Alternative economy

Alternative economy

Tech sector achieves exponential growth despite minimal investment. Imagine what it could do if it had more support

Tukan Das and his three business partners weren’t sure where to turn.

The international students were in the early stages of building their Halifax-based technology start-up, LeadSift. Their focus: software to generate sales leads from Twitter data. Though energetic and optimistic, they knew they needed help. But where to get it? Their adopted home province appeared to lack a formal network of mentors willing to help budding tech entrepreneurs.

So they headed to New Brunswick.

The group was accepted into the Moncton-based Launch36 startup accelerator, which, since its formation two years ago, has helped kickstart 26 technology start-ups. Those fledgling companies have since raised a combined $8 million and created 70 jobs.

Over five months, the LeadSift team traveled to New Brunswick for regular discussions with industry experts and coaching sessions with established tech entrepreneurs. At the time, Das lamented the lack of a similar program in Nova Scotia. New Brunswick, he admitted regretfully, was simply ahead of Nova Scotia.

“That was my complaint,” he says seated in his company’s downtown Halifax office. “And a lot of people said that… But it has changed drastically.”

In November 2012, not long after graduating from Launch36, LeadSift unveiled more than $1 million in funding, including $500,000 from OMERS Ventures, the venture arm of one of Canada’s largest pension funds. Das says the company will seek more money this year in a Series A round of funding. He’s hoping the round will include Silicon Valley-based backers such as Andreessen Horowitz, a $2.7-billion venture capital firm.

LeadSift has been likened to Radian6, the New Brunswick tech company Salesforce.com purchased in 2011 for more than $300 million. Mashable.com recently called LeadSift one of five social data startups worth watching.

LeadSift’s rise is mirrored in the Nova Scotia tech sector generally. In just two years it has produced a string of successes, including the emergence of dozens of startups and the creation of Dalhousie University’s Starting Lean course, which is designed to help students transform business ideas into actual start-ups. Last March, IBM opened a new Canadian Global Delivery Centre in Halifax that is expected to create up to 500 jobs over eight years. Yet the most significant piece of tech sector news arrived in 2012 when San Francisco-based Salesforce bought GoInstant, a Halifax start-up, for a reported $50 million.

Seated in the kitchen of LeadSift’s office, Das marvels at California’s “start-up attitude.” And he believes Nova Scotia is adopting some of that flavour. In fact, he says Nova Scotia is witnessing a start-up “boom”. “It’s tremendous. It’s buzzing,” says the native of Calcutta, who moved to Nova Scotia to attend Dalhousie in 2002.

Yet there’s a problem. Many Nova Scotians, even those in the business community, simply don’t grasp the tech sector’s potential. “They don’t. And they need to,” Das says. “No other industry grows this fast.”

According to Ulrike Bahr-Gedalia, the president and CEO of Digital Nova Scotia, the digital technology industry is one of the fastestgrowing segments of the Nova Scotia economy. In fact, she notes Nova Scotia’s digital tech sector growth has outpaced all other provinces over the last five years.

The province’s digital sector now employs 19,000 people across 600 companies, and is worth $1.5 billion. And that doesn’t include technology spinoffs in unrelated fields, such as biotech, finance, ocean tech, aerospace, and gaming — which boost the figure to $2.5 billion. “It’s a significant source of economic growth and opportunity in this region,” Bahr-Gedalia says. “We need to see that this is where the growth potential lies.”

The Nova Scotia tech sector is not without blemishes, however. BlackBerry’s decay resulted in the closure of the company’s Bedford office and a loss of more than 300 jobs.

But Bahr-Gedalia argues such fluctuations are completely normal. “I’ve been working in IT for over 20 years,” she says. “I’ve been made redundant and laid off and then a new opportunity arises. Companies merge, companies get acquired, companies shrink a little bit, and companies disappear. But new companies fill in.”

To support her claim, Bahr- Gedalia points to a career fair Digital Nova Scotia helped organize in November. The goal was to find positions for workers laid off by BlackBerry, Xerox and Convergys. “The space was totally booked,” she says, noting 40 companies attended. “We had about 700 job opportunities being offered and about 250 potential employees. That speaks to how vibrant and alive the sector is. There are opportunities out there.”

The buzz, potential and youthfulness associated with the tech sector is perhaps best revealed at Volta Labs.

Located in a former TD Bank office on Spring Garden Road in Halifax, Volta’s office space still contains the bank’s old green carpet and dated wallpaper.

Yet it’s clear there is a new tenant. Entering the main doorway, a visitor is immediately struck by a Star Wars mural depicting, among other things, an X-Wing and a Tie Fighter.

Volta is not an accelerator, a point its organizers stress on their website. Instead it’s a “start-up house” that provides select start-ups with everything from cheap office space and Internet access, to pro bono legal and accounting advice and unlimited coffee. There is even a program to help subsidize the travel costs (up to $5,000) for startups seeking investment cash in the U.S.

“People come here with an idea and a laptop, and we give them everything else they need,” says executive director Milan Vrekic. “So there is no excuse for failure.”

Volta opened in mid-2012 and so far 18 start-ups have been accepted. A few of those companies have already “graduated”, while another 15 sit on a waiting list.

In its first seven months, Volta companies raised more than $10 million and created more than 80 jobs with a median salary of $78,000. “And all without payroll rebates,” Vrekic says with a smirk.

Volta draws half its $350,000 budget from ACOA, while the other half is drawn from private contributors such as Deloitte and the McInnes Cooper law firm. It also received cash from Jevon MacDonald, a co-founder of GoInstant. Originally from Charlottetown, MacDonald started his fi rst company in 1998 and has since launched a half dozen Internet start-ups. He says the creation of Volta is a way to repay the support he received along his entrepreneurial path.

“Volta is a great start,” he says from California, where he is spending a month and a half this winter. The project, he insists, is “just at the beginning.” “We’re not even a fraction of the way to where we think we can get, in terms of the number of companies we’re helping to create,” he adds. “We want to create world-class tech entrepreneurs.”

MacDonald says a number of Nova Scotia tech sector announcements are likely to emerge in the coming months, involving local companies getting acquired or signing partnerships with big Internet companies. “It’s going to remind everybody that if we keep at this we’re going to keep getting good results,” he says. “I think the tech sector is still a little bit mysterious to a lot of local folks, but it’s at least in the news now. They read about it and it’s starting to get in the consciousness. My hope is that that will continue to happen.”

But far more has to be done, he argues. For one, the local education system must catch up with the demands of a tech workforce. Even grade school students must be introduced to technology and entrepreneurship earlier in their academic training.

More pointedly, MacDonald says the region’s established companies must put more effort into embracing and promoting technology development.

“Take Sobeys, for example,” he says. “I’m here in San Francisco and I just placed a grocery order on my computer. I went on AmazonFresh and I literally picked three containers of yogurt, four litres of milk and some baby formula, and it’s going to be at my door at 2 p.m. this afternoon in a box. And I’m not paying for anything but the cost of the groceries. You have these companies that are thinking of themselves as technology companies and totally disrupting traditional industries,” he says. “But we have Sobeys who aren’t even thinking of themselves in this way. They’re not investing in technology. They’re not contributing at a public policy or even philanthropic level to grow these skills and capabilities in the region.”

He continues: “You look at the existing big companies in the region, they just don’t contribute to any sort of tech (sector) economic growth. They don’t see themselves as technology companies… There’s a lot happening. But we’ve got a huge defi cit we need to make up.”

MacDonald recalls being at the Charlottetown airport recently and witnessing a father being reunited with his family, following a stint working in Alberta.

“I would say most people in the region look at a young guy and they think, ‘OK, he can go to the oil patch and make $150,000 a year.’ But we can’t keep sending our young earners and fathers there,” MacDonald says. “You can’t have these young boys and these young girls growing up without their dads and their moms. Society shouldn’t value that. But for some reason we do. I think it’s because we don’t understand what we can build here in Nova Scotia, New Brunswick and P.E.I.”

He pauses.

“Yes, good things are happening. But honestly, I don’t think we’re paying any attention to the real possibility of what we could be doing with tech sector growth in the region.”

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