The real gap between London and Waterloo in FedDev fundings

Getting back to FedDev and the differences in funding between Waterloo and London (see "Gap between FedDev spending in Waterloo and London not as large as it looks," September 10)—a discussion initiated by a couple of stories in the London Free Press.

The Free Press tried to aggregate all FedDev money going to Waterloo and London over the last three years—and didn't do it well. But even if you could do it well, it's an approach that's going to hide more than it reveals.

FedDev's focus has changed significantly over that period. Early on, funds went to municipalities to help them upgrade their recreation infrastructure—arenas, swimming pools, sports fields, and so on. Just in Southwestern Ontario alone that amounted to more than $40 million.

More recently, there's been an emphasis on providing (repayable) funds to businesses to help them attract investment and improve competitiveness. So if you're looking to draw conclusions about support for business—as the Free Press was—it's more relevant to look at program-by-program comparisons instead of lumping together money for business and infrastructure and everything else FedDev has supported.

We'll skip to the one that reveals the most significant difference in funding between Waterloo and London. For early stage technology companies, one of FedDev's most useful programs has been its Investing in Business Innovation (IBI) initiative. Along with providing money to companies, the program also funds angel investor groups:

Golden Triangle Angel Network     Cambridge     2011-02-24     $ 50,000.00
Southwestern Ontario Angel Group     London     2011-11-29     $ 50,000.00

No difference there: the angel groups serving Waterloo Region (GTAN) and London (SWOAG) received the exact same $50,000 ... as did most angel groups in Southern Ontario.

Many companies in the Waterloo area have received significant funding through the IBI program:

Miovision	$922,500
P+P Optica	$985,000
I Think Security	$75,000
ClevrU	$988,583
eSentire	$987,500
ActivDox	$996,000
Aeryon Labs	$985,000
ANTVibes	$300,000
Qwalify	$250,000
Primal	$987,500
BigRoad	$750,000
Fongo	$850,000
Well.ca	$975,000

Every one of these companies is from the tech sector and there are lots of old friends represented on the list—people I worked with through Communitech and WatStart and some Accelerator Centre clients as well.

If we subtract the numbers for Well.ca (it has a Kitchener office and the founder became a director of Communitech in 2009, but it's based in Guelph), that's 12 companies in Waterloo Region receiving $9.1 million

Now let's look at the list of London companies that have benefitted from this funding, according to FedDev's disclosures:

Want to see it again?

Yes, that would be zero companies receiving $0.

So here's where there's a huge difference in FedDev fundings between Waterloo and London. How you interpret it will be a bit of a Rorschach test.

For those of us coming from Waterloo, it sets off alarms. I have difficulty seeing it as anything other than more evidence of the weakness of the London tech support ecosystem over the last several years (with IRAP as a significant exception).

But Londoners who haven't been immersed in the Waterloo environment are more likely to take it in stride. They get sick of hearing about Waterloo and I doubt they'd even be motivated to look into it. Even if they did, they'd likely point out that Hamilton hasn't had any either (true), and Ottawa's only had a couple (true again), and decide it's really not so bad.

That's one way of looking at it, but it's hard for me to see the inkblots that way when I can remember when the gap between the Waterloo and London tech communities wasn't all that wide. Now they're in two different leagues and the distance between them is growing.

The success of BizInc has been a hopeful sign for London. It's done a great job since launching two years ago. It was through BizInc that I met eProf ... which went to Toronto to become one of the first cohort of startups in MaRS' Jolt program. And it was through BizInc that I met Coachd ... which went to Kitchener to become one of the first cohort of startups in Communitech's Hyperdrive program. Jolt and Hyperdrive had highly competitive selection processes, and made-in-London startups made the cut in each. That's very promising. Unfortunately, they both had to leave the area to get the support they needed.

The gap between Waterloo and London in IBI funding is certainly not FedDev's fault. In fact, fundings made by the provincially-funded Investment Accelerator Fund (managed by MaRS) in Waterloo Region and London would show an almost identical gap—and with several different companies in Waterloo getting funded.

And don't point fingers at LEDC—which received the most votes in the Free Press online poll of who was to blame for the (largely imaginary, in my analysis) gap in total FedDev funds provided to London and Waterloo. The FedDev success that London has had—particularly the Dr. Oetker facility and the funding for the cargo centre at the airport—have been initiatives where LEDC was heavily engaged and which fall within its mandate. If the numbers were reversed, I can guarantee you that few people in Waterloo would be blaming CTT, the Waterloo Region counterpart to LEDC.

But there would be people driven to action, and that's probably the biggest difference between Waterloo and London. In London, it'll almost certainly be another round of the same, from the same people who sat watching as Waterloo Region pulled away and vanished over the horizon.

And now that Hamilton seems to have its act together, London may get to go through it all over again.

Highlights of Ontario commercialization/innovation spending, FY2012

The Public Accounts of Ontario for fiscal year 2012 (ended March 31) have been released, showing—among other things—the transfer payments made by the Ontario government to various organizations though the year.

Some highlights from the commercialization/innovation sector:

Some of these dollars are passed through to other organizations, but that level of detail isn't provided. Many of these organizations receive other Ontario government funds, but these are the direct transfer payments recorded in the public accounts. Several of these fundings were through the Ontario Network of Excellence (ONE) program, which has about another 10 months to go under existing contracts.

Overall, the top recipients as shown in the public accounts for the research and commercialization sector were the Ontario Institute For Cancer Research ($82.1 million), Hospital For Sick Children ($49.6 million) and the University Of Toronto ($42.6 million). OCE was fourth.

Gap between FedDev spending in Waterloo and London not as large as it looks

I've used government disclosure statements as the basis of reports for years, but I still get a little uneasy when I do. They're almost never as clear or detailed as you'd wish, and can be a minefield for the unsuspecting.

A story last week in the London Free Press (a follow up on an earlier story I hadn't seen) compares contributions made by FedDev in the Waterloo and London areas—a story based on FedDev disclosure statements over the years.

On the one hand, it concludes that Waterloo Region is more aggressive about pursuing government funding than the London area, and that's been my experience as well—specifically, in the tech sector.

But the story manages to fall into some of the traps that await readers of disclosure statements. And in so doing, I think it misses the interesting story that the FedDev numbers point to—one that's a bit concerning from a London perspective (which I'll save for another time, since my blog posts are usually way too long).

The Free Press reported that Waterloo has received $87.4 million from FedDev compared to $37 million for London. Looking through the numbers, though, I'd say both of those figures are misleading. The actual gap seems closer to $5 million than $50 million.

FedDev disclosures look like this:

Western Ontario CFDC Association Inc.     Brantford, ON, CAN     2012-03-15     $12,000,000.00

Using that line as an example, you'd probably conclude that Brantford got $12 million and no other area received anything. In fact, very little of that $12 million will end up in Brantford. It's for a fund, now called SOFII, to help companies across Western Ontario—including all of Southwestern Ontario from Windsor to Guelph and beyond. But FedDev disclosures are listed with just a single municipality or community, and, in this case, since Enterprise Brant was the administrative lead on the WOCFDCA proposal, Brantford is that city. You can't always go by the municipality that's listed—sometimes you have to dig deeper, and that's usually not easy.

When you look for contributions for London, and don't know what to look for, you're going to skip right by this one:

Dr. Oetker Canada Ltd.     Mississauga, ON, CAN     2012-02-27     $10,000,000.00

It says Mississauga—and the Free Press didn't include it in the local numbers. But it's actually the largest contribution that FedDev has made to London—funding for the new Dr. Oetker facility in the city. (LEDC's Peter White is quoted talking about it, but it still wasn't included in the London tally.) Dr. Oetker Canada has its HQ in Mississauga, so that's what's in the disclosure, even though the money is being used for London's benefit.

The largest FedDev contribution assigned to Waterloo Region—by far—was this one from just over a year ago. It's nearly four times the size of the next largest contribution in the area:

University of Waterloo     Waterloo, ON, CAN     2011-08-23     $19,580,000.00

Again, if you don't know what you're looking at and don't have time to look into it, you'd think the City of Waterloo got $19.6 million from FedDev. But it really didn't. That's actually FedDev's contribution to the Southern Ontario Water Consortium, announced at last year's AMO conference. London is also a node in that network, as are Toronto and Guelph. The money is actually going to all those areas, but only Waterloo is shown in the disclosure.

There are other tricks and traps in analyzing the disclosure statements (projects get cancelled, dollar amounts get changed and the revisions can look like new fundings), but the one likely to create the biggest errors is allocating all the dollars to the municipality in the disclosure. It would make analysis much simpler if you could do it that way—a quick copy, paste, and sort—but accurate results require more work than that.

The Free Press also used a questionably broad definition of the Waterloo area. They didn't say what they were using, so I'm not sure, but it looks like they included Guelph on top of Waterloo Region—which takes us far beyond reach of anything apples-to-apples. Waterloo Region is already slightly larger by population than the London CMA, but they're close and make the fairest comparison. Adding Guelph on top of Waterloo Region is just stacking the deck.

So, if we call the Water Consortium funding a push and take it out of the calculations (how much is going to each node has never been disclosed, so we don't know how to divide the pot), I'm left with $54.5 million in disclosed FedDev contributions to organizations in Waterloo Region. Add the Dr. Oetker $10 million to the totals for the London area and I get $50.3 million ... and then you'd need to add millions more to each for the Water Consortium and funding for SOFII and anything else allocated to other areas in the disclosure statements but actually used for the benefit of London and Waterloo Region, minus amounts shown for those two regions that are actually being used elsewhere.

We don't know what those are, so we can't do the calculations. I'm not sold on the value of comparisons of the aggregates in this way—and I never feel very confident drawing conclusions from disclosure statements—but the difference in FedDev funding between Waterloo Region and London doesn't look to be anything close to $50 million.

In fact, the real gap looks narrow enough that you might not think there's any message to take away from the difference. But I think that would be a mistake too ...

IRAP Q1 contributions in Southwestern Ontario include RDM, ExactEarth, Systems Logic, Compudata

Waterloo Region's RDM and ExactEarth were among the companies in Southwestern Ontario that received IRAP contributions in the first quarter of FY2013. The largest project was from Essex County's Concours Mold.

Disclosed Q1 contributions:

Concours Mold Inc.	Lakeshore (Essex)	$200,000
MDL Doors Inc.	Brussels (Huron)	$85,246
Apogee Engineered Ceramics Inc.	Brantford	$50,000
Blue North Strategies Inc.	Guelph	$50,000
ExactEarth Ltd.	Cambridge	$50,000
RDM Corporation	Waterloo	$50,000
Systems Logic	Brantford	$50,000
Pavaco Plastics Inc.	Guelph	$45,751
Ramstar Carbide Tool Inc.	Windsor	$40,000
Bluestreak Equipment Inc.	Delhi (Norfolk)	$39,528
Ball Media Corp.	Brantford	$30,000
Compudata Systems London Inc.	London	$30,000

There was also an expansion of a project with Guelph's Biorem that began last year. Contributions below $25,000 are not disclosed.