Growing Nova Scotia’s Tech Startups: Lessons from Estonia

By Ainslie Pierrynowski (AIMS On Campus Student Fellow) 

“I’ve got a lot of friends back in Toronto and Waterloo and every time I go back it’s like, what the heck is going on up there in Sydney?”

These words were spoken by Nova Scotia-based entrepreneur Brian Best, while discussing Cape Breton’s emergent technology sector. Indeed, on Cape Breton Island and elsewhere in the province, a growing number of fledging technology businesses are attracting buzz, customers, and investments. From a company working to preserve the history of the Sydney Steel Plant to a Halifax firm enabling Internet users to collaborate with each other in real time, Nova Scotia has become host to a diverse array of new technology startups.

 

To provide some context, a startup means a small, recently founded business. startups generally seek to meet a particular marketplace need through a product, service, platform, or process. To grow their business, startups often rely on venture capital (VC). This term refers to investments from established firms or funds to a startup which they deem to have high potential for growth. As AIMS On-Campus fellow Samuel Hammond noted, a series of financial reforms helped to expand VC in Nova Scotia–and lay the foundations for a growing startup sector. In 1993, the provincial government introduced a tax credit for those who invest in small and medium-sized enterprises. The years 1994-1995 saw the creation of Innovacorp, a crown corporation tasked with investing in promising Nova Scotia startups. Later years brought a privately-managed $30 million Atlantic Investment Fund (AIF), intended to fuel investment in Atlantic Canada’s startups.

 

In addition to this recent expansion of VC, technology-oriented business incubators, including Cove Ocean and Volta, have aided the province’s prospective entrepreneurs in sharing their knowledge, networking with investors, and refining their technological skills. The resultant rise of technology startups has been heralded as a much-needed path to economic growth and diversification. For all the technology sector’s successes, however, unemployment, seasonality, and outmigration remain pressing concerns in Nova Scotia. As well, the closure of Sydney’s Uhma Institute of Technology, a training program for technology entrepreneurs, suggests that Nova Scotia’s technology startups are not immune from setbacks. While local journalists and policymakers seem largely optimistic about the province’s technology startups, some commentators are grappling with how to sustain and expand the industry in the long term. If Nova Scotia is searching a model for how to grow the number of startups and render existing technology startups larger and more profitable, the province should turn to Estonia.

 

In terms of population size, GDP per capita, and government budget, Estonia seems comparable to Nova Scotia. Estonia’s technology start-up field, however, represents a vastly different landscape from that of Nova Scotia. The relatively small state on the Baltic coast ranks third in Europe for the number of startups per capita. Technopol, a business hub in the Estonian capital of Tallinn, hosts more than 150 startups. Estonia is home to numerous, internationally successful technology startups, including Skype, software firm Teleport, and Skeleton Technologies. In fact, the technology sector accounts for 15% of Estonia’s GDP.

 

Estonia is a leader in e-government. Voting, maintaining official health records, and paying for parking all take place online. Filing an online tax return online, like 95% of the Estonian population, takes only five minutes. The process of building this vast online infrastructure could offer insight to Nova Scotia, in terms of how the province could make accessing government services and filing reports faster and easier for technology startups.

 

After achieving independence from the USSR in 1991, less than half the population of Estonia had a telephone line. Therefore, Estonia embarked on nationwide project to equip classrooms across the nation with computers. By 1998, all schools were online. Starting in 2000, when Tallinn declared internet access a human right, Estonia’s government helped to spread free, quick wi-fi throughout the country.

 

Estonia’s online government services notably reject legacy thinking, or in other words the needless replication of the formats used in the old, paper-based system in the new, online format. For instance, rather than simply reproduce a paper-based tax filing process, Estonia’s tax forms take advantage of the online medium. They are pre-filled, so the tax paper only needs to verify the calculations rather than re-enter tedious information. As this piece from AIMS concludes, Estonia makes government services simple as possible.

 

This technological boom was facilitated by Estonia’s tech-savvy, goal-driven political leadership. With government officials and business organizations that appear to recognize the importance of technology education and competing in the global marketplace, Nova Scotia would do well to follow Estonia’s lead. As well, the country’s imitable simplified, competitive tax system has proved appealing to technology start-ups.

 

In the words of Estonian tech entrepreneur Taavet Hinrikus, “In the 80s every boy in high-school wanted to be a rock star…Now everybody in high-school wants to be an entrepreneur.” There is hope that Nova Scotia and its growing technology start-up sector can foster a similar culture of technological entrepreneurship.

 

Federal Carbon-Tax System: Robust or Bust?

By Patrick O’Brien (AIMS On Campus Student Fellow)

The Federal Carbon-Tax has been the primary subject of debate in politics within the last couple months. The system is designed to tax consumers and businesses currently at the $35 per carbon tone, as an incentive to consume less and therefore produce less carbon emissions. Premier of Ontario Doug Ford has claimed that he will be dismantling the current “Cap and Trade System” that the Province abides by, and the next step will be the Federal Carbon-Tax system. The Cap and Trade system allows a certain carbon limit per firm to produce, and to continue production of goods, the firms either purchases credits from another company, or stop production. The main problem here is that the credit now “trade” like financial products in the carbon market, which independent companies then profit on by acting as a broker between firms that need the credits.

The new Federal Carbon-Tax is receiving a lot of criticism lately by politicians and consumers, as they feel the policy will not be as effective as initially stated. At the Summer Premier meeting in this past June, Premier Dough Ford along with Premier of Saskatchewan Scott Moe publicly announced that they oppose to the program, and that Saskatchewan will be going to court (with aid of Ontario) to challenge to proposed plan, and Federal jurisdiction to impose the tax on residents of Saskatchewan. PEI has also joined the list of growing Provinces who declare they will not implement the Federal Carbon-Tax program. PEI’s Environment Minister Richard Brown stated that the province will be able to reduce their carbon footprint by 30 percent below 2005 levels without introducing a tax. This will be included in the climate action plan to be submitted to the Ottawa on September 1st, but the Federal Carbon-Tax will not.

Why all the opposition against the carbon-tax program? The Provinces feel that the effects of this taxation on consumers would be unjust and would not promote the reduction of carbon emissions. Consumers would be affected by higher prices in gasoline, electrical heating, natural gas for homes, therefore effectively increasing the household costs and reducing the relative wealth of consumers. The other argument is that where a large amount of carbon emission comes from transportation, many driving would be hit with higher gasoline prices of roughly 11.6 cents per litre. Marginal but painful increase in necessity goods such as this would not have a profound effect on carbon reduction. It would just reduce wealth across consumers and consumption in other goods.

While some Provincial Governments are neglecting the Federal Carbon-Tax altogether, there has not been a definitive solution provided by these same Governments to replace the program. If they are to reject the Carbon-tax plan, then we need to see actual alternatives besides statements that just suggest action will be taken to reduce emissions. Besides the fact the countless hours and millions of dollars has been invested into the development of the Federal Carbon-Tax plan, it is also a major distraction to other large political problems Canada faces such as international trade negotiations, and primarily NAFTA. There needs to be a joint-meeting between Provinces, like that of this summers Premier meeting in New Brunswick, so that we can conclude with the next steps of carbon reduction across Canada.

 

Lessons from Atlantic Canada’s biotech sector: Part two

By Ainslie Pierrynowski (AIMS On Campus Student Fellow) 

In this two part series, I’ll examine several of the key factors behind the biotechnology sector’s success in Atlantic Canada—and what lessons they hold for other industries in the region.

It was the premier event for the industry. For biotechnology firms, the 2016 BIO International Convention offered a wealth of business opportunities. Its 15 000 attendees included major pharmaceutical companies, thousands of prospective investors, and exhibitors representing firms from around the world. The participating companies included several names which might have been familiar to residents of New Brunswick: Mycodev Group Inc., Soricimed Biopharma, Inc., and the Atlantic Cancer Research Institute, to name a few. In all, ten New Brunswick biotechnology companies and non-profits took part in the 2016 BIO International Convention, showcasing their work to a global audience. Their presence at this high-profile event is but one sign of Atlantic Canada’s growing biotechnology sector.

Find your area’s advantages—and showcase them to the world

A number of biotechnology firms have recently opened their doors in Halifax, where low operation costs have drawn in technology companies. The region as a whole has attracted biotechnology companies for a variety of reasons, including a growing network of business incubators and accelerators, low real estate and housing prices compared to large urban centres, and, as noted in part one of this series, strong research and development infrastructure.

In other words, Atlantic Canada has a number of advantages which have proven attractive to businesses. The region’s biotechnology sector provides a prime example of how Atlantic Canada companies can convey these advantages to prospective investors and business partners around the world. Atlantic Canada biotechnology companies send representatives to major conferences like the BIO International Convention. Businesses in other sectors would do well to follow the biotechnology industry’s lead and invest in networking opportunities. To ensure that these networking opportunities are productive, businesses in other industries should reflect carefully on the advantages which the Atlantic region affords their industry. Like their counterparts in the biotechnology sector, businesses should consider how these advantages can best be presented to prospective partners, clients, investors. At the 2016 BIO International Convention, for instance, the New Brunswick firms’ representatives coordinated with other Atlantic Canada biotechnology companies. Their appealing, unified messaging highlighted the rapid, continued growth of the biotechnology sector in Atlantic Canada as well as the region’s many natural resources.

In fact, for some biotechnology companies, partnership is at their core of their operations—and their success—as examined below:

Pursue partnerships

Nova Scotia’s Biomedical Translational Imaging Centre (BIOTIC) offers an instructive example of how industries can forge profitable, lasting, local partnerships.

To the dismay of Atlantic Canada’s biotechnology firms, the National Research Council (NRC) closed its medical device lab in Halifax. The IWK Health Centre, the Queen Elizabeth II Health Sciences Centre, and the region’s life sciences community banded together to fill the void left behind by the NRC lab. This partnership gave rise to BIOTIC, an imaging centre focused on the development and commercialization of medical biotechnology. What sets BIOTIC apart from other biotechnology businesses, however, is its partnership-based research model. That is, BIOTIC forges business partnerships with companies and research institutions. BIOTIC offers their partners with the expertise, equipment, support services, clinicians, and patient populations needed for the development of new biotechnologies. In turn, BIOTIC can collaborate with leading medical companies like GE Healthcare Canada on the creation of profitable new products and processes.

Partnerships can not only lead to valuable opportunities, but can facilitate economic diversification:

Diversify your industry

In an earlier op-ed, I noted that economic diversification is incredibly important to long-term economic growth and stability in Atlantic Canada. Essentially, Atlantic Canada’s economy needs to encompass a wide range of different, strong, and profitable industries. Doing so will reduce the chances of a crisis in a particular economic sector devastating the economy as a whole.

To further mitigate this risk, however, the region also needs intra-industry diversification. The biotechnology sector can serve as a useful guide here. The industry encompasses a wide range of subfields and applications, from the microbial production of insulin to the process of fermentation used to make alcoholic drinks. In Atlantic Canada, for instance, one can find industrial biotechnology, which produces enzymes (specialized proteins) for use in household cleaners, fuels, and other useful products. The region is also home to agricultural biotechnology, marine biotechnology, medical biotechnology, and more. As a result, an unforeseen event affecting one particular biotechnology field becomes is less likely to topple Atlantic Canada’s entire biotechnology sector. Therefore, the region’s businesses should seek to expand and branch out into new subfields and niches within their respective industries. Doing so could not only help these businesses to stand out, attract a wider customer base, and gain a competitive edge, but could also improve the region’s overall chances of economic survival.

Ultimately, the growth of the biotechnology sector in Atlantic Canada represents more companies, more job opportunities, and greater economic diversification and growth. The industry’s emergence also represents a new, successful approach to doing business in Atlantic Canada—an approach which many of the region’s industries could benefit from following.