On Thursday, Iain Klugman announced he will step down as CEO of Communitech in 2021, after what will be 17 years leading the Kitchener-Waterloo (KW)-based tech incubator.
Klugman has been a vocal advocate for tech startups in the region, pushing for favourable government policies like the Global Skills Strategy and insisting that tech giants like Google contribute mentorship and resources to the local community. During his time at the helm, the KW startup scene has grown from just over 200 companies to about 1,400 today.
Communitech CEO Iain Klugman has been a vocal advocate for the region’s startup community, pushing for favourable government policies like the Global Skills Strategy and insisting that tech giants like Google contribute mentorship and resources to companies. He spoke with The Logic about his decision to step down in 2021, the challenges that still lie ahead for the Kitchener-Waterloo tech community and the greatest failure of his time in charge.
But his tenure hasn’t been without challenges. The Ontario government recently hit Communitech with a 30 per cent funding cut, first reported by The Logic, which resulted in the company laying off 15 of its 105 employees. Klugman said the centre is now focusing more on private financing and that by the time he leaves, funding levels will be back to where they were before the cuts.
On the day he announced his departure, Klugman spoke with The Logic about his decision to leave, the challenges that still lie ahead for the KW tech community and the greatest failure of his time in charge.
This interview has been edited for length and clarity.
Why are you leaving Communitech?
I made the decision to leave at the end of my term because the organization is ready. We are strong from a financial perspective; we have an incredible board of directors; we’ve got really great customer relationships and customer loyalty. And, you know, after 15 years, I want to go and try something different.
What’s your next move going to be?
I have no idea. But I think this is part of the fun. And there’s two reasons why the board and I decided to do this now: one is to make sure that there’s a good 12-month period for the board to find the next CEO, and the second thing is to allow me the opportunity to start to have conversations with people and muse aloud about what I’ll do next. I know we’ll be staying [in KW]. My wife is very involved in the community, as am I, and I can’t imagine living anywhere else.
What are you most proud of having done in your 15 years at Communitech?
With all honesty, I’ve been most proud of the calibre of people we’ve been able to convince to come and be with us. When I arrived, there was only a small number of startups in the community and we didn’t have much in the way of brand or resources. We got those first few key people on board, and they really sent a signal about the importance and the calibre of this organization. And then from there, we truly have been so fortunate to attract people that, in many ways, we don’t deserve to have here.
Who are some of those key people you’re referring to?
There was Avvey Peters and Kevin Tuer early on, well over a decade ago, and our first entrepreneur-in-residence, Carol Leaman [CEO of Axonify]. When she joined us, people really took notice and said, “This must be real, because Carol is a big deal.” Those were the early ones that really helped us lay the foundation for what we were going to build.
Communitech is bigger than one person, and even the CEO. We launched this notion of an innovation hub; we built programming appropriate for companies as the ecosystem has evolved. When I started in 2004, our biggest challenge was the fact that there were zero startups, so the first thing we had to do was get every man, woman and child thinking about being an entrepreneur. Now we’ve got hundreds and hundreds of net new startups each year, and we have this stable of growth firms that we’ve never seen in the history of this region. So we’ve constantly been pretty good at evolving to meet the needs of companies as their needs have changed. And then the final thing is we’ve done a really good job at putting Waterloo Region on the map as being a major global innovation centre.
How much of an impact did BlackBerry’s decline in the region have on the startup scene and on Communitech?
When things started going south for BlackBerry, a bunch of us—CEOs of tech companies in town—we jumped in and spoke to the federal and provincial government, and we put in place a program to try and retain as many of the people coming out of BlackBerry as possible. We had a really strong startup community running at a time things started going south with BlackBerry. That’s what allowed us to retain so much of the talent. If BlackBerry had started to fall apart earlier, we wouldn’t have had companies that could have absorbed as much [talent] as we were able to absorb.
How are the challenges facing tech companies today different than when you entered the scene?
The difference is the composition. When I showed up, there was BlackBerry and OpenText, and really not a strong entrepreneurial community. We’re now on the cusp of something remarkable—probably a 20-year overnight success story. We have all these amazing growth firms and scale-ups tracking $100 million in revenue and beyond. That sets us up for all kinds of exciting things: more anchor tenants, some big acquisitions. All of a sudden, a lot of our entrepreneurs become second-time entrepreneurs, and that’s when things really start to become magical.
What did you hope to accomplish during your time at Communitech, but haven’t?
Probably my greatest failure in the 15 years that I’ve been here is that we still don’t have a viable train service in and out of Toronto. As we think about the biggest challenges that we’re facing, it is the fact that we just can’t make the Toronto-Waterloo Region corridor a reality without the transportation piece.
You don’t leave until January 2021—what do you want to get done before then?
I’ve got about five years’ worth of work left for the last 12 months, so there’s a few things. We launched the Communitech outposts, which is to establish legal entities in all of the G20 countries so that it’s as easy for a tech company to hire a salesperson in Brazil as it is to hire them in Canada. We have this scale-up platform that we launched in partnership with [the innovation hubs] MaRS and Invest Ottawa, and we’re going to build on that in a big way.
You mentioned that you’re leaving Communitech on stable financial footing. How did you get there—or how do you plan to get there—given the province’s recent cuts to your budget?
This year, we were dealing with the fact that every provincial and federal funding contract that we had ended on April 1. So it was both levels of government that we were working with, trying to put in place new agreements. That takes time—it was basically a year of my life. The good news is we’re over 50 per cent private investment now, which is right where we want to be. When this new provincial government was elected, we sat down with some of the key ministers and got a sense of the fiscal constraints they were facing. We told them we want to be part of the solution, and we can offer up some reductions in your investment in us.
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The financing structure has changed—is the amount of funding the same as it was under the last provincial government?
We dipped down, but we’ve also been working very, very hard to increase the private contribution. Within the next 18 months, our overall total revenue will be back to where it was.
What’s that revenue target and where are you now?
It’s about $26 million a year in income that we’re tracking toward, and we’re about $1.5 million shy of that.
Do you have any advice for whom the board should select as your successor?
Whomever they choose, they need to be able to translate and bridge between multiple different communities; they need to be able to understand and work with startups, with large corporations, with the public sector. Whomever it is, it’s going to be a very lucky person, because they’re inheriting an incredible team.