HomeMy WebLinkAboutCAO-07-006 - Communitech - 2007 Funding RequestTC NE - -~-
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Office
Report To: Finance and Corporate Services Committee
Date of Meeting: February 5, 2007
Submitted By: Rod Regier, Executive Director, Economic Development
Prepared By: Kathy Weiss, Director, Business Development
Ward(s) Involved: All Wards
Date of Report: January 23, 2007
Report No.: CAO-07-006
Subject: 2007 Communitech Funding Request
RECOMMENDATION:
That the City of Kitchener not support the additional funding request from Communitech in the
amount of $45,000
and further;
That Council direct staff to explore alternative opportunities to partner with Communitech in the
City's emerging cluster strategy -particularly in biotechnology and pharmaceutical life sciences.
BACKGROUND:
Communitech has approached the City of Kitchener for an increase of $45,000 for a total of
$80,000 (128%) in fiscal year 2007 over its 2006 funding of $35,000 (see attached). The
purpose of the increased request is to provide an expanded range of services including:
• Entrepreneurial Venture Support Program
o Additional staffing (3.0 FTEs -Executive in Residence, Commercialization staff)
o Business and Education Partnership
o Entrepreneurial training and skills development
o Building a local pool of risk capital
• Attracting high-tech employees to the region
o Add apart-time recruitment coordinator
o Mount an integrated marketing campaign for the region
o Relocation guide
• Ensure Waterloo Region receives share of funding
o Liaison with provincial and federal governments in technology industry
o Application for funds from other Federal and Provincial government sources
REPORT:
Kitchener is currently a member of Communitech for which it pays an annual membership fee of
$5000. In 2005, Communitech approached the City and received additional funding in the form
of a one-time grant of $25,000/yr to conduct its high-tech employee recruitment program. In
2006, Communitech requested an increase in their grant to $30,000 plus the $5,000
membership. These grant requests have become a permanent source of funding for the
employee recruitment program. Communitech is requesting the ongoing contribution of the
$30,000 grant and the $5,000 membership with an additional $45,000 for a total of $80,000 to
support and expand Communitech's services. They are also requesting a three year
commitment to this funding arrangement which corresponds to the term of a grant from the
Province of Ontario.
Although the services identified by Communitech do have merit, they have been developed
independently of Kitchener's economic development strategy. Staff believes that there are
opportunities for a strengthened partnership with Communitech around the City's emerging
cluster strategy -particularly in its biotechnology/pharmaceutical and digital media clusters.
Staff support the development of a partnership with Communitech which offers the potential to
utilize the expertise of their staff resources and membership network on these cluster strategies.
Detailed discussions, leading to an agreement about the way in which the City of Kitchener and
Communitech can work together on the implementation of the City's emerging cluster strategy,
are required before any additional funding or other non financial support such as in kind support
can be recommended. Staff will continue to work with Communitech to achieve the objective of
advancing both the City's and Communitech's goals.
Staff will report back to Council on the outcome of these discussions.
FINANCIAL IMPLICATIONS:
$35,000 as in 2006 contribution
Rod Regier Kathy Weiss
Executive Director, Director, Business Development
Economic Development
The technology industry and Communitech:
Driving economic growth in Waterloo Region
October 6, 2006
Communitech, the Waterloo Region Technology Association, recently secured $1 million in new
funding over three years from the Ontario Ministry of Research and Innovation. It is, by far, the
largest funding commitment we have ever received and will have a transformational impact on
our capacity and the resources we have to develop the local technology sector -the source of
much of the growth in the regional economy.
We are now looking to leverage those dollars through an expanded partnership with Waterloo
Region and the cities of Waterloo, Kitchener, and Cambridge. The focus of this partnership will be
the creation, retention, and growth of local technology companies to support the continued growth
and prosperity of the region.
Technology - a major contributor to local economic growth
Throughout this region, we have seen first-hand the economic benefits that flow from a vibrant
technology industry that merges innovation and an entrepreneurial culture.
The technology industry drives municipal growth. While many jobs within the region remain
outside of the high-tech sector, it is technology that has largely driven population growth in the
area. High-tech companies attract high-skilled, highly paid employees to the area, leading to the
creation of new residential subdivisions and condominium conversions and rising property values.
The technology industry generates wealth within the community. High-tech employees tend
to be well-paid and spend much of their money locally. High-tech companies use many local
suppliers and service providers -- including legal and accounting firms and financial services
companies -- spreading their financial success through the area.
Prosperity generated through the technology industry has passed through to support numerous
civic projects, and has led to the creation of some high-profile additions to our communities,
including the Waterloo Regional Children's Museum, the Centre For International Governance
Innovation, and Perimeter Institute For Theoretical Physics. The technology community is also
well represented on local boards, assisting many civic and charitable organizations in the area.
The technology industry brings investment to the region. Hundreds of millions of dollars in
venture capital, and even more through the public markets, have been invested in Waterloo
Region technology companies in recent years. Federal and provincial government funds have
also been attracted to the region either directly or indirectly because of our high-tech and
research strengths.
Even the billion-dollar companies that have been attracted to this area have almost entirely come
to Waterloo Region through the acquisition of a locally created startup. Companies such as
Sybase, Google, Oracle, Adobe, LSI Logic, and Agfa all came to the area through an acquisition.
The technology industry brings business visitors to the region. People come to the area to
meet with the technology companies and tech-related events and meetings are held throughout
the year at venues across the region.
What Communitech is doing ... and what we will do with
increased funding
The technology industry contributes to regional prosperity through the success of companies in
the area. Ultimately, it is success in the marketplace that will determine if a company prospers
and makes a contribution to the local economy - it will have to create products that customers
want to buy. We can't interfere with market forces, but we can provide support to give companies
their best chance at success.
Our model for supporting regional economic development is to create an environment that
supports the creation of new companies and then to support the growth of existing companies.
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Supporting company creation and growth
Note: For this proposal, we will discuss in separate sections our initiatives to attract high-tech
talent and our work to ensure that Waterloo Region receives an appropriate share of available
funding from provincial and federal government programs.
Communitech delivers a wide range of programs that support the creation and growth of
technology companies in the area and promote entrepreneurship. Our Entrepreneurial Venture
Support Program (EVSP) identifies innovators in the community and helps start-up companies
and entrepreneurs overcome development hurdles and increase their chances of success.
We provide advice to entrepreneurs through a combination of direct consultations and referrals to
resources in the community and across the province. To help entrepreneurs develop the essential
skills they need for success, we run a wide range of peer group meetings and events throughout
the year where entrepreneurs can learn from each other and develop their business-related skills.
We also help early-stage entrepreneurs to connect with money and become investment-ready.
We manage the ViaTech advisory network, a group of local service providers that meets monthly
with companies in the region to provide advice on a diverse range of issues faced by companies
of various sizes.
Through events such as Entrepreneur Week and our Startup Stories breakfast series, as well as
the PR campaigns supporting them, we promote the entrepreneurial culture within Waterloo
Region.
We also maintain relationships with venture capital firms and are the organization that several
VCs call when they're looking for deals in the area. We work with local companies to help them
prepare to meet with potential investors and make introductions to appropriate sources of capital.
New spending: $400,000
Total additional municipal request: $140,000
Investing in resources to make a difference: The EVSP has operated for the last year with
less than a 0.5 FTE staffing level. We will increase staffing for entrepreneurial services and
commercialization to 2.8-3.0 FTE, including two paid part-time executives-in-residence (0.8-1.0
FTE) (CEO and CFO-in-residence) and afull-time position devoted to commercialization and
building connections between SMEs and the research community across all industries (1.0 FTE).
We will also expand the existing position managing entrepreneurial services (to 0.8-1.0 FTE).
This is at a total cost (all-inclusive) of $250,000-$300,000.
This expansion will give us the resources needed to work with more SMEs -potential high-
growth companies, other than the startups that have been our focus in the last year.
We will be part of a joint initiative connecting Waterloo Region, Toronto (MaRS), and Ottawa
(OCRI) that will collaborate to find opportunities to help SMEs grow through stronger linkages to
the academic research community. We will assist companies in the community in making better
use of publicly-funded research capabilities, working with the University of Waterloo, Wilfrid
Laurier University, and Conestoga College.
Through the additional staffing, we will have a deeper and broader pool of expertise devoted to
providing advice and referrals to technology companies. We will be able to offer ongoing
mentoring through our executives-in-residence, work with more companies, and perform more
outreach to understand barriers to growth for existing SMEs.
In addition, a portion of the additional human resources will be devoted to exploring the viability of
a strategic sector growth strategy -assessing the value of aligning resources in the region to
support the creation of asector-specific cluster, possibly around digital imaging, gaming, or
nanotechnology.
Building a culture of entrepreneurship: To promote entrepreneurship at earlier stages, we will
allocate $40,000 in new funding to the Business and Education Partnership of Waterloo Region
(the organization that works with school boards to help kids make the right career choices.
Currently we connect with every school in the region and reach over 20,000 students per year) for
youth outreach at a high school level. We will also devote more resources to working with the
Entrepreneurs' Association at the University of Waterloo to reach what is primarily an
undergraduate audience (with over 800 members).
Entrepreneurial training and skills development: This is another vital component of promoting
the creation and growth of startups and SMEs. We will be launching new workshops and similar
educational events, including Entrepreneur's Edge, linking first-time founders and professional
service providers with seasoned entrepreneurs and start-up veterans willing to share lessons
learned from first hand experiences. We also will add training sessions for salesforce
development and recruitment, and work with MaRS in Toronto to adapt for Waterloo Region
programs, which it has found to be successful. We will allocate an additional $50,000 to develop
and deliver these new training programs.
We are also organizing ahigh-level business strategy development program where a top
consultant from the U.S. will work with several existing high-growth companies in the region. We
will be spending $30,000 on this new program.
Private sector investment - building a local pool of risk-capital: As part of the EVSP, we will
be working with local investors to building a pool of risk capital that will be invested within the
region and used to leverage additional provincial funding through a new program that matches or
supplements private investment. As part of the expanded training budget discussed above, we
will be creating a skills development program for angel investors in the region, and will explore
options and alternatives to creating a regional angel investment group.
Attracting high-tech employees to the region
Communitech and our members jointly develop and implement programs to promote this area
and its companies as "career destinations" in high-tech. We are working to establish Waterloo
Region as a premier technology community and career destination in North America. According
to our recent survey, this is the number one issue for CEO's in the Waterloo Region -building a
bigger pie to support continued growth. In essence, without more talent, they will look elsewhere
to grow their companies.
Our recruitment strategy has included the creation of an online job portal, media campaigns, and
recruitment events in such hotspots as Silicon Valley, Toronto, and Ottawa. The theme this year
has been "Get a life in Waterloo Region." We also work with local alumni associations to reach an
audience that is familiar with the area and may be reaching a point in their careers where moving
back to Waterloo Region is an attractive option.
New spending: $120,000
Total additional municipal request: $35,000
With additional funding, we will be increasing our staffing to add apart-time recruitment
coordinator (total additional cost, all-in: $40,000). Increased funding will be provided for
recruitment events and related materials and advertising (cost: $50,000). We will be able to
mount a full, integrated marketing campaign for the region and the opportunities here, covering
career and lifestyle, as well as opportunities for spouses of our target audience. A relocation
guide will be an additional product of the increased funding (cost: $30,000).
Ensuring that Waterloo Region receives an appropriate share of available
funding
Communitech works to bring investment dollars to the region from both private and public
sources. There are a wealth of new government programs, particularly at the provincial level,
focused on commercialization and entrepreneurship. Communitech has taken a leading role
within the community for ensuring that this area receives a significant share of that funding. We
are the organization the provincial and federal governments deal with when it comes to
supporting the technology industry.
We recently secured $330,000 a year for three years from one program delivered by the Ontario
Ministry of Research and Innovation. There are other new government initiatives that we also
expect will bring significant dollars to the region. We create the proposals and prepare all the
supporting documentation that enables us to pursue those dollars for the community. Our
intention is to land an additional $300,000 from government programs over the next 12 months.
One of our advantages is our ability to leverage dollars from the private sector. We have over 400
member organizations and receive significant revenue from our membership base, most of which
are from the private sector.
New spending: $10,000
Total additional municipal request: $10,000
With additional funding, we will have the resources needed to build closer relationships with
funding agencies, keep informed of all available programs, develop proposals and steer the
proposal process, all of which require staff time.
Request for funding
Currently, Communitech receives $110,000 annually from the four municipalities in Waterloo
Region. We are now proposing to expand that by $185,000 to $295,000 a year. The municipal
contribution will be highly leveraged through public and private sector dollars (Communitech
currently invests $1.3M in the community). We will be receiving about 20% more than our
municipal request through the provincial government's Ontario Research Commercialization
Program ($1 M).
Our proposed breakdown is as follows
Municipality Total Request
Waterloo Region $115,000
City of Waterloo $80,000
City of Kitchener $80,000
City of Cambridge $20,000
Additional Dollars over current funding
$80,000
$45,000
$45,000
$15,000
We believe this recognizes the current distribution of the value we are delivering across the
region. Ideally, we would like to have athree-year commitment at these funding levels -matching
the time period of our ORCP funding.
With the provincial funding in place, this is a unique opportunity for us to leverage the additional
resources that funding enables. We now have the capacity to deliver and manage more programs
and services to support company creation, retention, and growth -all within the sector that is
making vital contributions to the local economy.
The growth of the technology industry in this region has contributed significantly to our economic
prosperity. Communitech has the support of local technology companies, investors, universities,
colleges, and service providers, as well as all levels of government. We look forward to an
expanded partnership with the municipalities to cultivate and support the region's fast-growing
innovation economy.
Contact:
lain Klugman
President & CEO
Communitech Inc.
295 Hagey Boulevard
Waterloo Region, Ontario
N2L 6R5