BC Business Magazine - - Front Page - by AN­DREW FIND­LAY by AN­DREW FIND­LAY

NANAIMO has qui­etly rein­vented it­self as a des­ti­na­tion for in­no­va­tive star­tups. The Van­cou­ver Island port town may not be­come a tech mecca any­time soon, but it's thriv­ing de­spite city hall squab­bles that crit­ics say have thwarted eco­nomic de­vel­op­ment

Talby Mckay, founder and pres­i­dent of North­ern Biomass Con­sult­ing, folds heav­ily tat­tooed fore­arms over his chest and gazes at a scale model of an in­dus­trial fa­cil­ity that he hopes to break ground on this sum­mer in Nanaimo. At full ca­pac­ity, the joint ven­ture be­tween North­ern Biomass and Colorado-based Biochar Now will pro­duce roughly 70,000 kilo­grams of biochar a day at its six-hectare site. Known mostly as a soil con­di­tioner, this ma­te­rial has other ap­pli­ca­tions, from cloth­ing in­su­la­tion to wa­ter fil­tra­tion.

“Avail­abil­ity of wood fi­bre and a deep-sea port that gives us ac­cess to mar­kets,” Mckay says when asked what prompted his com­pany’s move from Prince Ge­orge to Nanaimo last sum­mer. “We did a fea­si­bil­ity study, and Nanaimo came out on top.” ❖ The pi­lot fa­cil­ity is the first of six plants that North­ern Biomass plans to build in West­ern Canada as it seeks to cap­ture a share of the Us$8-bil­lion North Amer­i­can mar­ket for biochar, a car­bon prod­uct de­rived from wood waste via py­rol­y­sis (us­ing heat to al­ter the chem­i­cal com­po­si­tion of or­gan­ics in the ab­sence of oxy­gen). When Mckay talked to Bcbusi­ness in May, he had se­cured land at an undis­closed lo­ca­tion but was still busy with fi­nanc­ing—so busy that he hadn’t fin­ished mov­ing into his new digs on Nanaimo’s wa­ter­front.

The same of­fice was home to Nanaimo Eco­nomic De­vel­op­ment Corp. (NEDC) un­til late 2016, when then- CEO John Hank­ins penned an op-ed crit­i­ciz­ing city of­fi­cials’ de­ci­sion to re­move tourism mar­ket­ing from NEDC’S man­date. The city fired Hank­ins be­fore clos­ing the de­vel­op­ment cor­po­ra­tion that De­cem­ber. There’s per­haps no bet­ter metaphor for Nanaimo, which seems to be suc­ceed­ing in spite of it­self: a com­pany takes over the premises of a de­funct mu­nic­i­pal agency aimed at lur­ing busi­nesses.

North­ern Biomass is one of the new play­ers in an emerg­ing en­tre­pre­neur­ial econ­omy that is mak­ing peo­ple re­con­sider this city of 90,000, which has tra­di­tion­ally re­lied on fish­ing, min­ing and forestry. For many, though, the Har­bour City is still best known for its name­sake con­fec­tion, the Nanaimo bar, shop­ping mall sprawl and the Loyal Nanaimo Bath­tub So­ci­ety (whose an­nual bath­tub race, which takes place from July 20 to 22, is a favourite sum­mer event). And, un­for­tu­nately, for civic chaos.

For the past three years, busi­ness tri­umphs have been rou­tinely trumped by head­lines high­light­ing Nanaimo’s mon­u­men­tally dys­func­tional mu­nic­i­pal coun­cil. Like they’re watch­ing a car wreck in slow mo­tion, cit­i­zens find it hard not to gawk as the news cy­cle dishes out sala­cious re­ports of bul­ly­ing and in­sult swap­ping among Mayor Bill Mckay and city coun­cil­lors, ques­tions about the mayor’s busi­ness deal­ings and a law­suit in­volv­ing a for­mer city staffer.

An­drea Rosato-tay­lor, one-time pub­lisher of the Nanaimo Daily News and a sales man­ager with Black Press, is one of the or­ga­niz­ers be­hind Vi­sion 2020, a rally first held in 2011 and again in April 2017 to show Nanaimo as a wel­com­ing place to launch a busi­ness. In other words, to counter the flow of neg­a­tiv­ity from city hall.

“We’re all just hold­ing our breath un­til this coun­cil is done,” Rosato-tay­lor says at a cof­fee shop on

Com­mer­cial Street, which winds through Nanaimo’s his­toric down­town. The core, where home­less­ness and poverty col­lide with the Van­cou­ver Island Con­ven­tion Cen­tre, art gal­leries and bou­tique shops, still has the gritty edge of a port city.

Un­til Oc­to­ber’s mu­nic­i­pal elec­tion, it’s a case of grin and bear it for com­pa­nies like Inuk­tun Ser­vices, a de­signer and man­u­fac­turer of re­motely op­er­ated vehicles (ROVS). This un­der­stated Nanaimo tech out­fit em­ploys 60 peo­ple in Canada and the U.S. Cus­tomers world­wide use its ro­bots to per­form search-an­dres­cue op­er­a­tions, sur­vey pipe­lines for dam­age, in­spect the ra­dioac­tive in­nards of nu­clear power plants—and even shoot big-bud­get re­al­ity TV shows.

Los An­ge­les–based Gur­ney Pro­duc­tions re­cently rented one of Inuk­tun’s spe­cial­ized in­spec­tion cam­eras to film an episode of the se­ries Shark Week. “They needed a ro­bust HD cam­era, and we were able to pro­vide an off-the-shelf model,” says Inuk­tun CEO Colin Do­bell.

As for the noise from city hall, Do­bell is frank: “I think the city in­fight­ing di­min­ishes Nanaimo’s rep­u­ta­tion over­all, which can have a neg­a­tive ef­fect on re­cruit­ing tal­ent, or even on cus­tomer and in­vestor per­cep­tions.”

Be­yond the Nanaimo bub­ble

But in some ways, Nanaimo is sell­ing it­self—by de­fault. Lifestyle and af­ford­abil­ity are big draws. Like else­where on Van­cou­ver Island, the lo­cal real es­tate mar­ket has been hot, with the aver­age price of a sin­gle-fam­ily home surg­ing 16 per­cent year-overyear to nearly $540,000 as of April, ac­cord­ing to the Van­cou­ver Island Real Es­tate Board. But for any­one used to Van­cou­ver’s seven-fig­ure list­ings, Nanaimo’s com­mer­cial and res­i­den­tial prop­erty is a bar­gain.

Add the sea­side set­ting, hik­ing, bik­ing and other recreational ameni­ties, and the city starts to shine, espe­cially given the difficulty some Lower Main­land com­pa­nies of­ten face re­cruit­ing and re­tain­ing young em­ploy­ees in a peren­ni­ally su­per-heated hous­ing mar­ket.

When Kent Flint, chief op­er­at­ing of­fi­cer at Real Es­tate Web­mas­ters (REW), first came to Nanaimo in 2013 to visit his re­tired par­ents, he fell in love with Van­cou­ver Island, he says. So Flint left a suc­cess­ful ca­reer in the Ottawa tech sec­tor and moved west with his wife and three chil­dren. In early 2016 he joined REW, which has a staff of 150 spread be­tween a three-build­ing cam­pus in Nanaimo and a

down­town Van­cou­ver of­fice and pro­vides soft­ware and web so­lu­tions to 60,000 real­tors through­out North Amer­ica. Flint be­lieves the com­pany’s suc­cess in the years ahead will re­quire think­ing out­side the Nanaimo bub­ble.

“When I first ar­rived at REW, they were com­par­ing them­selves to other Nanaimo-based em­ploy­ers, but we’ve re­de­fined our­selves as a high-tech em­ployer, and this has played a piv­otal role in shap­ing a more tech-like cul­ture at the com­pany,” he says. “We are the big fish in a small pond in Nanaimo and had to do a bit of a re­al­ity check when we opened our of­fice in Van­cou­ver, join­ing 100 other tech em­ploy­ers fight­ing for tal­ent.”

Lifestyle also sold Chris Davis in 2015, when he was search­ing for a place to re­lo­cate with his fam­ily and launch his lat­est cy­ber­se­cu­rity startup, Hyas In­fosec. The Nanaimo na­tive, who spent his teenage years as a hacker in the base­ment of the fam­ily home, geeked his way into a suc­cess­ful In­ter­net se­cu­rity ca­reer in the U.S., work­ing for big names like Dell and Dam­balla be­fore start­ing De­fense In­tel­li­gence and later Mor­ri­gan Re­search.

For his third ven­ture, Hyas, Nanaimo fit the bill: close to ex­tended fam­ily, af­ford­able and of­fer­ing most con­sumer con­ve­niences with­out be­ing too big, even if he knew it could pose ex­tra chal­lenges to at­tract­ing ven­ture cap­i­tal and tal­ent.

Two years in, Hyas em­ploys 10 full-time staff and five con­trac­tors. This Jan­uary the com­pany launched its de­but cy­ber­se­cu­rity plat­form, named Co­mox; its client list in­cludes Amer­i­can Ex­press, the U.S. govern­ment, in­vest­ment houses and two ma­jor ac­count­ing firms. In March, Hyas re­leased its next soft­ware prod­uct, Salt Spring, which Davis says got an early boost thanks to “a pre-or­der from the cy­ber in­tel team at De­loitte HQ in New York.”

A few blocks away, Ron Hart­man, co-founder of IDUS Con­trols, sits at a desk at Square One, a co­op­er­a­tive, open-con­cept workspace next to the sto­ried Queens Ho­tel, which has been serv­ing pints of beer since log­ging and coal formed the re­source foun­da­tion of Nanaimo. The decade-old busi­ness is an­other home­grown suc­cess story. The com­pany, whose soft­ware and hard­ware let farm­ers mon­i­tor soil mois­ture con­tent and ad­just ir­ri­ga­tion, has cus­tomers across the globe, in­clud­ing food tech­nol­ogy heavy­weights like Mon­santo Co. and Syn­genta.

The busi­ness could have lo­cated any­where, but in Nanaimo, Hart­man lives in a her­itage house blocks away from a quaint down­town of brick and stone build­ings, rides a bike to work and walks from Square One to his sail­boat. It’s as if to say: Put that on a bill­board, why don’t you?

Along­side Nanaimo’s IT pioneers, the city has a small but di­verse clean­tech sec­tor. In green en­ergy, there are SRM Projects and Barkley Project Group, which both spe­cial­ize in run-of-river hy­dropower de­vel­op­ment. For 25 years, Cana­dian Elec­tric Vehicles (CANEV) has been de­sign­ing and mak­ing elec­tric vehicles in ru­ral Er­ring­ton, north of the city. The com­pany’s flag­ship prod­uct is the Might-e Truck, a light-duty, elec­tric-pow­ered ser­vice ve­hi­cle found in the fleets of air­ports and of mu­nic­i­pal­i­ties like Tofino and Ucluelet.

In early 2017, founder Randy Holmquist sold CANEV to Al­berta me­chan­i­cal engi­neer Todd Maliteare, but he’s stay­ing on the pay­roll at least un­til the end of this year. CANEV’S pro­duc­tion vol­ume is mod­est: in 2018, the com­pany will roll out a dozen of its Might-e Trucks from Holmquist’s back­yard shop.

Still, you need much more than lifestyle perks to de­clare your­self a tech­nol­ogy hub, like some Nanaimo boost­ers tend to do th­ese days. Ac­cord­ing to one in­dus­try in­sider who spoke on con­di­tion of anonymity, if you walked into a ven­ture cap­i­tal mixer in Palo Alto and touted Nanaimo as a tech cen­tre, “you’d be laughed out of the room.”

It took decades for Van­cou­ver and Vic­to­ria— the lat­ter now home to roughly 300 firms gen­er­at­ing a com­bined $4 bil­lion in an­nual rev­enue—to make that claim. Kelowna also has a boom­ing tech sec­tor that has grown roughly 30 per­cent since 2015 and is lead­ing the charge in the Okana­gan, where more than 650 such com­pa­nies do busi­ness. By com­par­i­son, Nanaimo is still a di­a­mond in the rough.

“Over the past few years, it has been very ex­cit­ing to see sev­eral lo­cal and re­gional tech­nol­ogy star­tups break through the early stage,” says Gra­ham Truax, act­ing ex­ec­u­tive di­rec­tor of In­no­va­tion Island, which ser­vices Van­cou­ver Island (out­side of Vic­to­ria) and the Sun­shine Coast, and be­longs to a net­work of tech in­cu­ba­tors es­tab­lished by Crown agency the BC In­no­va­tion Coun­cil. “Tech is start­ing to mea­sure here, slowly but surely. The chal­lenge for most of th­ese com­pa­nies is that the tech sec­tor is a global mar­ket­place. This means com­pet­ing for cap­i­tal, cus­tomers and tal­ent with larger cen­tres that of­ten have far more re­sources.”

“Tech is start­ing to mea­sure here, slowly but surely. The chal­lenge for most of th­ese com­pa­nies is that the tech sec­tor is a global mar­ket­place. This means com­pet­ing for cap­i­tal, cus­tomers and tal­ent with larger cen­tres that of­ten have far more re­sources” — Gra­hamtruax,actingex­ec­u­tivedi­rec­tor,in­no­va­tion­is­land

Most tech in­vestors can’t pro­nounce Nanaimo, let alone pin­point it on a map, Truax says. For now, he ad­vises, it’s best to dis­pense with la­bels like “tech hub,” and “get down to busi­ness.”

Play­ing the long game

At a time when the city’s star ap­pears to be ris­ing, Nanaimo’s of­fi­cial eco­nomic de­vel­op­ment ef­forts have shown lit­tle progress lately. In Novem­ber 2017, the city an­nounced that it was fold­ing that file into the real es­tate and busi­ness de­vel­op­ment sec­tion of com­mu­nity de­vel­op­ment and that staff would de­velop a “work plan.”

Bill Cor­san, deputy di­rec­tor of com­mu­nity de­vel­op­ment, had few de­tails about the work plan to share with Bcbusi­ness. Tourism pro­mo­tion for the city has been out­sourced to the re­gional des­ti­na­tion mar­ket­ing or­ga­ni­za­tion, and long­time city staffer Am­rit Man­has is now eco­nomic de­vel­op­ment of­fi­cer in a lonely one-per­son out­post at city hall that faces an up­hill bat­tle to re­gain pub­lic con­fi­dence.

Sh­eryl Arm­strong is a tough-talk­ing ex- RCMP sergeant who won elec­tion to city coun­cil with nearly 50 per­cent of the vote in a by­elec­tion last July. Arm­strong said she ran for of­fice be­cause she’s in­ter­ested in pol­i­tics and was dis­gusted by the drama and neg­a­tiv­ity at city hall. Last De­cem­ber, Nanaimo launched a law­suit— since dropped— against Mayor Mckay over ac­cu­sa­tions of leak­ing con­fi­den­tial in­for­ma­tion. This March, the Crown laid crim­i­nal charges against chief ad­min­is­tra­tive of­fi­cer Tracy Samra for al­legedly threat­en­ing staff and coun­cil, and the in­ves­ti­ga­tion is on­go­ing.

“The sad thing is that coun­cil is so di­vided that they have for­got­ten to put the city first,” says Arm­strong, who at press time hadn’t de­cided if she would run in this fall’s elec­tion. “I know that some busi­nesses have opted not to lo­cate in Nanaimo be­cause of the tur­moil and that others are hold­ing off on ex­pand­ing un­til there’s a new coun­cil.”

Arm­strong be­lieves Man­has is do­ing her best,

“The sad thing is that coun­cil is so di­vided that they have for­got­ten to put the city first. I know that some busi­nesses have opted not to lo­cate in Nanaimo be­cause of the tur­moil and others that are hold­ing off on ex­pand­ing un­til there’s a new coun­cil ”— Sh­eryl arm­strong, nanai mo city coun­cil­lor

but eco­nomic de­vel­op­ment is stalled, she reck­ons.

In early 2017, this lack of con­fi­dence prompted a group of lo­cal busi­ness lead­ers headed by Bob Moss, pres­i­dent and founder of real es­tate bro­ker­age NAI Com­mer­cial Cen­tral Van­cou­ver Island, to form the Mid-island Busi­ness Ini­tia­tive (MIBI). A decade ago, Moss helped lobby the city to cre­ate an in­de­pen­dent eco­nomic de­vel­op­ment of­fice; its de­ci­sion to kill the arm’slength or­ga­ni­za­tion frus­trated him, he says. But th­ese days be­ing ex­as­per­ated by civic pol­i­tics comes with Nanaimo cit­i­zen­ship, so he moved quickly.

“I knocked on doors to see if there was in­ter­est in cre­at­ing a pri­vately funded or­ga­ni­za­tion, and I got a great re­sponse,” Moss re­calls. More than a dozen busi­nesses and in­sti­tu­tions now back the ini­tia­tive, in­clud­ing Van­cou­ver Island Uni­ver­sity (VIU), web de­sign and In­ter­net mar­ket­ing firm Ar­ray Stu­dios and Kristo Zorkin Group, the de­vel­op­ment firm be­hind the re­ju­ve­na­tion of Nanaimo’s old down­town quar­ter. “We’re com­pet­ing with a lot of com­mu­ni­ties, and we want to get the mes­sage out about Nanaimo,” Moss says.

MIBI hired John Hank­ins as its CEO, a half-time po­si­tion, and in 2017 it hosted two events in down­town Van­cou­ver. This past April, the group wel­comed guests to the Ter­mi­nal City Club for an­other of th­ese gather­ings, which Hank­ins de­scribes as “in­vite-only meet-and-greet, aware­ness­build­ing and myth-bust­ing ses­sions,” aimed at high­light­ing Nanaimo’s af­ford­abil­ity, lifestyle and busi­ness-friendly at­tributes.

“We’re not here to point fin­gers, but what­ever is hap­pen­ing busi­ness-wise in Nanaimo th­ese days is in spite of city hall,” Hank­ins says.

Odai Sirri, di­rec­tor of op­er­a­tions at Wa­ter­front Hold­ings, rolls his eyes at the men­tion of MIBI dur­ing a meet­ing at the Grand Ho­tel Nanaimo, a prop­erty de­vel­oped and owned by Wa­ter­front in the north of the city that serves a mostly busi­ness clien­tele. He prefers the Gra­ham Truax ap­proach: for­get the cheer­lead­ing, roll up your sleeves, and get down to work.

Wa­ter­front got its start in West Van­cou­ver 30 years ago, when Sirri’s Iraqborn engi­neer fa­ther turned his fo­cus to prop­erty de­vel­op­ment. With two and a half decades’ experience in Nanaimo, the com­pany has been in­volved in a va­ri­ety of projects and part­ner­ships there, among them a re­de­vel­op­ment of the Moby Dick Ocean­front Lodge and Ma­rina, a mo­tel with a rough-and-tum­ble past that was orig­i­nally de­vel­oped by Frank Ney, one of Nanaimo’s most colour­ful for­mer may­ors.

In 2012, Wa­ter­front signed an eco­nomic de­vel­op­ment agree­ment with the lo­cal Snuney­muxw First Na­tion fo­cus­ing on joint ven­tures and in­vest­ment in tourism, hos­pi­tal­ity, ma­rine ser­vices and ed­u­ca­tion, and in­clud­ing plans to grow tourism busi­nesses on New­cas­tle Island, a scenic park ac­ces­si­ble by wa­ter taxi from the har­bour.

Wa­ter­front’s lat­est ven­ture is the Diver Lake In­no­va­tion and Tech­nol­ogy Park, sim­i­lar in spirit to Kelowna’s In­no­va­tion Cen­tre, which opened last year. The pro­posed 70,000-square-foot fa­cil­ity, aimed at IT and R&D firms and lo­cated in the heart of Nanaimo, is still at the blue­print stage. Sirri says Wa­ter­front hopes to start build­ing once the project reaches 70-per­cent ten­ancy com­mit­ment.

The idea for the tech­nol­ogy park emerged from a con­ver­sa­tion that Sirri had with the city’s Am­rit Man­has sev­eral years ago about ro­bot maker Inuk­tun need­ing to move to a new space: “Am­rit told us that Nanaimo def­i­nitely wants to keep a com­pany like Inuk­tun.” But get­ting shov­els in the ground is prov­ing to be a test of en­durance. Nanaimo is a city that doesn’t “un­der­stand it­self and lacks po­lit­i­cal ma­tu­rity,” Sirri says.

“We know there are good busi­nesses here; we know that we’re a fast-grow­ing com­mu­nity. But ev­ery­one is sick of hear­ing about how Nanaimo has so much po­ten­tial,” he adds. “Nanaimo is re­ally about play­ing the long game.”

The long game, and the lifestyle game. For Hyas In­fosec founder Chris Davis, de­spite the draw­backs of be­ing away from ven­ture cap­i­tal hubs like Sil­i­con Val­ley, the pros of Nanaimo still far out­weigh the cons. He’s pre­pared to pay what he calls a “de facto tax” for set­ting up shop in the city.

“Our em­ploy­ees are all ab­so­lutely lov­ing it here. They are en­gaged in the com­mu­nity, go­ing to lo­cal events, bitch­ing about the city govern­ment and get­ting out to ex­plore ev­ery chance they get,” Davis says. “Much like most peo­ple who live here.”

por­traits by NIK WEST

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