Monday, September 24, 2012

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:

P+P Optica  $985,000
I Think Security  $75,000
Aeryon Labs$985,000

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 (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.

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