A lesson from Vancouver startup bust
Government can’t spend its way to innovation
When I wrote recently that government grants to “fake startups” won’t build Silicon Valley North, I never imagined that the first multimillion dollar example of this would surface so soon.
In May, a grant-soaked accelerator in Vancouver called Wavefront Innovation Society went bust, leaving debts of $2.1 million. The largest claim, of $958,500, was owed to the National Research Council of Canada and its Centres of Excellence for Commercialization and Research Program. Other public grant givers were involved as well.
There were 266 creditors, but among the biggest were Accelerate Okanagan Tech Association (owed $138,021), British Columbia Innovation Council ($156,284), Ontario’s Centres of Excellence for Commercialization and Research ($618,835), Info and Tech Association of Manitoba, and the Victoria Advanced Technology Council ($180,417). Small startups in their accelerator were also stiffed.
Wavefront invested mostly public money and despite huge amounts going through its books ended up bust. An investigation into who or what was to blame for this is — the grant-giving agencies or the management or both?
Wavefront has been at the government trough for years and its bankruptcy news release was unapologetic and blamed revenue shortfalls. Critics say it spent extravagantly on parties and glitzy premises in Vancouver and most recently opened a fancy office in Toronto.
The history of Wavefront is eyebrow-raising.
“In 2014, Wavefront was one of four B.C.-based incubators and accelerators to receive government support through the Canada Accelerator and Incubator Program,” according to technology website Betakit.
“As part of the program, Wavefront was to receive up to $9.5 million over the next five years with a requirement to demonstrate ‘matching contributors on at least a 1:1 basis during the period of the contribution funding. Wavefront had also received $19.6 million in National Research Council funds starting in 2011 through to 2021,” the site said.
Wavefront’s news release contained the usual hyperbole and questionable job creation boasts that all these grant-getters claim. These claims are never independently audited by the public sector outfits that hand out tax dollars.
“For a decade Wavefront was a recognized centre of excellence for mobile and IoT technologies in Canada,” read its bankruptcy news release. “Wavefront has helped create 6,735 jobs, and add $417 million to the Canadian economy. More than 250 companies have been created through Wavefront’s programs and services,” it stated.
None of these claims are supported and, possibly, cannot be. Apparently, these outfits ask their starts for beneficial statistics every year to file to their grant givers and take their word for it.
“The list of claims against the not-for-profit — which presented itself as a key player facilitating the creation of technological so-called ‘smart cities’ and advancing development of the Internet of Things through companies — suggest it had not paid bills in months,” according to Betakit.
Stay tuned for more scandals because Ottawa and governments cannot hand out money fast enough.