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Incubator boosts local tech startups
Tucked away at Innovation Place, right next door to the University of Regina, is an office that feels like it could be a portal to Silicon Valley.
Colourful sticky notes and murals coat the walls while young people type code on computers with big monitors. There are even nifty amenities, a staple of lush tech offices, such as a soundproof telephone booth.
It may feel like a wealthy tech company, but it’s actually home to a cluster of scrappy young startups. Paper cut-outs of logos hang from the ceiling above rows of desks, each representing a small company with big dreams.
This is Conexus Credit Union’s tech incubator, known as Cultivator. It’s been hailed as a key factor behind Regina’s recent technology renaissance. Cultivator supplies a space for new companies to work, along with programming and mentorship. The goal is to help them achieve rapid growth, and possibly go from a young startup with a handful of employees to Saskatchewan’s next big successful tech company.
Kirk Morrison sits at a ping-pong table inside what’s known as the Wimbleton Room, which can be used for meetings or blowing off steam with some table tennis.
“It’s a great space. It’s been great for the city,” says Morrison, who is the CEO of Krugo, a Regina-based travel app that aggregates event listings such as sports games, festivals and concerts.
Morrison comes from a business background, previously working in sports tourism and for Economic Development Regina.
Krugo’s beginning was a classic startup story. Morrison and his co-founders started working on their idea on nights and weekends. In the summer of 2018, things started heating up. They signed partnerships with Vivid Seats, a ticketing company out of Chicago,
as well as Booking.com, a travel and accommodation aggregator with more than 28 million listings.
“Everybody quit their jobs and kind of went all in,” says Morrison.
The company now employs 10 people, and raised $300,000 of private investment last December. So far the app has 10,000 downloads, but that’s just the beginning. The company has its sights set on much more growth in the next year, as well as raising more investment.
Morrison and his team recently travelled to Fort Lauderdale in Florida for the largest travel tech conference in North America. It was an opportunity to meet with titans of the industry such as Tripadvisor, Expedia and Airbnb.
Morrison is fine with having to fly somewhere else to make business deals. In fact, he never gave relocating much thought.
“We just found great support, I think, at every step of the way, whether that be government programs that help with grant funding to on-board young employees or whether that be certainly in the Cultivator,” he says.
Cultivator provides a comfy office and desks in a collaborative environment. It’s a place where challenges and successes are shared.
“The network that it creates of all these other small kind of fledgling companies who are really trying to get going, facing a lot of similar problems. So whether that be from a marketing sales side, or whether that be from a development side, you’re surrounded by people who are kind of in the same boat as you,” says Morrison.
Less than a year after it launched in early 2019, Cultivator has worked with 30 companies and created 70 new jobs. It has kicked off a new era of excitement around technology startups in Regina, a city more traditionally known for being a government town.
“Everything ’s kind of blown out of the water, and none of this was supposed to happen until June 2020. So it’s been really exciting to see all of this in a short period of time. Cultivator’s basically been very similar to a startup in terms of our rapid growth,” says Jordan Mcfarlen, who manages the incubator.
For several years, Saskatoon has been hailed as the technology hub of Saskatchewan, and for good reason. It’s home to high-profile companies such as 7 Shifts and Skip the Dishes. That’s not to say Regina doesn’t have established tech companies, but there was a noticeable lack of new ventures.
This is starting to change, and experts point to Cultivator as a difference-maker. The incubator has provided a hub for startups to flourish in Regina, rather than make founders who have to travel to the Saskatoon equivalent, Co. Labs.
According to Economic Development Regina, the technology sector had an economic impact of $1.4 billion in 2018. The organization has counted 214 tech firms in Regina, and 6,571 people employed directly or indirectly by the sector.
A lot of the tech activity that takes place in Regina is invisible. Many companies are business-to-business rather than direct-to-consumer, so they operate under the radar.
Aaron Genest, the chair of the advocacy organization Sask Tech, described an era of Regina’s technology scene that was dominated by giants such as Gasbuddy, ISM and iqmetrix. Those companies were great success stories, but then Regina’s story came to a halt.
In the last couple years, Genest says there has been “massive change,” into what he calls a vibrant startup community in the city. He gives a good chunk of that credit to Cultivator.
“It’s certainly a place around which many of those companies are basing their activities and a great connection point for them,” says Genest.
The other piece of the new chapter to Regina’s tech story is investment. In particular, many industry experts cited the provincial government’s technology startup incentive. The pilot program offers a 45 per cent non-refundable tax credit to investors who put money into eligible technology-based startups in the province.
Since the incentive was launched, $7.23 million of private investment has been attracted to the province. There have been 112 investors and 40 technology companies approved by the program, leading to 51 new jobs created by startups.
Genest said Saskatchewan has always been good about investing in agriculture and mining, but struggled with early-stage investment when it came to technology. According to Conexus, in 2018 Saskatchewan startups got less than half a per cent of all venture capital funding spent across Canada.
“We really didn’t have a lot of investors who were very savvy about it (technology), and they were a bit risk averse when it came to doing it. And so the creation of this allowed investors to enter the technology investment space and learn the ropes without losing everything they had. And that’s pretty important,” says Genest.
He says the boost of investors entering the space also made it more feasible to become a technology entrepreneur in the province.
This year, the province saw an explosion in venture capital being deployed. According to the Canadian Venture Capital and Private Equity Association, $98 million in venture capital was spent in Saskatchewan so far in 2019. The bulk of that was an early-stage $40 million investment in Vendasta Technologies Inc. and $13.4 million in 7 Shifts, both Saskatoon-based companies. In Regina, Retail Innovation Labs Inc. received $4 million of later-stage investment, and Paradigm Consulting Group got $2.9 of early-stage investment.
The amount of venture capital investment in Saskatchewan this year has totalled more than the last five combined.
The narrative remains that Saskatoon’s tech ecosystem is in a more advanced stage. However, those championing Regina insist momentum is building, and the city is starting to catch up. There’s nothing inherently wrong with Regina, they argue, Saskatoon just had the right pieces in place earlier.
“All the signs that you’re seeing in Regina are the ones that we would have seen about 18 to 24 months ago in Saskatoon. So it’s not that they’re completely different cities. It’s just one’s a little bit further ahead than the other,” says Sean O’connor, venture capital fund manager for Conexus.
To address the lack of VC funding in the province, Conexus threw its hat into the ring. In 2019, the credit union started a $30 million venture fund with the intent of investing in Saskatchewan startup companies. So far, just over $5.4 million of the fund has been deployed to five companies. Most of those companies are based in Saskatoon
The Regina startups coming out of Cultivator have legitimate revenue, but are still in the early stages of finding their traction. O’connor is still keen on these young companies, and Conexus is looking at them for potential investments in the future.
What Regina’s tech ecosystem needs now is what O’connor calls an anchor startup. A “unicorn style” high-growth company that’s doubling or even tripling it’s revenue every year. A company that’s a market leader on a global scale.
It’s a template seen before in other Canadian cities that went from unknown ecosystems to formidable ones. Saskatoon’s Vendasta, 7 Shifts and Coconut Software are examples of these.
Having an anchor startup is so crucial because it legitimizes a city as a place where startup success stories can happen. And once that success is achieved, those companies can help foster even more growth.
“They become great culture carriers for the ecosystem. They show the founders what the outcome can be if you really are able to continue pushing and growing your company, and then they also become a great place for cultivating and building talent, not all of which stays at those companies, much of which will then end up at the younger startups,” says O’connor.
The hope is that one or two of the small startups being nurtured at Cultivator will turn into one of these high-growth companies, and put Regina on the map.
In order for Regina to be a legitimate tech hub, it will need to eventually evolve past the startup phase. Rory Cain, a co-founder of Regina’s Vivvo, which makes identity software for the public and private sector, says there’s a gap between startups chasing investors and mature software companies already over the hurdle of being viable.
“I think in some ways our market, or startup market space, is still quite immature around what does investment mean. I know we talk to a lot of guys, and they think success is actually getting investment. That’s just getting out of the starting block. You have to have a pretty good understanding of, OK, that’s great you raised capital, you gave away a bunch of equity to raise it, what are you doing with it?” says Cain.
Cain also feels there’s another gap in the city’s technology ecosystem when it comes to education and the labour pool.
Data from a 2019 study by CBRE on the tech labour market of Canadian cities showed Regina having a small labour pool, but one that is growing. When it comes to the tech labour pool size, Regina is ranked 15 out of 20 cities. Its ranking for quality of labour is even worse, coming in dead last at 20.
The number for employment growth is more promising, where the city is ranked number two. Between 2013 and 2018, the number of total tech occupations increased by 68 per cent, with software developer and programmer positions specifically rising 54.5 per cent.
To support a tech ecosystem, Cain uses the analogy of a threelegged stool. There’s government, the private sector and education. The first two are already present, but the third is still posing a challenge.
“In the fields of computer science, our education system really has not kept pace with the rate of change. And I understand it’s a challenge because it changes quickly. But as a company, if we’re hiring a university grad, we have to invest a significant amount of money in that university grad to get them to the point where they’re actually productive for us,” says Cain.
He estimates it takes a full three months of loaded cost to get new grads in a place where they can start doing constructive work at Vivvo. The company is even looking at opening another office in a different city so it can access another talent pool.
Cain says technical colleges in the province provide a good condensed education, but face a challenge in keeping their curriculum up to date. As for universities, Cain says it’s his opinion that computer science programs provide a more holistic technology education than helping students become industry-ready programmers.
Cain believes private companies, the government and educators need to collaborate to help solve the problem.
“I think we actually need to come together to say, ‘Look, we can provide the landscape of what’s current technology, maybe even some mentorship or specialized educational sessions.’ We need government to invest in helping us make that happen in terms of the cost, and we need the universities to say, ‘Hey, you know what, we recognize we can’t deliver this on our own,’ and to buy into that,” says Cain.
An additional burden Regina’s talent pool has is the heavy government presence in Saskatchewan’s capital city.
Cain said government unintentionally becomes a competitor with the private sector for the already scarce resource of qualified workers.
This shallow talent pool ends up making a deeper dent in the pockets of companies. Cain says an entry-level developer in Regina can make up to 30-per-cent more than in Toronto.
According to the CBRE’S report, the average wage for software developers and programmers in Regina rose 15.9 per cent in the past five years, with the average wage sitting at $79,872. Regina’s ranking on talent quality to cost was last place, at 20th.
Many industry experts agree Regina and Saskatchewan’s technology sector is at a crucial period where there’s great potential. O’connor says the city is currently seeing momentum build in its startup scene, and things are moving in the right direction.
It may take a few years, but O’connor foresees a near future when the city has some big companies making “a lot of noise.”
“I think that we’re going to look back at this point in time we are right now as one of the key moments in Regina’s startup resurgence,” says O’connor.
While in the past Saskatchewan has lost talent to other provinces, Mcfarlen is starting to see a reversal. Companies outside the province are expressing interest in Cultivator based on the activity they’re seeing, and one is considering relocating to launch in Saskatchewan.
“I think that in the past that typically would have been the other way around, so seeing that kind of come full circle is pretty exciting,” says Mcfarlen.
For Cain, the tech sector is the next economic boom. There are hardly any industries that don’t have a major technology component, including sectors that already have a strong presence in the province, such as agriculture and mining.
And much like the decisive and gutsy mentality startup founders need to have, Cain says the city and province as a whole needs to be ready to seize these opportunities.
“We collectively cannot be shy or cautious when it comes to our technology ecosystem. This is a time to be bold and to significantly invest collectively in getting this right, because if we miss the boat, it will be hard to claw it back in the future.”
We collectively cannot be shy or cautious when it comes to our technology ecosystem. This is a time to be bold and to significantly invest collectively in getting this right ...
RORY CAIN, co-founder, Vivvo