Ontario cuts funding to startup, innovation programs

Theglobeandmail.com
May 9, 2019
Josh O’Kane

The Ontario government is cutting funding that supports startup and later-stage businesses, prompting cutbacks at some of Canada’s top innovation institutions.

Members of the Ontario tech ecosystem, including four sources outside the government to whom The Globe and Mail granted anonymity because they were not authorized to speak publicly, described a funding environment in great flux.

The province intends to cut funding, by as much as half, to the Ontario Centres of Excellence, which helps innovative companies secure funding through a number of programs. In addition, sources familiar with the Ontario Scale-Up Vouchers Program, which offsets costs of up to $1-million for high-potential tech firms to scale up, hire and develop intellectual property, say they expect it to be on the chopping block. And a growing number of regional innovation centres say their funding has taken a hit.

Premier Doug Ford’s government has promised to balance Ontario’s books in five years and has been slashing costs across myriad ministries since the provincial budget was released last month. With that has come a nearly 20-per-cent budget reduction to the Ministry of Economic Development, Job Creation and Trade, the effects of which have begun cascading through the innovation ecosystem it supports. In the budget, the province also revealed plans to review the effectiveness of provincially funded innovation institutions such as incubators, and The Globe reported it will include a panel assessing efforts to commercialize intellectual property led by smartphone pioneer Jim Balsillie.

Ontario Centres of Excellence, or OCE, runs programs to bolster research and help scale-up firms in numerous technology segments, including autonomous-vehicle tech, cybersecurity and 5G wireless adoption. It invested $81-million into Ontario companies on behalf of the province in its fiscal 2017-18 period, according to its most recent annual report. Another source familiar with the situation said it expected to lose between 40 per cent and 50 per cent of its provincial funding.

“OCE has been advised of some program adjustments,” spokesperson Andrew Robertson said in an e-mail. He did not confirm any cuts or their potential size, but said OCE was working with the province on “our plan moving forward.”

Toronto’s MaRS Discovery District will see its provincial funding cut by more than $2-million, a reduction of more than 30 per cent of Ontario’s contribution to the institution’s core operating budget, according to one of the sources. MaRS, which runs programs for startups, receives both public and private funding. Its chief executive Yung Wu said in an interview that the innovation centre had been working with the Ford administration since it was elected last year to understand how it intended to fund the institution.

He said he always expected cuts based on the government’s fiscal approach and planned around it. While some projects would be deferred and staff vacancies left unfilled, Mr. Wu said that MaRS has no plans to let anyone go. “We’re not going to rely on the province to the same degree, but we’re not backing away from entrepreneurs," Mr. Wu said. “Our plan was always to diversify sources of funding.”

In an e-mail, Economic Development Ministry spokesperson Sarah Letersky declined to confirm any of the cuts reported by The Globe but said that since forming government, “we have had frequent, constructive conversations with the tech sector about creating the conditions that will allow companies to scale and grow. Their recommendations have since informed our approach to the sector, in the context of Ontario’s fiscal situation.”

Digital tech publication The Logic first reported last week that the innovation hub Communitech in Kitchener, Ont., laid off about 15 of its 105 employees after a 30-per-cent funding cut from the province. In an interview with The Globe on Wednesday, CEO Iain Klugman said the hub would work with fewer early-stage companies and shift its focus to later-stage scale-up companies and “high-potential” startups. Other organizations such as Velocity at the University of Waterloo, he said, have grown to the point where they can help innovators that Communitech no longer can.

The changes come amid a broader shift in funding for innovation centres. Last month, the federal government announced a new $52.4-million program for scale-up companies that would flow through MaRS, Communitech and Invest Ottawa. While the program is hailed as first-of-its-kind, those in the innovation community see it as a replacement for the former Canada Accelerator and Incubator Program, a previous federal funding initiative.

Meanwhile, several of the sources said that the Ontario Scale-Up Vouchers Program had been paused, which one source said was a strong indication it had ended entirely. The program has provided growth coaches and funding for companies such as Waterloo’s adaptive-learning company Axonify and self-driving tech company Clearpath, but has not made any funding announcements since April 12, the day after Ontario tabled its budget. The program was first announced by the previous provincial Liberal government in 2017.

Dave Pooley, Axonify’s chief financial officer, said in an e-mail the program had been very helpful to the company. He added: “We have received no communication that there has been a cancellation" and the company was operating under the understanding it was still eligible for these funds.

“A lot of our members have found Ontario’s network of innovation hubs and provincially funded business-support programs to be more oriented toward early stage companies and pre-revenue startups,” Benjamin Bergen, executive director of the Council of Canadian Innovators, said in an e-mail. “Our hope is that all governments recognize the importance of supporting high-growth companies because they are the ones creating well-paid jobs and long-term economic prosperity.”