By Keith Edmund White, Editor-in-Chief
We all know the obvious: the world, along with the technologies that make it run, is moving at a faster and faster clip. As such, the governments of advanced economies are facing a common challenge: how can they not only maintain the important mainstays of their economies, but also harness future technologies? Today's press release from the government on Ontario shows one such model: a government-funded nonprofit, MaRS DD, that provides funding and other business services to potential-filled early-stage start-ups. CUSLI-Nexus explores how MaRS DD fosters innovative businesses in Canada, and if these innovation incubator/accelerator organizations can solve Canada's innovation challenge.
Yesterday the government of Ontario heralded its support of
12 innovative businesses, giving
particular focus to a social responsibility start-up Better the World. What’s most interesting about this news-release is how Ontario's provincial government went about supporting these tech ventures. The government established a $7 million fund
Investment Accelerator Fund (IAF), and then had MaRS (short for “medical and related
sciences”) Discovery District (MaRS DD) administer this fund to worthy Canadian
start-ups. The non-profit organization, which was founded in
2005 and provides business services
to science, technology, and social entrepreneurs, doles out grants up to $1
million to get early-stage start-ups up and running. And the IAF also takes in funds from private
sources. As such, MaRS DD is an example
of a public-private partnership geared to spurring tomorrow’s in-demand
industries and technologies in Canada. How’s MaRS
DD doing? Well in 2010 alone, MaRS DD
has pumped
over $108 million in capital for Canadian start-ups.
To get a sense of what MaRS provides to Canadian tech entrepreneurs, check out this article by
MaRS CEO Ilse Treurnicht:
Every day, more than 2,500 people from the worlds of science and technology, entrepreneurship and business, as well as investors and the innovation community come to work at the 750,000-square-foot complex. And we’re still growing. By the fall of 2013, MaRS will more than double in size to become one of the world’s largest urban innovation hubs, commercializing research and accelerating the growth of startups in life sciences, ICT, cleantech and social enterprise. MaRS is also an active member of the Ontario Network of Excellence (ONE), a regional platform that supports the fast growth of technology ventures in over a dozen communities across the province.
So why is this particularly important to Canada, and what
has MaRS DD accomplished?
First, MaRS DD is a important piece of protecting Canadian
prosperity in the 21st century.
As I discussed last month, today’s relatively rosy Canadian economic performance
faces a
long-term innovation challenge. Now,
that August post focused on the structural problems getting in the way of current
Canadian businesses innovating their business practices (think making a widget
5 seconds faster), and not the ‘MaRS DD’ angle on innovation. MaRS DD is doing the start-up slice of
innovation: funding new businesses that—if
they succeed—will provide new products or ways to deliver in-demand services. The end-result: a start-up working at MaRS DD becomes the
next big bio-tech or tech company, or simply gets bought-out from an
established company, which—in turn—generates increased corporate profits.
As such, business incubators like MaRS DD—based in a city
with $1 billion in annual science and technology research spending are a small,
but critical piece of building the Canadian economy of the future. And, most interesting to me, it shows an
attempt to combine the long-term funding capability of government with academic and real-world
business expertise to create successful Canadian start-ups.
As to how MaRS DD is doing, it’s clear that MaRS DD is doing
good work. MaRS DD has provided 900 research requests for companies and
entrepreneurs, 13 market intelligent reports, and has created 600 jobs in 2010
alone. A $7 million government expenditure
to create 600 jobs isn’t bad (~$11,667.00/per job), especially if some of these
then lead to either big start-up buy outs or permanent businesses. So, it’s clear MaRS DD hasn’t been a waste of
tax-payer money.
But, the most interesting—and vexing question—is how one can
analyze how a start-up incubator can measure its effectiveness. Most start-ups fail; at least with government
funding, we’re not forcing would-be entrepreneurs to be stuck paying back debts—and
not trying to succeed again. But judging
a start-up incubator by the number of jobs created, while a key political
indicator of success, has little—if anything—to do with whether MaRS DD is fulfilling
a need the private sector can’t provide.
This is not to throw cold water on the project, as MaRS
DD’s expansion and track-record of success shows that MaRS BB is a model for successfully spurring tech start-ups.
But, to get a sense of start-up incubator/accelerator skepticism, check out Lyn Blandchard's article at Your Capital Edge:
This research led to a few broad conclusions: while there are plenty of startup success stories to provide anecdotal evidence of incubators and accelerators having success on a regional basis, there is no broad consensus on just how effective these programs are.
So, will MaRS DD—and similar organizations—solve Canada’s
innovation challenge? Ultimately, only
time will tell. But MaRS DD sure looks
like a part of the solution.
