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Pay InvoiceJune 2010
Our environment needs work - defining Halifax's economic ecosystem
By Jon Tattrie
On a cool day balanced between winter and spring, a groundhog tunnels through the warming earth beneath Halifax. Moving the dirt in front of him to behind him, he suddenly has a brilliant idea of how to do it better. Exhilarated by the revelation, he changes course and paws upward. He breaks through the surface and emerges blinking.
Does he find a thriving entrepreneurial ecosystem replete with encouraging banks, welcoming governments, skilled lawyers and accountants ready, willing and able to help him make his dream come true for the benefit of all? Or does he encounter a hostile, predator-ridden and threatening environment, in which case it’s easy enough to flip over and use his new technology to burrow back underground in search of sunnier pastures, leaving the land above to its long winter?
The metaphor is Brian Rose’s. He’s vice president of the Halifax Chamber of Commerce and he thinks Halifax needs to work on it’s entrepreneurial ecosystem to make it more welcoming for entrepreneurs and a magnet for the kind of risk taking dreamers who were behind everything from personal computers to hybrid seeds.
Rose says that if we’re to adapt and prosper in this new economy we need to change our attitude about entrepreneurs, both supporting them and being one.
“If what the world has been through in the last few years has shown anything it’s that we need to embrace innovation, creativity and hard work – all characteristics of entrepreneurs,” Rose says. “In order to stay prosperous and maintain the quality of life that people want, our economy needs to stay ahead of the pack. Given the fiscal condition of this province, one could say we need to hit some home runs to get ahead of our competitors all over the world.”
The support the entrepreneurial ecosystem provides is a combination of direct assistance and resources provided by both the public and private sectors, and a softer type of support that comes from a community that values the role of business, business people and perhaps most importantly start-up businesses and the adventurers who choose to be the driving force of the economy: entrepreneurs.
Almost every jurisdiction from Bangor to Bangalore can offer these supports, so when Nova Scotia’s ecosystem isn’t firing on all cylinders we risk missing out on the next big thing.
“We need to have open minds as well as open wallets to be attractive to the new breed of idea people,” Rose says. “I’m talking about what it takes to be the next Silicone Valley or a hotbed of biotech commercialization, and to start we need to nurture the people and the support systems that makes Nova Scotia home to the next big thing, not just the dying embers of the last big thing.”
There are a great number of agencies and programs available to Nova Scotian entrepreneurs that will help them in the early days and in fact Rose says there may be too many.
There are dozens of economic development agencies at work in Halifax and there is no way you can get that many players all playing on the same team. Once again in our rush to be part of the solution, these agencies are competing to see who can be the most helpful.
“While the supports of Halifax’s economy engage in healthy debate about who has the best vision, all the prospective economy-boosting businesses here is the arguing,” Rose says. “If somebody were to stick their head up here, read the newspapers and watch the news, listen to people talking, they’d think, ‘These people hate business.’ It seems like a frightening place that doesn’t support businesses, change or growth and nothing could be further from the truth.”
As Rose points out, we have a tendency to attack those who dare to fail.
Stephen Hartlen, president of InNOVAcorp, sees a brighter landscape if the groundhog has a great idea involving new technology. InNOVAcorp helps high potential, early stage Nova Scotia companies commercialize their technologies and succeed in the global marketplace. It does it through investing, incubating and mentoring.
“There are a lot of support mechanisms in place,” he says. “Our attitude would be yes, first. From my perspective, most of the partners we have are very supportive.”
He concedes that getting venture capital is harder on the east coast. A start-up tech company seeded with $10 million in California would get $5 million in Toronto and $2.5 million in Halifax.
“And those companies in Atlantic Canada are expected to compete against those more well-funded companies from other parts of North America,” he says. But venture capital is hard to get anywhere and most of the entrepreneurs InNOVAcorp works with are Nova Scotians who want to succeed here.
“I think the companies that deserve venture capital get it in the region. They just don’t get enough of it,” he says. Over at the Centre for Entrepreneurship, Education and Development (CEED), CEO Kathy Murphy deals with more than 2,000 would-be entrepreneurs a year. CEED greenhouses about 70 a year, from restaurants to accountants. Most are micro-businesses, such as spas, massage therapies, homeopathic practitioners and people in the pet industry. CEED deals with a younger client base without a long credit history because it can get loans in those situations. It helps them do market research, create a business plan, learn how to operate a business and how to get investments.
“When you get down to the work that’s involved in developing the concept… some people back away at that point,” she says. “It’s not for everybody.” CEED is in the midst of a 10-year review of 400 past clients. Murphy notes plenty of success stories, but has identified holes in the ecosystem that can prove fatal.
“It’s lonely out there. If you don’t have a mentor or someone who really understands operating a business, it’s really difficult,” she says. Investment capital is in short supply, too.
CEED is trying to patch up the ecosystem by increasing the pool of mentors to offer a guiding light to foundering entrepreneurs.
So how does the entrepreneurial ecosystem look to the groundhogs? Richard Black stuck his head up in 2008 after being downsized. Initially, he found a lot of support, including the federal government’s self-employment benefits program run by CEED. It helps would-be entrepreneurs who are collecting employment insurance turn their ideas into a business.
It incubated Black’s idea and helped him found Rich Graphics, a Dartmouth based graphic-design company.
“I think it’s a great place to launch a business,” he says of HRM. “There’s a strong small-business community in the city.”
Most of Black’s clients are in HRM, but he has worked remotely for clients in Digby and New Hampshire.
At times he feels he’s still treading water. CEED helped with seed money, but the banks told him to come back after his two-year anniversary. Clients can be slow in paying invoices and a lack of bank support means he has to carry the debt personally.
Early on, he identified networking as a key to expanding his business. Not finding much on the Dartmouth side of the harbour, he founded DartNet. It’s grown to 120 members and hosts monthly networking mornings that draw about 30 people. For Black, that provides a vital eco-niche to meet new clients and to bounce ideas off friendly ears.
For serial entrepreneur Bill Murphy, how green the ecosystem appears depends on where you last emerged. He started a one-stop business advice firm called Ledgers in Sydney in the 1990s. The business boomed, and then exploded in 2001. Ledgers emerged from the ruins as an international bookkeeping company, but not with Murphy.
The experience was too painful to talk about, so he wrote a 90,000-word allegorical novel called A Forest Tale about Bill the Eagle’s forest-wide-web idea going bust. Murphy then tunneled to Halifax.
Last year, he opened Our Town Earth, a web-based community for people with disabilities. He finds Halifax a vibrant ecosystem, in sharp contrast to operating in more rural parts of Nova Scotia. He cites access to other experienced entrepreneurs, accountants, lawyers and venture capitalists.
But breaking new ideas in a province whose old guard has built a mighty “Wall of No” is hard, he says.
“For Our Town Earth, it’s just a constant battle, a daily battle, to stay on top of everything to make sure you’re relevant,” Murphy says. It’s up to the entrepreneur to make it work, though. “I don’t know how in the heck the government could do it. I think there’s too much expectation here in Nova Scotia by entrepreneurs that government should help.”
If there’s a clear payback for the general economic ecosystem, then it makes sense for the government to get involved. Otherwise, the perils and pearls of entrepreneurship fall to the entrepreneur alone, he says.
One area he’d like to see more help in is improving access to capital, especially for tech ventures. Investors tend to treat seed money as venture capital, expecting to see a proven revenue model past the high-risk stage before handing over money.
Murphy suggests that when government invests money luring a call centre or other business to the province, they should require them to set up a tech fund to provide seed capital funds for new ventures.
“Let’s start developing a seed-capital infrastructure that really makes sense,” he says. That money needs to stick around too, but what enthusiasm there is for funding a start-up tends to vanish when it needs follow-on capital and investors recoil from working again with an entrepreneur if their first business didn’t work out. Because most new businesses don’t succeed, Murphy advances an Edisonian approach: the entrepreneur’s haven’t failed, they’ve just found ways that don’t work.
He encourages investors hang tough while a business finds its feet. “If we don’t try and fail and keep trying and failing, we’ll never get there,” he says. “Successful companies have to go and wander around a little bit. If you wander too much, you fail, if you don’t wander enough, you probably fail.” A healthy entrepreneurial ecosystem can help a groundhog find that balance, he says.
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