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HomeMy WebLinkAboutDSD-2022-058 - Proposed Use of 2 King Street West Development Services Department www.kitchener.ca REPORT TO: Finance and Corporate Services Committee DATE OF MEETING: February 7, 2022 SUBMITTED BY: Cory Bluhm, Executive Director of Economic Development 519-741-220 ext. 7065 PREPARED BY: Naudia Banton Entrepreneurship and Technology Advisor 519-741-2200 ext. 7194 Chris Farrell, Manager, Waterloo Region Small Business Centre 519-751-2604 WARD(S) INVOLVED: All DATE OF REPORT: January 28, 2022 REPORT NO.: DSD-2022-058 SUBJECT: Proposed Use of 2 King Street West RECOMMENDATION: That the development of a at 2 King Street West, as outlined in report DSD-22-058, be approved; and, That $400,000 be allocated from the Economic Development Investment Fund 2.0 (EDIF 2.0) to support capital improvements to initiate the Sustainable Development reet West, as outlined in report DSD-22- 058; and, That $350,000 be allocated from the Economic Development Investment Fund 2.0 (EDIF 2.0) to support ongoing operations of the Sustainable Development Goals Lab allocation of $100,000 as the partnership contribution of the Waterloo Region Small Business Centre, as outlined in report DSD-22-058; and, That the Waterloo Region Small Business Centre be permitted to add one full-time and one part-time resource to support the ongoing operations of the Sustainable through the combined annual revenues of the nce with all applicable Collective Bargaining Agreements; and, That the General Manager, Development Services, or designate be authorized to execute partnership and/or lease agreements with all major partners at 2 King St W, *** This information is available in accessible formats upon request. *** Please call 519-741-2345 or TTY 1-866-969-9994 for assistance. in accordance with report DSD-22-058, with said agreements to be satisfactory to the City Solicitor; and further, That the Executive Director, Economic Development,or designatebe authorized to execute license agreements for a term of 3 years or less with SDG Lab licensees at 2 King St W, with said agreements to be satisfactory to the City Solicitor. REPORT HIGHLIGHTS: The purpose of this report is to obtain approval to establish a new Sustainable Development Goals (SDG) Lab at 2 King Street West, as a pilot, using a partnership model. The financial implications include an initial capital cost of up to $400,000 and an annual operating cost estimated at up to $450,000, with up to $350,000 being offset by partnership contributions. Community engagement included a survey of Kitchener businesses involved in social and environmental innovation, and a virtual round table discussion with local stakeholders. The report has been advance of the committee meeting. This report supports the implementation of Strategic Plan, supports the implementation of Make It Kitchener 2 Economic Recovery Framework. BACKGROUND: In 2020 the City of Kitchener purchased a 21,000 sq ft commercial property at 2 King St W (DSD 20- 041). The City will retain ownership of the building for up to 10 years to allow THEMUSEUM to complete their business case and execute a fundraising campaign to facilitate the proposed capital expansion of the adjacent building. In the interim period, the City may utilize the building as it sees fit. Should THEMUSEUM not proceed with the expansion within the 10-year period, the City would be free to redeploy the asset for another long-term purpose. Currently, 15% of the building is temporarily occupied by a non-profit until May 2022. Note throughout this report, staff refer to the concept of placeholder. If approved, the actual name of this concept may differ. REPORT: The Make it Kitchener 2.0 strategy is committed to an ambitious plan to support economic recovery by investing in catalytic growth opportunities and creating a future where everyone can make a difference. The building at 2 King St W could provide a space for purpose-driven entrepreneurs and change-makers to launch new businesses, create local and global impact, build an ecosystem and a sense of belonging, all focused on advancing the United As noted in the comprehensive business case appended to this report: community can help. 2 King Street West could be a purpose inspired space that unites our region, empowering entrepreneu This report proposes that the City use of 2, King St. W, as a Sustainable Development Goals Innovation Lab ("SDG Lab"). Utilizing a partnership model, the former bank building would become home to 4 entrepreneurial program partners who would provide training, mentoring, incubation and/or coworking space to their various start-up companies. In addition, a community program partner and various supporting partners would add intangible value to the ecosystem while supporting greater community collaboration. The SDG Lab space would be an inclusive and welcoming space for entrepreneurs, academia, government, community groups, citizens, students, and industry leaders working together to impact people, the planet, and prosperity. Conversion of the former bank building into a functioning incubation space will require up to $400,000 in capital improvements for aesthetic upgrades, furnishings and technology upgrades. Given the expectation that the building will be demolished or repurposed in maximize the reuse of the existing structure (offices, meeting rooms, materials, etc.) while minimizing the amount of sunken costs. Furnishings and technology would be selected based on City standards to ensure they could be repurposed at other City facilities. Annual operating costs at 2 King St. W. at full occupancy are estimated at $400,000 - $450,000. The proposed business model would be anchored by four partner organizations/tenants sharing annual operating costs and space equally. Each partner organization would deliver their own programs, events, advisory and mentoring services. All partners would in some way, support purpose-driven businesses committed to impacting the UN , such as: Goal 3 (G3) good health and wellbeing Goal 8 (G8) decent work and economic growth Goal 10 (G10) reduced inequality Goal 13 (G13) climate action and others. Ideally, two of the partners would be focused on supporting racialized and equity-deserving entrepreneurs while two of the partners would be focused on environmental sustainability and social innovation. Entrepreneurs and community groups associated with the partners would have access to offices, co-working desks, hot desks, meeting, and training rooms. Annually the SDG Lab could assist more than 100 entrepreneurs to learn, launch, and grow their companies. The first of the four partners would be the Waterloo Region Small Business Centre (WRSBC), a division of the City of Kitchener's Economic Development Department. WRSBC will continue to offer small business information, advisory services, programs, and events while overseeing the operations, building community relationships, and collaborating on programming with the partners. The SDG Lab would require two additional employees - a Community Activator and a Program Assistant. These new roles will focus on activating the space, fostering partnerships, supporting collaboration and creating other revenue streams through sponsorships, rentals, event fees events and seeking other government funding. Economic Recovery Benefits of an SDG Lab Major economic events, such as recessions, often result in increased entrepreneurship and innovation. This due in part to individuals seeking new employment opportunities and/or entrepreneurs advancing innovations in response to new economic opportunities. Supporting entrepreneurial program partners will indirectly support the growth of new start- up companies small businesses. As a result of the pandemic, the Kitchener community has experienced increased office vacancy rates. Recently CBRE reported office vacancy rate of 16.6% across the city, including a 26.9% vacancy rate in Downtown Kitchener. Companies emerging from the SDG Lab could potentially fill vacant office space in our community Business Models Staff assessed three different business models, and ultimately recommend Option 1 Partnership Model. A full overview of this model is contained in the business case appended to this report. The options considered include: Model and Description Pros Cons Option 1 Partnership Model Four anchor partner Operating costs shared Risk of not securing three tenants providing equally by four tenants additional tenants within st entrepreneurial ($100K each), leveraging the 1 year. programming City staff to manage Each tenant shares the Multiple program partners multiple partnership operating costs and space attract a diversity of agreements and licensee equally entrepreneurs and users agreements with residents/entrepreneurs Waterloo Region Small Limits financial risk, Deficits in operating costs Business Centre oversees exposure to program the facility and tenants partners to be covered by the City. Incubate purpose-driven Opportunity to support a THEMUSEUM advances businesses variety of community their construction sooner partners, including equity-than anticipated. City of Kitchener funds the deserving entrepreneurs, initial capital thought leaders, youth, improvements citizens City of Kitchener covers Tenants collaborate to any annual operating support each other. deficits If an annual operating Builds a more rich, diverse surplus exists, partners network of like-minded determine use of funds businesses, citizens, and entrepreneurs Ability to support more than ?? entrepreneurs each year. Model and DescriptionProsCons Option 2 Lease to Singular Private Sector Operator Lease to a one Building is occupied The City has ongoing company/organization to maintenance costs. Operating costs would be operate as an incubation covered by tenant Difficult to guarantee a space lease term given the City only requires one uncertain timelines of agreement THEMUSEUM Leasee would need to invest in improvements No obvious community partner with capacity to operate such a facility. Any tenant would likely require government assistance and would seek a City contribution. Less likelihood of diverse users/entrepreneurs if only one operator. The high number of vacant commercial properties minimizes prospects. Model and Description Pros Cons Option 3 City Leases all the Spaces Individually City would need to add a City leases individual City could curate overall sales role to actively seek offices to small businesses tenant mix out tenants. similar to the Creative Hub Occupancy would be model slower than Option 1. Revenue generation is subject to tenant acquisition. Revenues required to cover operating expenses would make it challenging to offer affordable rents for startups Less likelihood of diverse users/entrepreneurs than Option 1. Concerns from other co- working operators/building owners that the City is in competition Based on the above, Option 1 best supports the objectives of Make It Kitchener 2.0 and the Economic Recovery Framework, while offering the most sustainable financial model. Timing If approved, staff would look to add an initial partner to the space as early as March of 2022. Design and renovations would occur in Q2-Q3 with an anticipated opening of August- September of 2022. Like 44 Gaukel, operations would continue until such time as the noted operating allocation has been exhausted or THEMUSEUM is prepared to commence construction. In advance of either instance, staff will return to Council with a report on the success, challenges and opportunities around the future of the SDG Lab. Long-Term Growth and Opportunities Once launched, staff are confident that demand and interest in the SDG Lab concept could outgrow the proposed space. If so, staff would pursue the following: a) Exploring opportunities for entrepreneurial programming partnerships within other City facilities; and, b) In collaboration with local academic, business and community partners, explore the potential for a more significant permanent facility, not unlike the current scale and scope of the UW Innovation Arena. STRATEGIC PLAN ALIGNMENT: This report supports A Vibrant Economy by undertaking industry business cases. -wide Startup Network startup ecosystem including city-owned spaces and to develop a hub to support businesses tackling the UN SDGs. The Council approved Economic Recovery Framework identifies the need to accelerate a new wave of entrepreneurship by expediting the launch of a city-wide startup network and providing funding to support new entrepreneurial programs that address barriers related to equity and anti-racism. FINANCIAL IMPLICATIONS: For an overview of the estimated capital and operating costs, including a proposed operating budget, see page 11 of the Business Case appended to this report. The initial capital improvements required are estimated to be up to $400,000. The ongoing operating costs are estimated to be $450,000. Should the City be successful in securing all $100,000 It should be noted that should the building remain largely vacant, the City will continue to bear the costs of utilities, taxes, maintenance, etc., with limited revenue to offset these costs. As part of the Economic Recovery Framework, Council allocated $5 million to support initiatives such as this. Approximately $1.3 million of this funding has not been allocated. Staff recommend allocating $750,000 of the recovery funding to support the launch of the SDG Lab. City staff would continuously seek out additional funding opportunities (ex: Federal grants, private sponsorships) so support programing and offset costs. COMMUNITY ENGAGEMENT: INFORM This report has been the council / committee meeting. CONSULT The Small Business Centre facilitated community consultations with stakeholders including academic institutions, funding institutions, innovation organizations, small business leaders and local entrepreneurs. This included a virtual round table with local stakeholders and a survey of local businesses. In addition, staff presented the SDG Lab concept at multiple meetings of the Economic Development Advisory Committee, which received broad support. PREVIOUS REPORTS/AUTHORITIES: There are no previous reports/authorities related to this matter. APPROVED BY: Justin Readman, General Manager Development Services ATTACHMENTS: Attachment A Business Case: 2 King Street West SDG Lab BUSINESS CASE SDG Lab TABLE OF CONTENTS 1/20/2022 SDG LAB 01/2021 2 Table of Contents Executive Summary The Why.3 The How.5 The Opportunity The What.6 Strategic Alignment10 Financial Plan a0 The Business SWOT Analysis18 Local Ecosystem19 Conclusions and 20 SDG LAB 01/2021 3 EXECUTIVE SUMMARY otted along city streets are a symbol of a recycling program that's largely taken for granted these days. Surprisingly, the idea didn't arise from a government committee wrestling with the challenge of waste management. It came from visionary thinker Nyle Ludolph, a humbl We Believe Entrepreneurs Want to Make a Difference in the World The world is in a difficult place. Environmentally. Socially. Economically. We all know it. But most importantly, a new generation of entrepreneurs know it and believe they can make a difference. What if the City could create a space that enables entrepreneurs to harness the power of business as a force for good? We Believe Our Community Can Help The first City to implement the blue box program, Kitchener has always been a community willing to lead in the face of crisis. With or Greenhouse, REEP Solutions, The Working Centre, and countless others, our community has long driven social and environmental innovation. Meanwhile, organizations like Communitech, the Accelerator Centre, Velocity and MIX have shown how nurturing entrepreneurial communities can lead to greater growth and impact. Today, the City has an opportunity to bring these two worlds together, by creating incubation space focused on the Unite Sustainable Development Goals. 2 King Street West could be a purpose inspired space that unites our Region... Waterloo Region is fortunate to be home to numerous organizations who support entrepreneurs focused on social and environmental innovation. Recently, new organizations and programs have emerged to support racialized and equity-deserving entrepreneurs. Currently, many of these programs exist in isolation. Rather than create yet another isolated community, 2 King Street West could provide a central convergence place for these organizations, bringing together likeminded entrepreneurs. ...empowering entrepreneurs to ... Foundational to the ethos of 2 King Street West would lie the principle of urpose driven entrepreneurship A space where growth and profitability are not the objective but the vessels SDG LAB 01/2021 4 to achieve existential aspirations focused on the UN Sustainable Development Goals. An inclusive-thinking, forward-embracing community, from a range of backgrounds, who believe collaboration is essential to tackling local and global crisis... ...while building a new ecosystem of difference makers 2 King West could act as a catalyst to build an entrepreneurial ecosystem of like-minded individuals driven to localize the UN Sustainable Development Goals while solving global problems. With capacity to accommodate 50+ companies, the SDG Lab could support as many as 100 companies over 3 years. With the Waterloo Region Small Business Centre as an anchor tenant and caretaker of the facility, other partners in the Lab would be able to focus on what they do best provide training and mentorship to their entrepreneurial clients. overb SDG LAB 01/2021 5 HOW The Vision The City of Kitchener has a unique opportunity to transform 2 King Street West over the next 3 years into an iconic hub and incubation space focused on supporting purpose driven businesses. The 21,000 square foot building has the capacity to accommodate 50+ companies at any given time. Meeting and event spaces would enable a multiplicity of community partners and passionate residents to focused on social and environmental innovation. SDG Lab Rather than build a new ecosystem from the ground up, 2 King Street West would aim to bring 4 existing program partners together under one roof. Tentatively referred SDG Lab, 2 King Street West would champion goal seventeen Goals - strengthening the means of implementation and revitalize the global partnership for . Together, the partner based on the following principles: Pillar #1 Business as a Force for Good A place for difference makers and entrepreneurs focused on social and environmental innovation to access tailored business advisory supports to develop and launch a profit driven enterprise. Pillar #2 Dedicated to Leading Inclusivity & Belonging A space for racialized and equity-deserving entrepreneurs, with a conscious and intentional effort to eliminate systemic barriers for entrepreneurs. Pillar #3 Push forward on the UN Sustainable Development Goals The 2030 Agenda for Sustainable Development, adopted by all United Nations Member States in 2015, provides a shared blueprint for peace and prosperity for people and the planet, now and into the future. At its heart are the 17 Sustainable Development Goals (SDGs), which are an urgent call for action by all countries - developed and developing - in a global partnership. They recognize that ending poverty and other deprivations must go hand-in-hand with strategies that improve health and education, reduce inequality, and spur economic growth all while tackling climate change and working to preserve our oceans and forests (UN, 2021). Broader Impact By creating the first SDG-focused social entrepreneurship hub in Waterloo Region, The SDG Lab would enable connections into similar centres around the world, allowing stakeholders to SDG LAB 01/2021 6 collaborate on broader social development projects. If successful, this model could become a template for other municipalities looking to establish a similar centre in their community. OPPORTUNITY The central role of the SDG Lab (2 King Street West) would be to enable a sense of belonging, facilitate connections and collaboration between and among entrepreneurs and entrepreneurial support resources. A place where entrepreneurs and other members of the ecosystem belong, convene, network, learn, create, and celebrate. It will be a microcosm of the regional entrepreneurial community, a place to meet, learn, network, and grow. The Model As such, Sustian17 model. Anchored by the Waterloo Region Small Business Centre The Waterloo Region Small Business Centre (SBC) would oversee the building operations on behalf of the City of Kitchener, manage costs and support any necessary licensing agreements with tenants. In addition, the SBC would: hire a Community Activator/Partnership Development Coordinator and Program Assistant manage shared space bookings; and, provide a concierge service for visitors. The Small Business Centre team would shift their main operations to 2 King Street West and continue to deliver core services for small business, entrepreneurial programming, information, advisory services and deliver workshops and events. The SDG Lab would enable the SBC to provide incubation space to client entrepreneurs focused on social and environmental innovation. Entrepreneurial Program Partners Three additional entrepreneurial program partners would join the SBC to form an inclusive, and equal share, 4-partner alliance. Each partner would occupy an equal percentage of the office space having access to meeting rooms, training rooms, co-working spaces, and hot desks. Each partner would share equally in up to $400,000 of the annual overhead costs (appendix A budget). SDG LAB 01/2021 7 Each of the four partners would deliver unique entrepreneurial programming, value added resources, connecting entrepreneurs with industry experts, mentors, and business professionals in the ecosystem. Ideally, the partners would equally support a) equity-deserving entrepreneurs; and, b) entrepreneurs focused on environmental and social innovation. Community Program Partner Additionally, the space could accommodate a fifth partner focused on broad-reaching community impact. Incorporating a community-based partner could enable entrepreneurs greater access to additional networks, volunteer resources, funding opportunities, etc. This partner would share in the remaining annual costs, estimated at $60,000. Supporting Partners The SDG Lab could also provide co-rtners, stakeholders, investors, community groups, etc. These would typically be an informal setting such as a bookable meeting room, hot- could connect with their primary office, do email, or perform other tasks. Ideally, supporting partners would either be a) actively engaged in social or environmental innovation; and/or b) provide entrepreneurial supports to tenants. This could include, for example, funding bodies who support startups. Collaboration Spaces Meeting rooms and event spaces would be available for hourly or daily rental by entrepreneurs and other members of the public. Similarly, event planners, including partners, would incur nominal rental fees for the use of the meeting rooms, multi-purpose space and atrium. Making these spaces available would enable even more community stakeholders and entrepreneurs to become part of this community. The Value of Collaboration By bringing together multiple partners, The SDG Lab will hopefully reduce duplication of existing resources, create new opportunities across the program partners and enhance the potential reach for every entrepreneur referred to each program. Therefore, a strong partnership with existing entrepreneurial service providers, funders, nonprofit membership organizations with an interest in entrepreneurship, private sector providers (such as banks, lawyers, accountants), and educational and research resources will enable our community to advance Goal 17 of the SDGs. SDG LAB 01/2021 8 The Space 2 King Street West provides 21,000 square feet of space across 3 floors. The City has engaged a design consultant to maximize the usability of the building. In concept, Sustain 17 would offer the following: 1.Main floor - 7,500 sq ft could feature a reception area, atrium event space, 9 offices, a meeting room, 12 co-working stations and up to 16 hot desks. An accessible entry with an elevator or a choice of 3 stairways to access upper and lower levels 2.Second floor - 6,000 sq ft could feature up to 11 offices, 1-2 large meeting rooms, up to 13 co-working/hot desks and a common area with kitchenette and washrooms 3.Basement - 7,500 sq ft- features 2 large board / training rooms, a maker space, 2 kitchenettes, a sound-proof room potentially useable for podcast/video production, 2 large lockable storge spaces and washrooms. The building meets accessibility requirement for entry and elevator access to all levels. -speed internet (Wi-Fi), secured entry access, mail service, AV equipment for event spaces, meeting/training rooms and amenities common with modern office spaces (ex: kitchenettes, collaboration areas, bike storage, etc.). Parking is always an issue, and so access to parking for staff, partners, and visitors may be a challenge. Fortunately, the central location is close to light rail transit, bike routes and walkability allows for convenient access. The Duke & Ontario Parking Garage is nearby. SDG LAB 01/2021 9 Direct Programming Community Activator In 2021, the Small Business Centre surveyed Kitchener businesses to better understand how the City can accelerate social and environmental innovation. Of 86 responses, 67% stated they are looking to be connected with like-minded people and organizations. To achieve this, the proposed partnership model contemplates the ctivator, which would be central in fostering an ecosystem in the following ways: 1) TO INSPIRE the community to create a city that does the most good in the world, to challenge mindsets, fostering creativity and support innovation. This could be accomplished through, for example, speaker series, community round tables, pitch competitions, etc., where local and national innovators can share their approach to social innovation. 2) TO CONNECT local entrepreneurs, researchers, organizations, etc., with like-minded individuals, locally and abroad. This could include industry events, ecosystem mapping, resource compilation, development of a mentor network, etc. 3) TO SUPPORT COLLABORATION by actively fostering collaborations among entrepreneurial, academic, government, and social impact organizations that influence sustainable development goals. 4) TO FOSTER BELONGING by cultivating relationships among entrepreneurs at any stage and across all program partners. This could be accomplished through direct training, educational awareness, forums, bootcamps, problem-solving labs, etc. 5) TO CELEBRATE A COMMUNITY OF DIFFERENCE MAKERS by amplifying the work of the companies, organizations, partnerships and work already happening locally. Core Functions & Staffing Implications The SBC staff would provide primary oversight of the facility and, where possible, utilize their existing core services to offset a number of the functions of the space. However, it will be necessary to augment certain services to ensure the SBC can continue to deliver on its core mandate. The proposed partnership model contemplates the hiring of an administrative role to support basic functions (ex: reception, contracts, etc.). In addition, the proposed annual operating budget anticipates costs associated with custodial services, security and IT support. SDG LAB 01/2021 10 STRATEGIC ALIGNMENT The SDG Lab aligns with the Make it Kitchener 2.0 Strategy in several ways. The overarching to do it. Beca strategy is embedded on a promise to solve major societal challenges such as affordable housing, the elimination of systemic barriers, environmental sustainability, and giving social entrepreneurs a platform. This project would represent the first major inv-Wide Startup Network be a catalyst for change and a platform for entrepreneurs to collaborate and work towards solving some of challenges. The creation of an SDG Lab suppor network of incubators, accelerators and co-working spaces; and ii) combating systemic barriers. Equally important, the SDG Lab would build a platform for our local community to support the 2030 Agenda for Sustainable Development. FINANCIAL PLAN & RISK ANALYSIS Legal Framework The SDG Lab would operate using the same legal framework as 44 Gaukel, where the City remains the overall landlord. A written agreement would be established with each program partner to document arrangements and obligations between the parties. Program partners would identify and approve residents (entrepreneurs/startup companies of the program) to utilize their allocated spaces. The City would then enter into a standard Licensing Agreement with each resident/startup. Doing so ensures there is a legal agreement between the City and all occupants of the building with proper insurance and risk mitigation measures in place for all. Any subsequent tenants, such as Community Program and Supporting Partners, would be established either through formal lease agreements or utilizing the standard Licensing Agreement. SDG LAB 01/2021 11 Financial Structure Capital - the City would cover all of the capital expenses including the initial capital buildout, estimated at $350,000-$400,000. Capital construction would be limited to aesthetic improvements and the acquisition of furniture/technology which can be redeployed to other City facilities should The SDG Lab ever cease to exist. Given the potential for the building to be redevel costs while reusing existing infrastructure and furniture left behind by the previous owner. Operating - the four Entrepreneurial Program Partners would equally share in $400,000 of operating expenses. This estimate includes the cost of utilities, internet, property taxes, and the cost of hiring a Community Activator and a Program Assistant. Additional operating expenses (estimated at $50,000) would be funded through lease payments of any Community Program and Supporting Partners. The City would bare the risk and absorb any annual cost overruns. If there are any annual surpluses, the partners would determine how to reallocate funds (ex: returned to the program providers, invest in future services, etc.). The City would contribute $100,000 partnership. If the City is unable to land three additional partners, the City would contribute the balance of needed revenue. Proposed Operating Budget Year 1 Year 2 Year 3 Total REVENUE Partners $ 300,000 $ 300,000 $ 300,000 $ 900,000 COK Contribution $ 100,000 $ 100,000 $ 100,000 $ 300,000 Rentals $ 5,000 $ 5,000 $ 10,000 Leases/Partnerships $ 50,000 $ 60,000 $ 60,000 $ 170,000 Other Total Revenue $ 450,000 $ 465,000 $ 465,000 $ 1,380,000 EXPENSES Wages/Benefits $ 147,348 $ 157,558 $ 160,709 $ 448,708 Overhead Expenses $ 252,652 $ 253,410 $ 254,170 $ 760,232 Contingencies $ 40,000 $ 40,000 Programming/Misc $ 10,000 Tbd Tbd $ 10,000 Total Expenses $ 450,000 $ 410,968 $ 414,879 $ 1,258,940 Net Surplus/deficit $ - $ 45,032 $ 50,121 $ 121,060 SDG LAB 01/2021 12 Proposed Capital Costs INTERIOR IMPROVEMENTS Estimate DEMOLITION - REMOVAL 15,000 SECURITY& IT 25,000 Painting 70,000 Carpentry, Millwork 25,000 Flooring 70,000 Electrical 50,000 Plumbing 25,000 CONTINGENCY 20,000 TOTAL INTERIOR IMPROVEMENTS 300,000 FURNISHINGS & EQUIPMENT Co-Working & Hot Desks 16,000 Event, Meeting, Training Rooms 20,000 Signs, Artwork 25,000 AV EQUIPMENT 24,000 CONTINGENCY 15,000 TOTAL FURNISHINGS & EQUIPMENT 100,000 TOTAL CAPITAL COSTS 400,000 Funding Opportunities Given the global focus on combating climate change and inequities, it is anticipated that Federal, Provincial and corporate funding will become more readily available. Such funding could support programming resources, entrepreneurial training, seed funding/startup grants, etc. City staff will continuously seek out funding sources to further leverage the municipal investment and to support the various program partners of the SDG Lab. Risk Assessment The following identifies potential risks associated with this project: Risk Options for Mitigation Following the pandemic, reluctance to utilize If necessary, implement sound public health coworking spaces. policies and expectations. Future mandates to close the facility in Ensure program partners understand the response to the pandemic. potential for closure, support public health expectations. May need to renegotiate SDG LAB 01/2021 13 funding contributions should access be limited for extensive time periods. Failure to secure Program Partner or loss of Under these scenarios, staff would seek to partner mid-year. mitigate expenses where possible; may require additional funding from the Make It Kitchener 2.0 Reserve; withhold recruitment of Community Activator until all partners are onboard. Insurance requirements for individual Explore group insurance options or residents/entrepreneurs is cost-prohibitive opportunities for Program Partner to provide and deter users. No additional funding (ex: private sector, Programming expenses would be limited to Federal grants) is secured. align with available funding. Significant after-hours use of the facility Implement after hours protocols for all users creates security concerns when City staff not (ex: restricted access); introduce onsite. security/alarm access. With increased use of the facility by multiple Introduce partnership and license agreements partners, residents, entrepreneurs, etc., the for all who may reside in the facility which will increase (ex: future ensure appropriate insurance coverage. claims, damage, etc.) Improvements will be limited primarily to proceeds, capital investments will be lost. cosmetic improvements. Any furnishings, equipment and IT will be sourced using City standards to ensure they can be repurposed in other City facilities. SDG LAB 01/2021 14 THE BUSIENSS CASE implementation of solutions to challenge societal and environmental issues in support of collective progress. use of business practices and enterprise to develop, fund and implement solutions to social, cultural and environmental issues. While social innovation and social entrepreneurship are not new, in the face of societal and environmental crisis, the world is in the midst of a movement where business practices are used as a force for good. Social ventures and innovation can span many, if not all, industries. In 2019, social ventures were most commonly associated with the following industries: 1. Professional, Scientific and Technical services (15%) 2. ICT and Artificial Intelligence (15%) 3. Arts, Media & Entertainment (5%) 4. Education (5%) 5. Environment and Cleantech (5%) The following section provides an overview of local and global growth. Global Growth The growth of the social entrepreneurship sector continues to grow as businesses look for ways to operate in a cleaner, more efficient way. According to Forbes, investment in renewable energy is projected to grow to $3.4 trillion by 2030. The need for new ideas and methods to help businesses modify to a socially forward way of operation and thinking, begins not just within the business itself but with entrepreneurs. Social entrepreneurs are developing groundbreaking technology and products to help push the social mindset in the way we live and work. In a 2020 study done by the United Nations, it was found that 3.2% of working age individuals in the 58 countries that were surveyed, were engaged in social entrepreneurship in the start-up phase. In the UK, approximately 34% of all new startups are social enterprises, and 61% of all social enterprises anticipate expanding their workforce in the next twelve months (Social Enterprise UK, 2021). Here in Canada, the potential for social entrepreneurship growth is substantial. In a 2019 Startup Canada Census, more than 40% of Canadian entrepreneurs are interested in advancing UN sustainable goals. In a Thomson Reuters Foundation study (2019), Canada was ranked as the #1 SDG LAB 01/2021 15 country in the world for social entrepreneurship. This study evaluates the global social entrepreneurship landscape in six key areas: government support, attracting skilled staff, public understanding, making a living, gaining momentum and access to investment. Since 2016, Canada has improved and ranked the top three for every category except attracting skilled staff and ease of selling to businesses. Waterloo Region Demand Below is a breakdown of the Waterloo Region Small Business Centre Entrepreneurial Training and Programs Attendance. Female Male Social Equity-Deserving Soc & Equity 64% 36% 39% 44% 9% The table below highlights the need and demand for the Waterloo Region Small Business Centre from 2020 and 2021. 2020 - Total 2021 - Total WRSBC nitiative Performance Metrics 345 193 Businesses Started 12 5 Businesses Purchased 78 111 Businesses Expanded 492 370 Jobs Created 12683 9080 Inquiries 720 675 New Client Consultations (Starting a Business) 649 742 New Client Consultations (Existing Business) 1297 656 Repeat Client Consultations 0 0 French Language Consultations 5064 2950 Referrals to Public Sector 5306 2999 Referrals to Private Sector Professionals 180 230 Workshops/Seminars 7724 7577 Outreach Connections 12 33 Events Hosted 2535 1264 Events Attendance 41 396 Mentorship Matches In a 2021 survey, the Waterloo Region Small Business Centre want to garner feedback from social entrepreneurs in the Region to inform programming regarding the future SDG lab. Below are the results after 36 survey responses. SDG LAB 01/2021 16 Gender Do you identify as a member of any of the following groups? Female 72% Person with a disability 12% Male 22% Indigenous person 5% Non-binary 3% Visible minority 33% Prefer not to say 3% Immigrant of Refugee 10% LGBTQ2S 2% Other 38% What type of organization are you? What resources/supports do you need to advance your Non-profit 8% sustainability goals/maximize your impact? For-profit 75% Space to work (hot desk, co-work, office) 3% Academia 3% Space to hold meetings & make calls 5% Community Group 6% Project funding and proposal writing 16% Other 8% Connections to like-minded people/orgs 16% Mentors, Experts, Researchers 14% Learning Opportunities 10% Advisory Business Services 8% Social Enterprise Accelerator 12% Impact Measurement Roadmap 7% Prototyping Workspace 5% Other 3% The Need for Access to Funding Access to early stage and venture capital funding is a critical challenge for social entrepreneurs. 44% say funding is not accessible. As a result, only 15% of social ventures have revenue in excess of $100,000 and are primarily self-funded. Once established, a key effort of the City and the partners of the SDG Lab will be to improve access to funding. Fortunately, most major banking institutions in Ontario have established funds to support social and environmental challenges. The Federal Government offers two funding programs (Investment Readiness Program and Social Finance Fund) to increase access to funding, with a particular focus on equity-deserving entrepreneurs. In addition to working with the KW Community Foundation, Small Business Centre staff are also exploring partnership opportunities to support micro-loans to future users of the Lab. Growth in Equity Seeking Entrepreneurs Today, a large percentage of social change being made in Canada is led by equity deserving individuals. A Social Impact Report released in 2019, by Startup Canada, identified the following: 33% are visible minorities; 58% of social entrepreneurs are women; 13% are new to Canada within the last 5 years; SDG LAB 01/2021 17 10% are Indigenous, Inuit or Metis 7% identify as LGBTQ+ Within this breakdown, 52% of social entrepreneurs are created and led by a non-Canadian-born entrepreneur. These stats suggest that individuals that often face the greatest systemic barriers are at the forefront of an in Our task as a City is now to push that boundary even further and develop a Hub that is free of systemic barriers and inequities allowing marginalized groups to have access to a space where they can be inspired. Indicate source for this information Global Business Movement Businesses are recognizing the need for sustainable practices to attract new employees, driven largely by millennial employees. In an article released by Inc., it states that: by 2025, 75% of the U.S. workforce will be made up of millennials. 64% of these millennials will not take a job if the employer does not have a strong Corporate Social Responsibility policy. 83% would be more loyal to a company that is actively seeking to be more socially responsible. Today, more than 4,490 comp-, a designation that a business meets the high standards of their operations (ex: high environmental standards, charitable givings, social performance, etc.). Business Example: she also . All Mary wanted to do was provide meaningful work for people that are functionally illiterate, have learning challenges, and/or grew up in families of abuse or neglect. Some live with physical limitations or mental illness and suffer from social exclusion, poverty and a harm to dignity that accompanies a lack of participation in the paid work force and community life. What she knew everyone has the desire to live a . What started as a brainstorming session at her kitchen table in 2014, has grown to a business with three locations and up to 30 employees. Customers can pick up, order online, or find the product in grocery stores. This business, and others like this, impact not just one SDG, Goal #10 - reduce inequalities; but many more goals: Goal 1 - poverty, Goal 3 - good health and well- being, Goal 8 - decent work and economic growth, Goal 12 - responsible consumption and G17 - partnerships for the goals. Who knew a bowl of soup would have such a large impact. SDG LAB 01/2021 18 SWOT ANALYSIS The following identifies various strengths, weaknesses, opportunities and threats that should be considered in evaluating the potential benefits and challenges of the SDG Lab: Strengths collaborative, barn-raising approach to community development and growth. A growing regional focus on creating equity-deserving entrepreneurial programs and services. iversity in startup activities across traditional / non-tech industry sectors. Innovation District is anchored by startup organizations such as Communitech and UW Velocity. Talent base of highly educated industry experts, professionals, and workers. A strong base of innovation companies in Downtown Kitchener. A network of local SDG leaders, entrepreneurs, non-profits, researchers, and resources exist. Location in the heart of the region, with direct access to the ION corridor. An existing network of mentors that has been built up by the SBC. Potential for partnerships with local funding organizations to support startup activities. Weaknesses Limited programming and support for equity-deserving, non-tech entrepreneurs during start up and growth phases of business. Currently there is no clear , facility or focal point in our region for social innovators and organizations. Lack of major employers to lead the social innovation ecosystem. Lack of available seed funding for social ventures. Lack of Provincial funding to support operations of such a facility. Opportunities Social entrepreneurs are seeking a space where they feel like they belong. To provide physical space for program providers and startup companies of equity-serving organizations. SDG LAB 01/2021 19 Graduates from programs at post-secondary institutions are seeking a network and landing spot to advance their ideas. Opportunity for social entrepreneurs and academia to interact for research and development purposes. To inspire youth to be a part of positive change. Funding opportunities from the Federal Government, federal organizations and the private sector. Non-profits organizations are increasingly looking for alternative ways of funding their project, collaborate with like organizations to avoid duplication of services and physical spaces to meet. To attract regional, national, and international Social Innovation, Social Finance and Social Enterprise leaders to our community. Building partnerships and trust, find an entry point for entrepreneurs, partners and stakeholders. To provide a way for citizens to participate in a positive local change. Challenges Limited resources: such as staff, funding, technology, and databases to gather client information, and impact measurement system. Finding the right mix of anchor tenants. Access to traditional funding/lending and government grants for entrepreneurs. Tracking impact data to demonstrate results. Localization of impacts to support/justify local investment. Curating a vibrant in-person network of entrepreneurs in post-pandemic environment. THE LOCAL ECOSYSTEM In the Waterloo Region community, there are several organizations operating in the social and environmental space. Local universities, colleges and other organizations have created programming to support social entrepreneurs and the Sustainable Development Goals. These institutions include, but are not limited to: Wilfrid Laurier University The Social Entrepreneurship Option o The first Canadian undergraduate social entrepreneurship program grounded in liberal arts Wilfrid Laurier University Conestoga College Business Sustainability Management & Entrepreneurship Collective University of Waterloo UW Greenhouse SDG LAB 01/2021 20 Accelerator Centre Sustainable Future Program Local Non-Profits - YWCA, Social Venture Partners, Capacity Canada, Immigration Partnership, WR Community Foundation, Sustainable Waterloo, Tamarack Institute, United Way, etc. o May of the above organizations providing impact investments for community and agency projects addressing poverty, food security, youth, social justice, environment etc. Other institutions and organizations within and outside the Region include, o Center for Social Innovation, Pillar Non-Profit, Circular Economy Accelerator, Mars, Coil Activate Circular Accelerator, The Working Centre, etc. The facilities listed above all primarily focus on social development goals. Outside of these facilities there are several accelerators and incubators that focus on startup growth, primarily focused on tech, AI and health innovation. CONCLUSIONS AND RECOMMENDATIONS Based on the foregoing, staff conclude the following: Given the transformative economic and social impact of the COVID-19 pandemic, a new wave of innovation and entrepreneurship is anticipated, likely with a place greater focus on advancing social and environmental good; Existing entrepreneurial programs within the region, including the Waterloo Region Small Business Centre, have experienced significant growth in the number startup companies and small businesses focused on social and environmental innovation; Within our region, the number of new companies lead by women, racialized individuals and/or people of colour is increasing, as demonstrated by the Waterloo Region Small Business Centre, CCAWR (program named LiftOff) and Centre; Many organizations in our region are tackling the UN SDGs, however there is no central hub for the organizations and entrepreneurs in this ecosystem; 2 King Street West provides the City an opportunity to pilot an interim SDG Lab in advance 2 King Street West provides an opportunity for our community to simultaneously support entrepreneurs seeking to tackle tSustainable Development Goals, provide space for equity-deserving entrepreneurs to grow their companies, and provide a central but for the local social innovation ecosystem; An SDG Lab would enable greater collaboration, innovation and a place for bright minds to tackle global problems. SDG LAB 01/2021 21 Through a partnership model, the longevity, vibrancy and impact of 2 King Street West as an SDG Lab can be maximized. In turn, staff recommend the following: That 2 King Street West be utilized as an SDG Lab in advance of Tfuture expansion; That the Waterloo Region Small Business Centre provide oversight to the facility on behalf of the City; That the City utilize a partnership model to bring multiple organizations into the space, where partners are equally sharing in the space and operating costs; and, That an initial allocation of $750,000 be allocated to support an initial capital investment of up to $400,000 with the balance to support annual operations. With the location, the academia support, the available transit, the social impact and the wide breadth of entrepreneurs in the social development space, do the most good and make the biggest change for generations to come.