commercialization culture around Canada’s medical research prowess. It was a tall order.

In December 2003, the last payment to UHN was coming due for the land where the West Tower of MaRS was to be built, and the organization didn’t have the money to pay it. By then, they had $5 million from the University of Toronto, $10 million from the Ontario Innovation Trust (Stiller and Knox recused themselves from the decision to accept the money, given their roles at the OIT), $36 million from the Ontario government and $20 million from the federal government, on top of nearly $14 million from individual funders. But that money was committed to building MaRS itself, not for securing the land. Some board members feared they were in imminent danger of losing the property. Having exhausted their fundraising options, and with time running out, Evans called a Saturday meeting.

To the board’s surprise, the news was good: they had found a funder to pay the $14.2 million they needed, he told them. The only stipulation was the cash source was to remain anonymous. “The board must have known it came from John [Evans],” says Cook, “but we were sworn to secrecy.”

It would be nine years before the public would learn of Evans’ generosity in a Globe and Mail article announcing another Evans-family donation to MaRS, this time for $10 million.

Left to right: John Evans, Ken Knox and John Cook at the construction site for Phase 1 in 2001 MaRS

In 2005, MaRS welcomed its first tenants, led by Evans’ pharmaceutical company NPS, and for the first few years, the centre operated more or less as planned. By 2007, they were fully leased and needed more space. The organization entered a 99-year lease with California-based developer Alexandria Real Estate, known for building life-science centres across the U.S., to construct and lease out the next structure. But when the financial crisis hit the U.S. in the fall of 2008, MaRS was knocked off-course. Alexandria was grappling with the real estate crisis in the States, and so they stopped Phase 2 construction just over a year in.

“We tried to persuade them that the conditions were such in the Canadian market that it was worth restarting, but they did not agree,” says Ilse Treurnicht, MaRS’ CEO from 2005 to 2017.

Development troubles aside, Treurnicht notes that, internally, “the machinery of MaRS, in terms of building out our innovation support capacity, was going full-steam ahead.”

The organization was building out a scrolling portfolio of coaching programs for startups, and focused on mobilizing new sources of capital. They took over the Investment Accelerator Fund (IAF), an Ontario government seed funding program, and set their sights on attracting big corporations to take up space in the centre.

But outwardly, MaRS was an inactive construction site of which the public was growing increasingly skeptical. In 2011, Infrastructure Ontario stepped in with a $224-million loan to help MaRS finish construction itself. Alexandria, however, still had a minor stake in the project—the approval rights over the lease rates—and was seeking rents well above Toronto’s market rate, which few companies, including deep-pocketed corporations, were willing to pay. “It became very clear,” says Treurnicht, “that we had to borrow additional money to try and buy them out, so we could actually execute on the leasing.” The Ontario government kicked in another $65 million to buy out Alexandria in 2014. Meanwhile, the building was still two-thirds empty.

During that period, from 2011 to 2014, MaRS still managed to bring in $53 million in revenue from tenants in the centre, raising questions as to why taxpayers were funding what appeared to be a real estate venture that offered little in return to the public. Popular opinion was that MaRS had become a white elephant—a reputation that’s been hard to shake, even today, long after the centre secured bank financing to repay the Province’s loan three years ahead of schedule and, eventually, filled the building with tenants.

MaRS West Tower MaRS

The political backdrop to this adolescent phase of MaRS’ was one many scientists, as far as they were concerned, would describe as increasingly hostile. The percentage of federal government spending on research relative to GDP began steadily declining in 2009, dropping from the standard two per cent that year to 1.5 per cent in 2017. Venture capital funding in Canada saw two consecutive years of record lows in 2009 and 2010. The following year, the government drastically reduced its commitment to fundamental and basic research through the National Research Council (NRC), shifting resources instead to innovation and commercialization. “What became was this idea that scientific discovery is not valuable unless it has commercial value,” says Jason Tetro, an Edmonton-based microbiologist. “I was so ticked off by that.” The changes created a catch-22 of sorts, whereby researchers needed funding in order to prove their discoveries’ marketability, but the NRC wouldn’t fund them until that value had been demonstrated.

At the same time, businesses also reined in research and development spending. The most recent Statistic Canada figures show that between 2007 and 2013, R&D personnel employed by Canadian businesses dropped 21.1 per cent.

“So that’s the climate,” says Tetro. “In order to go from good old-fashioned research, to innovation, to commercialization, it’s no longer a matter of being able to do it yourself through proper funding, et cetera. Instead, you pretty much have to depend on getting bought out by a larger company who’s then going to get bought out by an even larger company than them.”

Critics of MaRS point out that a large portion of the centre—11 per cent by square feet, according to the organization—is now occupied by multinationals like Facebook, Johnson & Johnson and Samsung, offering little apparent value for startups at MaRS. “MaRS’ goal is to be able to help basic research develop into innovation and possibly towards commercialization,” says Tetro, “but the question becomes: are they working toward developing the researcher into a proper innovator and then eventually someone who can become commercialized, or are they falling into that system whereby you attract someone who’s going to buy your technology and then they will get bought by Facebook or whoever it is, leading to the commercialization?”

A spokesperson from MaRS insists the centre aims to help startups become corporations unto themselves, rather than fold them into existing ones. But Tetro argues we’ve created a system in Canada—not just at MaRS or other incubators—where being acquired is practically the only path to commercialization for startups. It begs the question, says Tetro: “Are you going to be one of the lucky ones that gets bought out?”

We now have a proliferation of available technology, but the system hasn’t modernized at the same pace—it’s actually atrophied.

Had MaRS materialized like Evans dreamt it would, the civic return would be enormous: Canadians would have more precise and effective healthcare and high-growth companies to boost GDP. But that hasn’t exactly happened. In part, that’s because MaRS has broadened its scope well beyond medical innovation, now supporting startups in cleantech, cryptocurrency, machine learning and virtual reality.

The bigger factor, though, is that the process for getting medical devices and products to market hasn’t changed in the years since MaRS opened. While more companies are forming and integrating research, innovators have the new challenge of getting their products regulated and sold in Canada.

For instance, take Synaptive Medical, the poster child for successful incubation at MaRS. The company has built a suite of robotic tools and high-power optics to navigate the brain and remove tumors with precision. It grew from six to 250 employees in its four years inside MaRS. In 2016, three years after launching, Synaptive’s technology got Health Canada approval, and FDA approval a year before that. Fifteen U.S. hospitals now use their devices, but in Canada, Vancouver Health Authority is their only customer. Despite their efforts, they haven’t been able to commercialize their product in Ontario, their home province.

Meanwhile, Chipcare, a medical device startup at MaRS, isn’t set on selling in Canada at all. “The market here is 10 times smaller than in the U.S., and it’s complicated to get new technologies adopted in the Canadian healthcare system,” says James Fraser, Chipcare’s CEO. “That’s why we’ll focus on the U.S.”

When asked if it’s become easier to get medical and related sciences to market since MaRS opened in 2005, Knox was frank. “No,” he says. “It’s probably harder.” He says the reason is simple: the process in place for commercializing medtech is designed for pharmaceuticals, not new devices or techniques, which are the focus of most health innovation companies today. Add to that the exorbitant cost of new medtech, which cash-strapped hospitals and provincial health authorities are reluctant to pony up for, even if they’re more effective than what’s currently available.

“We now have a proliferation of available technology, but the system hasn’t modernized at the same pace—it’s actually atrophied,” says Zayna Khayat, future strategist at Saint Elizabeth Health Care and a professor of healthcare consulting at the Rotman School of Management. “It’s like you’ve got an Uber-type app and you’re trying to use it on a disk operating system.”

As Khayat explains, a lot of the focus in the last decade has been on simply building startups: making more inventions and converting IP into something marketable. “That’s what all the incubators and accelerators were focused on, and VCs got excited,” she says. “But in systems like health, the only way you have a monetization event—i.e. you commercialize—is when somebody actually buys the damn thing. Now those young companies are bumping into a wall where their own backyard isn’t adopting their stuff.”

Some provinces are taking steps to address that. Quebec launched a ten-year Life Sciences Strategy last year, along with $117.5 million in funding to support health science commercialization. Alberta made changes about a year ago to the government departments in charge of health innovation marketing, shifting responsibility from Alberta Health to Economic Development and Trade. In 2015, Ontario created a Chief Health Innovation Strategist position, occupied by William Charnetski, tasked with bringing health and medical technologies to the provincial and global markets. “He has access at the top to all the levers in the health system,” Khayat says. “Before, it was little companies trying to stitch it together for the health system. Now, you’ve got somebody at the top whose job it is to pave the pathway.” Meanwhile, the federal government shifted NRC funding back to basic research this year, in an attempt to reinvigorate Canada’s strong-suit in the innovation process.

For its part, MaRS launched an initiative aimed at helping expedite the path from research to market for health tech innovators. The program, called EXCITE, takes in startups with viable health technologies and guides them through the system, coordinating with regulators and potential buyers along the way. So far, just three companies have successfully completed the program since its launch in 2011.

Tetro says there’s a better way to commercialize health-tech: a system used in Europe, called the triple-helix, that coordinates government, business and higher education in the research-to-market pipeline. “It gives researchers the opportunity to get in at the ground level of these triple helices, whereby they would be doing their research knowing full well it would have an impact in a particular area of innovation.”

The approach has worked particularly well in the England, Khayat says. “They have a very robust and much more integrated system than what we have here. They’ve gone a lot faster than we have despite starting later than us,” she says, noting their clear advantage of operating on a single healthcare system, compared to Canada’s 13.

In the beginning, “MaRS” was not an acronym; it stood for nothing in particular. Rather, it signalled the Herculean effort required to realize John Evans’ vision, and the influence it would have on Canada, should that happen. “John [Evans] would talk about how Kennedy put a man on the moon, and how that had huge impact,” says Gazzola, who’s still at MaRS today. “What we’re talking about, it’s like putting a man on Mars—that’s how big of an idea this is.”

While commercializing medical innovation remains a major challenge in Canada, part of Evans’ dream certainly has materialized. The centre helped pioneer what’s now a sprawling network of entrepreneurs in Canada, many of them connected in some way through the 150-odd incubators that have cropped up since MaRS launched. Venture capital spending on Canadian companies has been trending upward since about 2012. MaRS itself houses close to 200 tenants, more than half of which are startups which, according to the organization, have generated $1.8 billion in revenue since the centre opened. Among the most significant changes, though, is the value policy-makers in Canada now place on tech and innovation generally. The federal Liberals, for example, have earmarked $950 million for five innovation “superclusters” across the country, focusing on AI, agritech, manufacturing, oceans and digital technology. Prime Minister Justin Trudeau has made clear on the international stage that Canada is “open for business” in science and technology fields.

MaRS was not set up as a public policy instrument,” says Knox. “It was set up to bring new ideas to the marketplace.” But completing the MaRS mission will indeed require policy change—like harmonizing provincial formularies, for instance, and balancing priorities around research and commercialization. That’s beyond the incubator’s mandate, he says.

That daunting prospect hasn’t deterred others from picking up the baton from Evans. Across the street from MaRS, on the north side of the same intersection, a new incubator is in the works. U of T, having outgrown its space in MaRS, is building its own facility in two phases, roughly the same size as its neighbouring incubator. Construction on the first phase, a $100-million-plus project, is slated to start next year. The university will occupy one-quarter of the structure, the Vector Institute in another quarter and the remaining space will host startups, with priority going to those in the AI sector. When the second phase is built many years from now, it will focus on regenerative medicine and biosciences. The stated goal: making that elusive dream of commercializing research a reality.