Feature

How These Billion-Dollar Deals Helped Launch Fredericton’s Tech Scene

Image: Kognitiv Spark Facebook page.

FREDERICTON – The idea for one of Fredericton’s latest tech startups was dreamed up on a hike in Scotland.

As Duncan McSporran and Ryan Groom, the co-founders of Kognitiv Spark cleared their heads in the outdoors and talked about augmented-reality software that could be used for industrial-worker support. McSporran, then in the military, thought it could have the potential for the armed forces.

“It was essentially a meeting of the minds where we put together what we thought would work for workers,” said Yan Simard, who became CEO of the company that launched in 2016.

Kognitiv Spark is the kind of business that emerged in the years since 2011 when two back-to-back exit deals totalling nearly a billion dollars were made.

Commercial Properties space for rent

Salesforce, a San Francisco-based software company, bought Radian6, a Fredericton-based social media monitoring company, for $326 million. Shortly thereafter, IBM bought Q1 Labs, another Fredericton startup, for $600 million.

The Fredericton ecosystem that has developed since then has allowed for the emergence of new businesses ranging from Somadetect, an agri-tech business, to HomeWurk, a student-founded online platform that pairs people with odd jobs for work. Most recently, a co-founder and a CEO from of Q1 Labs launched Sonrai, a cybersecurity startup that attracted 18.5-million in investment.

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The environment for growth, which includes hubs and facilities to support budding entrepreneurs, along with the presence of the University of New Brunswick, is a driving force in generating a hotspot for startups.

In 2016, Startup Canada, an entrepreneurship organization, named Fredericton Canada’s Start Up Capital for that year. And Startup Canada recently named a UNB engineering major its young entrepreneur of the year.

In 2017, the city’s 75,000 square foot Knowledge Park generated an estimated $145-million in gross domestic product, according to Ignite Fredericton.

The complex includes Planet Hatch, a so-called “startup acceleration centre,” which provides entrepreneurs with mentors, coaching and resources. About 80 people work out of a collaborative office space, where cardboard circles of business logos dangle overhead, reminding the occupants of past successes. Whiteboard walls jotted with ideas line the hallways. Sticky notes cover the walls of glass cubicles.

Since it opened five years ago, the centre has supported more than 150 startups, generating more than 400 jobs.

Adam Peabody, the director, said the rise of startups correlates with the growth in restaurants and is the equivalent of 35 new homes in residential development. It’s helped fuel growth and change the character of the city.

Ten, fifteen, twenty years ago Fredericton was regarded as this sleepy university government town where you get a job in government, get a job in a university. That’s what our economy was,” Peabody said. “And in some ways that contributed to the provincial problem of people moving away and our population declining.”

In fact, Fredericton has one of the most highly educated and skilled populations in Canada. More than seven per cent of the population has a master’s degree or higher, according to Statistics Canada, compared with five per cent in the rest of the country.

The five-kilometre stretch between Knowledge Park and the downtown core is home to more than 60 research and development organizations, or one per 1,000 residents. This includes government centres, companies and university departments.

While half of the Canadian startups fail within three years, in New Brunswick three-quarters are surviving and some are even growing, Peabody said.

“We’re certainly punching above our weight,” he said.

Kognitiv Spark is an example of the growth and sustainability startups in the province are experiencing.

Vanessa Matthews, the company’s chief marketing officer, describes the product as a “hyped-up Skype call.” Through a Microsoft augmented-reality lens, experts in an office communicate with front-line workers on oil rigs, and in other industrial settings in manufacturing, aerospace and engineering.

The fully encrypted, low-bandwidth software enables moveable holograms to be placed and moved around a room. The technology allows experts to work remotely with technicians in the field, saving companies the time and money to bring the needed expertise to the site where a piece of equipment needs to be repaired.

Since its initial product launch in 2017, Kognitiv Spark has obtained several seven-figure contracts, including with the Department of National Defence.

However, Fredericton itself is a bit off the grid which presents challenges for growing the tech industry. Flights to larger cities involve time-consuming and expensive connections. Access to financing and investor funding is tough, particularly before revenues start flowing in.

Simard, Kognitiv’s CEO, said Fredericton has its upsides, though. The city offers a high-quality, critical mass of talent for his company and a better quality of life compared to bigger urban centres. This results in higher employee retention.

“I like the momentum we have here,” he said.

Simard said because the consumer market is so small, startups must push into foreign markets.

In this vacuum, private venture capital dollars have made the difference. Since the sales of Radian6 and Q1 Labs, venture-capital investments in the region have grown by 37 per cent annually, compared to 30 per cent in the rest of Canada, according to Peabody.

Somadetect, an agriculture tech startup with an office at Ville Cooperative, a community centre in Marysville that rents out spaces to emerging business ventures, won $1 million at a competition in Buffalo, N.Y. last year. It also received additional space there, which has become the head office.

Bethany Deshpande, Bharath Sudarsan and Nick Clermont, Somadetect’s founders, launched the business in 2016 based on technology developed by Deshpande’s father, Satish, a biophysicist. Somadetect sells a sensor that measures milk from cows by refracting light to determine the various count of white blood cells, fat and protein.

Because a single infected cow can spoil an entire batch of thousands of litres of milk, the return on investment for a farmer buying the sensor is less than one year. The product can be integrated into farms of various scales.

Somadetect has expanded to 25 staff from 11 just a few months ago. Andrew Robart, a business-operations assistant, forecasts that number will double by the end of the year.

“It’s an environment where other startups want to see other startups succeed, so if you want to get help from others, there’s a really tight-knit community,” he said.

Robart started as a fellow at Venture for Canada, a non-profit program that recruits, trains and places recent graduates at startups. He said the opportunities in Atlantic Canada surpassed those in Ontario by almost a third.

UNB student Canada’s Young Entrepreneur of the year

Cameron Ritchie, centre, with Christine Guyot and Francois Lecavalier from the Business Development Bank of Canada. Credit: Startup Canada.

Current students are a driving force behind new businesses. Last month, Cameron Ritchie, a first-year engineering student, was named Canada’s Young Entrepreneur of the Year. He launched HomeWurk, an online platform that pairs students with odd jobs in the community. Students choose jobs that fit their busy schedules.

“I think it’d be much harder if I was outside of New Brunswick to start this up because there’s a lot of noise and a lot of people doing their own thing,” Ritchie said.

Applications this past June to the UNB Summer Institute entrepreneurship program increased to more than 100 from just thirty a few years ago, according to Melissa O’Rourke, program manager at the university’s J. Herbert Smith Centre for Technology Management and Entrepreneurship.

“Our current generation [wants] to work for something that has impact,” O’Rourke said. “In the Maritimes, people are starting to have to create it themselves.”

Atlantic Canada has historically been a resource-driven economy, focused on oil refinement and lumber. But as those industries have waned, the region has developed consistently high unemployment. Over the past decade, the four Atlantic provinces rank dead last in population growth and GDP.

“Necessity is the mother of innovation,” Simard said, “so I think there’s more awareness here that if we don’t change the way we’re doing economic development, we’ll probably end up with a large problem fairly soon.”

Alexandre Silberman is a journalism and political science student at St. Thomas University.