Communitech’s tech savvy is admired around the world
Organization estimates economic impact was $1.7B last year
KITCHENER — A group of Australians travelled halfway around the world to tour the Communitech Hub.
While researching ways to support startups and spur economic development, the Australians kept hearing about Communitech — a nonprofit organization in Waterloo Region that anchors one end of a world-class technology cluster.
The Toronto Waterloo Region Corridor is second only to Silicon Valley in the number of technology workers and companies. At this end of the corridor, Waterloo Region has the third-largest tech cluster in Canada, after Toronto and Montreal. Its startup ecosystem is ranked 25th in the world, according to analytics firm Compass.
So the Australians came to Kitchener to see the incubators, accelerators and corporate innovation labs in the Tannery, a historic, sprawling building at Charles and Victoria streets. The building once housed the biggest leather tannery in the British Empire — making boot soles and harness leather for soldiers in the First World War, and fuel tank liners for fighter planes and bombers in the Second World War.
While waiting in the lobby, the Australians met another group that was in Kitchener for the same reason. That second group was from Australia, too. They laughed, sharing a “fancy meeting you here” moment.
The Aussies were among the 13,000 people who toured the Communitech Hub during visits to the region last year.
Communitech certainly has come a long way in 20 years. The organization, launched in May 1997, estimates its economic impact on the region last year was
$1.7 billion.
Its membership last year included 717 startups, 124 mid-sized companies and 66 large ones. Collectively, they raised $255 million in private investment and hired 2,782 new employees.
The innovative Communitech model is widely copied. From Sudbury to Halifax, there are innovation hubs based largely, or in part, on Communitech. Politicians from every level of government love to visit the Communitech Hub for announcements, photo-ops or consultations on public policy.
“I think Communitech is a leader that we all look up to,” said Pam Banks, executive director of the RIC Centre, an innovation hub in Mississauga that offers services to technology startups. “And they have been very good about sharing things.”
Inside the Tannery building is a meeting space called the Atlas Room. It is named after a littleknown group out of which Communitech emerged. The Atlas Group was formed in the early 1990s and included the CEOs and general managers of some of the region’s pioneering technology companies, including Dalsa, OpenText, MKS, Waterloo Maple, RDM Corp., Watcom, Spicer Corp. and a startup called Research In Motion.
Once a month, its members took turns buying coffee and doughnuts at Tim Hortons before meeting in the boardroom of a local tech company. They talked about financing, human resources, marketing, forming boards, going public, getting investors, accounting and doing business in the U.S. at morning meetings.
“We were exchanging stories with each other, literally learning from each other as we grew,” said Tom Jenkins, chair of software company OpenText.
When the Atlas Group was formed, Jenkins was the general manager of Dalsa, a Waterloobased manufacturer of digital imaging products. He moved to OpenText and became CEO when it had only 11 employees. The enterprise content management business now has 12,500 employees and is the largest software company in Canada.
“There really wasn’t a playbook for startups in technology as there is today,” said Randall Howard, a prominent angel investor in Waterloo Region who was a cofounder and CEO of software company MKS back then. He remembers the Atlas Group well.
MKS did 98 per cent of its business in the United States, and Howard shared the lessons and insights from his experience. “We were all just figuring it out, so comparing notes was probably even more valuable then,” he said.
In 1993, 15 members of the Atlas Group chartered two planes to Ottawa where Howard made a presentation about the region’s budding tech sector to federal politicians, and bureaucrats from the finance and industry departments. The trip was initiated by the late Andrew Telegdi, Waterloo’s MP at the time.
At the time, the tech sector in the region employed about 5,000 people, but firms were growing fast with ambitious plans. They exported most of their products and services to the U.S. That was, and remains, the glittery stuff of digital dreams for politicians and economic development agencies at all levels of government.
There was only one woman among the members of the Atlas Group on that 1993 trip to Ottawa — Louise Colley, CEO of Willow Software.
“But that was the time,” said Howard. “The sad thing is, it has not gotten a lot better actually, but Communitech is today, rightly so, working hard on that with things like Fierce Founders.”
Last year, Communitech created Fierce Founders, an accelerator for startups founded by or led by women. It attracts entrepreneurs from Halifax to Calgary, and beyond.
The Atlas Group was a beta test for the knowledge economy, said Howard, as the members taught themselves how to build and grow tech companies. As the number of firms slowly grew, the group realized in 1997 it needed a formal association to represent its interests.
Jenkins figured he knew the right person for the job of leading the new organization — Vince Schiralli.
By 1997, Schiralli’s resumé included 25 years in tech, mostly in sales, mainly in management roles. He worked at IBM, had his own startup and worked for a medium-sized tech company. Jenkins invited Schiralli to his home for a chat.
“It took a couple of bottles of wine at my kitchen table,” said Jenkins.
Jenkins assured Schiralli the new job was his to define. He would have funds to get everything going, and pay himself a salary.
“We killed a few bottles, and frankly it sounded like a good deal,” said Schiralli, who is now retired and living in Vancouver.
The 43 members of the Atlas Group each wrote cheques for $5,000 to launch Communitech. Among the founding supporters were the man hailed as the father of computer science at the University of Waterloo — Wes Graham of Watcom — and Jim Balsillie, co-CEO at RIM, a fast-growing company now known as BlackBerry.
“So that’s sort of how it all started,” said Jenkins.
Another Atlas Group member, Yvan Couture of the Taaz Group, gave Schiralli an office. The name Communitech came out of a brainstorming session there. Schiralli liked the name right away because it evokes community and collaboration.
“I was selling a concept, I was selling an idea, I was selling futures, I was telling people how good it was going to be,” said Schiralli. By the end of its first year, Communitech had 120 members. It focused on networking and peerto-peer groups for self-help and professional development. Memberships cost $5,000 a year for companies and $500 for individuals.
Communitech lobbied for better telecommunications infrastructure, lower taxes on stock options and exemptions to labour laws so companies would not have to pay overtime to software developers. But mostly it organized events that brought techies together for sharing contacts or learning from other members and speakers.
Schiralli moved Communitech into an office at 425 King St. N. in Waterloo, in what was then the location of Conestoga College’s Waterloo campus. Today, the offices of tech company Intelligent Mechatronics are located on the property.
By 2000, Schiralli was ready for the next chapter in a career that included being the CEO of a publicly traded company in Vancouver. “Those three years, there are no words to describe the fun, the feeling of accomplishment and the learnings I took away from all those great people,” Schiralli said.
Jenkins then called Greg Barratt, a regional director of sales and marketing at Ernst & Young, about becoming the second president of Communitech.
“We didn’t kill two or three bottles of wine, but he had me over to his house, his kids were scratching at the door, they were pretty young at that point,” said Barratt.
It was a Sunday afternoon in Jenkins’ den. Barratt accepted the job. He inherited a self-funding organization with a brand and its first government grants. Jenkins led the call on the board of directors to spend that money on peerto-peer groups, and professional development breakfasts and lunches called Communitalks.
“I have to give Tom Jenkins credit for that as a board member, that was one of his things,” said Barratt.
After three years as president of Communitech, Barratt left and moved into senior sales positions at tech firms Miovision and Coreworx, and Cowan Insurance Group, and also served as an entrepreneur-in-residence at Communitech. Recently, he announced he is returning to Communitech as a vice-president to oversee REV, a sales and marketing program for promising startups.
When Barratt was president, Communitech slowly expanded and moved into new offices at the Centre for International Governance Innovation at Erb and Caroline streets in Waterloo.
Iain Klugman was hired to lead Communitech in 2004. Prior to coming to Waterloo Region, he worked for the federal and provincial governments, including a short time as CEO of Tourism Ontario, and in branding and advertising roles with Nortel Networks, and ran his own consulting business for a short time.
By 2007, Communitech had moved into the Accelerator Centre, an incubator for tech startups in the David Johnston Research & Technology Park on UW’s north campus. It had 400 members and a $2-million budget. But all of that was about to change as Communitech greatly expanded, gaining national and even international prominence.
Jenkins figures in that part of the story, too.
“I was saying we need to be thinking about a $10-million strategy,” said Klugman, Communitech president and CEO. “And Tom said: ‘Not $10 million, it has to be a $100-million strategy.”
The board was looking for something bigger, and Klugman delivered.
He prepared an ambitious plan that included a move to downtown Kitchener and much larger offices in the former Lang Tannery building. Renovations to the old industrial building cost $30 million. Klugman’s plan also included the launch of the Canadian Digital Media Network, a partnership with the University of Waterloo’s Velocity startup support program, expanded programs to recruit talent for established companies and more resources for startups.
“So off we went to do that,” said Klugman. “So far today I think the strategy is around $250 million as far as activity, contributions, investments and everything else.”
Communitech’s expansion was enthusiastically supported by the public and private sectors. When the Communitech Hub opened in the Tannery building in 2010, Klugman said $100 million had been raised to run it over the next five years, with 40 per cent coming from public sources and 60 per cent from the private sector.
“It was actually the easiest money we have ever raised because it was such a compelling idea,” said Klugman. “People were like: ‘Yeah, I’m in, that makes such good sense. How do I be part of this?’”
The City of Kitchener was in first with $500,000 and the federal government provided $5.35 million to create the Communitech Hub. The Ontario government has given Communitech $5 million every year since 2009. Last July, it announced a $1.2-million contribution to pay for another expansion of The Hub. In 2015, the federal government announced it would give Communitech $9.7 million over five years to run programs to help mid-sized startups ramp up their growth. The same year, Ottawa announced Communitech was getting $3 million to launch the Canadian Open Data Exchange. The data exchange opened in May in a former police station in Uptown Waterloo.
Since the board of directors approved the expansion plans in 2007, Communitech says it has worked with 3,500 tech companies. Last year, Deloitte estimated those companies had a $1.7-billion impact on the economy, according to Communitech’s annual report.
Under Klugman’s leadership, the membership in Communitech has increased from 279 in 2004 to more than 1,300 today.
Membership increased quickly as Communitech focused more resources on incubating and supporting startups. In 2010, it worked with 115 startups. That has increased to about 400 new startups a year for each of the past five years.
A constant supply of new startups helps sustain a tech ecosystem, said Klugman. Back in 2006, Communitech hosted all manner of events, including film festivals and beer nights to get people thinking about doing a startup.
There were few takers. Then in 2010 “The Social Network,” a biopic about Mark Zuckerberg and the early days of Facebook, was released.
“And overnight everyone wants to be an entrepreneur,” said Klugman. It’s “absolutely remarkable how it changed everything — everything. Then it was just, like: ‘Hang on.’”
Communitech now employs 80 people and had revenue of $17.6 million in the fiscal year ended June 30. Just over half of its budget comes from government grants.
As it moves into its third decade, Communitech is ambitious and forward looking as it has ever been. One of its main objectives between now and 2026 is to see the Toronto Waterloo Region Corridor rival Silicon Valley as the world’s top tech ecosystem.
To achieve that, it aims to create 15 new companies with annual revenues of $100 million each, see $5 billion invested in tech companies (up from $1 billion) and have 350,000 jobs (up from 200,000) in the corridor, said Klugman, who as CEO of Communitech earned $345,000 last year.
One of the biggest obstacles to achieving those goals is attracting enough talent to the region, Klugman said.
“Best guess, we need 20,000 people in the next five years, people who don’t exist,” he said.
“And if we don’t have the talent then these companies that are high growth, they have to make some difficult decisions about where they are going to grow. It is a real risk for us.”
Klugman said it was a turning point in the region’s startup scene when Michael Litt and Devon Galloway returned from the Y Combinator accelerator in Silicon Valley and decided to grow their video analytics company, Vidyard, in downtown Kitchener. Founders of other startups, including Thalmic Labs, followed.
“All of a sudden they legitimized that choice and evangelized that choice and said: ‘It’s actually a better decision to do a startup here because of tax incentives and access to talent,’ and it changed over night,” said Klugman.
Klugman credits the board for its visionary leadership and support. The board at Invest Ottawa did not back expansion plans there, and Communitech eclipsed that organization years ago.
“I remember the board saying things to me like: ‘We want you to put Waterloo Region on steroids, you are going to take this place and sell it to the world,’” said Klugman.
As Communitech helps grow the innovation corridor between here and Toronto, the group’s first president enjoys a retirement full of golf and grandchildren. From his Vancouver home, Schiralli marvels at what happened at Communitech.
“It blows my mind,” said Schiralli.
“I don’t think any of us had a sense it would get this big or be this successful.”