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Entrepreneurial Magic in the Waterloo Region

Excerpt from Cool Companies www.coolcompanies.ca  Edited by Irene Dimopoulos

Read PDF version that appeared in the Cool Companies industry guide [PDF]

The Waterloo Region is a hive of entrepreneurial activity. What is the source of this entrepreneurial productivity? We took our question to entrepreneurs who live and run companies in the area. They told us it’s their recent successes in the tech sector, a collaborative culture and world-class educational institutions. In the past 10 to 15 years, the Waterloo Region—made up of the cities of Kitchener-Waterloo, Guelph, Cambridge—has become home to some of Canada’s newest innovation rockstars. They are companies like RIM, Open Text, DALSA and Descartes. Many internationally known companies have also established research or manufacturing operations in the Region including Google, IBM, Siebel, Cisco, LSI Logic, Agfa, Abode, Sybase, McAfee, and Nuvation. The Waterloo Region is a small tight-knit community with a population of only 500,000 people, but the Region has demonstrated that it can—repeatedly—produce world-class technology. What’s the source of the entrepreneurial magic in the Waterloo Region?

SUCCESS BREEDS MORE ENTREPRENEURIAL ACTION

DAVE BULLOCK, President and co-Founder, LiveHive Systems Inc., Waterloo, ON LiveHive is a leader in nanogaming, 40 employees, founded 2005, VC funded, livehivesystems.com.
‘There’s an entrepreneurial atmosphere in town. I think that’s fueled by successes like RIM and others who have aided a lot of people (here). A lot of people have done very well as a result. People have worked at those companies, people have invested in them, people have seen how entrepreneurialism works and the big windfalls that it can produce. Everyone in town has seen entrepreneurialism succeed, so they are willing to take the risks inherit in it. That entrepreneurialism really penetrates the entire community. It gets other people thinking, ‘We’ve seen it work. We’ve seen how small businesses can grow into world-leading companies.’ It’s a self-fulfilling prophecy: when there are success stories, the talent comes. Having talent around breeds our ability to come up with more and more companies all the time.”

DIVERSE MANUFACTURING ECONOMY

The waves of immigration, notably from Scotland and Germany, have given the Region a strong tradition of hard work, self-reliance and entrepreneurship, as well as a culture of sharing and community. Some of the companies built that have brought prosperity to the Region include Schneider FoodsKrug FurnitureMutual Life Insurance (now part of Sun Life), Electrohome, and Home Hardware.

JOERG STIEBER, Founder and President, Ontario Drive and Gear Limited (ODG), New Hamburg, ON
ODG is the world leading manufacturer of amphibious off-road utility vehicles (i.e. vehicles that go on land and water), 173 employees, 15% growth every year for the past 20 years, odg.com.
“If you go to Windsor, it’s more automobile based. In the Ottawa Valley, it’s strongly high tech communications based. The whole economy in Alberta is driven by oil. In our area, we have lots of small manufacturing companies in very diverse manufacturing fields. Our manufacturing ranges from people who make Blackberries at RIM to automotive manufacturing such as Toyota, to a whole bunch of small machine shops to companies like ours, making special equipment such as amphibious vehicles. This gives the Region a lot of strength and stability. So we’re not just high tech based. If there are problems in the economy, such as the bursting of the tech bubble in 2001 or automotive slowdowns, then we are not as affected as other places because there’s a buffer.”

Strong Work Ethic History
“Another major advantage for us as a manufacturer is that we never have to go very far to find good suppliers because there’s such a diverse manufacturing culture here and so many different small companies supplying a broad range of goods. Part of it is also the strong German heritage in the area. Germany has had a very strong manufacturing culture, at least in the last 140 years or so. A lot of people with a background in this culture and a solid trade or education came to Canada and started some kind of manufacturing business. There are even examples of immigrants growing businesses they started in basements into industrial powerhouses.”

COOPERATION

Communitech is widely accepted as the hub of the high tech sector in the Waterloo Region and as one of the key factors contributing to the sector’s development and prospects. It describes itself as an “organization driving the growth and success of Waterloo Region’s technology sector through leadership, connections and promotion.” Communitech was started in 1997 by a handful of entrepreneurs who decided they wanted an organized way to get together and share ideas. It now has 350 members with more than 26,000 employees. It provides a number of services including peer groups for CEOs and key executives.

J. PAUL HAYNES, CEO, MedShare Inc., Cambridge, ON
MedShare produces a software that captures and manages medical records for patients receiving home healthcare services to allow enhanced collaboration among all people involve in patient care, 22 employees, medshare.com.
 “I go to lots of events {offered by Communitech}. And you often see Tom Jenkins {Executive Chairman and Chief Strategy Officer of OpenText}, Jim Balsillie and Mike Lazaridis {Co-CEOs of Research In Motion (RIM)}, or Ian McPhee {Chair of the Accelerator Center, former CEO of Watcom}. As busy as these guys are, they still manage to find time to come out and lend advice and share some of their experience. They in effect show it’s safe to help out the tech community. If you behave this way, others see its OK. . . .This has been going on for years and all of these guys are still putting in this kind of time. {Through this} they give a lot back to their community. I think that’s the kind of leadership action that speaks louder than words.”

MATT WHITNEY, President and Founder, Acumenex Inc., Burlington, ON
Acumenex is the eye care industry’s leading developer of consumer contact lens portals, 9 employees, founded in 1998, bootstrapped, acumenex.com.
“There seems to be a lot of cooperation. {J. Paul Haynes, CEO of MedShare} is the perfect example. After just meeting him a few times, he recommended a building we could move to and a conference he thought would be good for us to be part of. And that seems to just be the nature of all the people involved in that (Waterloo) community. It’s really quite remarkable that way.”

GOOGLE AND MICROSOFT APPROVED NEW GRAS

“Most years we hire more students out of Waterloo than any other university in the world.”
— Bill Gates 2005

The Waterloo Region has 3 universities and one college:

  • The University of Waterloo has been ranked #1 by Maclean’s magazine in the categories of Top Innovator, Leaders of Tomorrow and Best Overall university in Canada. It has the world’s largest co-operative education program with 11,000 students per year, and it has the world’s largest mathematics faculty (although this includes computer science in the faculty, which many other universities do not). 28% of all technology firms in the Waterloo Region were spin-offs from this university. The university established the Centre for Business, Entrepreneurship and Technology (CBET), which provides management education structured along the lines of the birth and development of an enterprise.
  • Wilfrid Laurier University is directly across the street from the University of Waterloo. Its business school is the second largest in Canada and bigger than the business schools of the universities of Western Ontario and Queen’s combined. Setting the fostering of entrepreneurship as a priority, it established the Schlegal Centre for Entrepreneurship which provides entrepreneurial instruction to all faculties across the university.
  • The University of Guelph is known as Canada’s premier agri-sciences university.
  • Conestoga College Institute of Technology and Advanced Learning ranked #1 among Ontario’s community colleges for seven years in a row.

HOWARD ARMITAGE, Director, Centre for Business, Entrepreneurship & Technology (CBET), University of Waterloo, Waterloo, ON
“We initially set this up {CBET} with entrepreneurs in the community who are part of our advisory council… and we ended up with this knowing-doing approach to education. We’re going to replicate the commercialization process – we start off with the idea, move it to prototype, move it to customers. And we introduce the academic material on an as-needed basis. So, for example, in accounting, students in any normal graduate or undergraduate course have to learn the accounting cycle – the debit-credit. That’s not what entrepreneurs need. They need to know where the cash is coming from, who provides it, and how they get next week’s working capital.”

INVESTMENT RESOURCES

A report commissioned by Communitech in conjunction with PricewaterhouseCoopers (2005) confirmed that the Waterloo Region is the best place in Canada to do a start-up and/or invest in technology companies.
“Entrepreneurs need infrastructure and investment money. There is no shortage of people who are excited about investing in entrepreneurialism in Waterloo. There’s a willingness across the country to invest in companies in this area. They’ve seen the talent. They’ve seen the many success stories over the last 5 to 10 years.  Investors know it’s a place where ideas are bubbling to the top, constantly.”
— Dave Bullock, President and co-founder, LiveHive Systems Inc.

ENTREPRENUER WEEK

Do you know Entrepreneur Week happens every year on the first week of October? People in the Waterloo Region know how to celebrate it! They have created North America’s second largest festival of innovation dedicated to the entrepreneurial spirit. The week’s activities include visits from world-leading speakers such Bill Gates and Guy Kawasaki. Of course it’s a good thing this event happens in the beginning of October, because the Region then gets ready to host the Kitchener-Waterloo Oktoberfest, which is one of the largest Oktoberfests in the world outside of Germany.

UNIVERSITY OF WATERLOO'S IP POLICY

  1. DAVID CLAUSI, Founder and CEO, CREZ Basketball Systems Inc.
    David is also a Professor of Engineering at the University of Waterloo
    Waterloo, ONCREZ produces an innovative analytical tool to assist basketball coaches and scouts, 4 employees, founded 2005, bootstrapped, crezbasketball.com.

    “The key difference between other universities in Canada and the University of Waterloo is that here I {as an employee} own the technology that I create. Waterloo {university}, by policy, awards 100% of IP ownership to the creator and takes zero stake. You do your research and, at the end of the day, anything you create is yours. . . . None of the other universities in Canada have realized the value associated with such a policy. They are too concerned about trying to retain when they should be giving, and if they gave, WOW! … Of course, I wouldn’t want every university in Canada to do it {adopt this IP policy} because we would loose our advantage!! But in terms of our society, it would be the best darn thing.

{How does the university benefit?} You are immediately going to hire graduates from the university. You’re immediately going to hire co-op students from the University of Waterloo and all of a sudden the university is laughing because with zero effort, they’ve increased and enhanced the capabilities of the university and its reputation. The university builds a reputation and receives more resources and more incentives for people to go to the institution. A world class institution can be built that way. At the end of the day, for universities that own technology developed by faculty and staff, the net gain is minimized. . . . that invention can sit on a shelf at the university unused or underutilized. . . . But, if the university takes no stake, the net gain is maximized because the knowledgeable person is motivated to move it ahead. This is especially true for innovative discoveries that have the potential to create new markets – the business world is better equipped to shape this technology, not the university with limited resources.”

SAMPLE COMPANIES

  1. Sample of home-grown tech companies with over 100 employees in the Waterloo region.

    • ATS (TSE: ATA)
    • C3 Group
    • Christie Digital
    • COM DEV (TSX: CDV)
    • Dalsa (TSX: DSA)
    • Descartes (TSX: DSG)
    • Desire2Learn
    • Geosign
    • Maplesoft
    • Mitra (now part of Agfa)
    • MKS (TSX: MKX)
    • Navtech (OTCBB: NAVH)
    • Ontario Drive and Gear
    • Open Text (TSX: OTC)
    • RIM (Research in Motion) (TSX: RIM)
    • Sandvine
    • Virtek (TSX: VRK) 

    Source: Gary Will, Waterloo Tech Digest