public report - oshawaapp.oshawa.ca/agendas/development_services/2014/07-16... · 2014-07-11 ·...

Public Report

To: Development Services Committee

From: Thomas B. Hodgins, BES, MA, RPP, MCIP, Commissioner, Development Services Committee

Report Number: DS-14-157

Date of Report: July 10, 2014

Date of Meeting: July 16, 2014

Subject: Funding Request from Spark Centre to develop “The Loft” Incubation Space

File: B-1500

1.0 Purpose

The purpose of this report is to recommend the approval of a request for funding from the Spark Centre (Spark) for the creation and operation of incubation space (“The Loft”) for entrepreneurs and startups.

On June 16, 2014 the Development Services Committee referred to staff for a report correspondence from Dennis Croft, Executive Director of Spark requesting an annual contribution of $30,000 for “The Loft”.

Attachment 1 is a copy of the correspondence from Spark including a description of “The Loft” initiative.

There is some urgency in this matter since Spark is prepared to immediately begin the leasing and development process associated with “The Loft” should the City provide funding.

2.0 Recommendation

That the Development Services Committee recommend to City Council:

1. That, pursuant to report DS-15-157 dated July 10, 2014, the request dated June 10, 2014 from Spark Centre for annual funding be approved in the amount of $30,000 for each of five years beginning August 1, 2014 with the 2014 contribution funded from surplus funds in the Downtown Initiative Capital Project (Project 2834-2-0) and the remaining commitment of $30,000 per year be included in the 2015 to 2018 operating budgets and subject to the execution of an agreement between the Spark Centre and the City, satisfactory to the City Manager and the City Solicitor, addressing such matters as reporting obligations to the City, signage and other recognition for the City’s

Report to Development Services Committee Item: DS-14-157 Meeting Date: July 16, 2014

contribution, the ongoing provision of services by Spark to innovation and technology entrepreneurs, etc.

2. That staff be authorized to liaise and assist Spark Centre in achieving private sector support for The Loft and other initiatives in order to further advance the potential success of local entrepreneurs and startups.

3.0 Executive Summary

The Spark Centre (“Spark”) is a Regional Innovation Centre (RIC) located in Oshawa. It is provincially funded and part of a collaborative network called the Ontario Network of Entrepreneurs (“ONE”).

There are 14 Regional Innovation Centres (RIC) throughout the province such as Spark in Oshawa, MaRs in Toronto, Communitech in Waterloo and ventureLAB in York Region.

Spark serves Durham Region and Northumberland County.

Spark rents space for its head office in the Core 21 building at 21 Simcoe Street South.

Spark is mandated to advise and develop talented entrepreneurs that will build world-class growth companies in Ontario.

Since its inception in 2011, Spark has assisted over 400 clients.

Spark has identified an opportunity to further nurture and grow innovation and technology businesses and drive potential job growth and private sector investment by creating The Loft, a collaborative incubator space on the second floor of Core 21.

Spark has asked the City to commit $30,000 annually to The Loft initiative.

Spaces such as The Loft are available in other cities and have proven successful.

It is common throughout Ontario for the host municipality to provide support for its RIC’s and incubator space given the positive economic impact such facilities can have on the local economy.

The creation of The Loft incubation space would be of significant benefit to the City and the downtown.

Supporting The Loft is consistent with Oshawa’s ongoing efforts to transform its economy, create investment and jobs and revitalize the Downtown.

It would be appropriate for the City to commit $30,000 in each of the next 5 years to Spark for The Loft subject to the execution of an appropriate performance agreement.

Sufficient surplus funding is available in the Downtown Initiatives Capital Project (Project 2834-2-0) to fund the 2014 grant. It is recommended that $30,000 be included in the 2015 to 2018 operating budgets to fund the remaining four years of the grant.


4.0 Input From Other Sources

The following have been consulted in the preparation of this report:

City Manager City Treasurer/Executive Director of Finance Services Other Regional Innovation Centres Dennis Croft, Spark Centre

5.0 Analysis

5.1 Background

The Spark Centre (“Spark”) is a Regional Innovate Centre (RIC). It is provincially funded and is part of a collaborative network called the Ontario Network of Entrepreneurs (“ONE”).

There are 14 Regional Innovation Centres (RIC) throughout the province such as Spark in Oshawa, MaRs in Toronto, Communitech in Waterloo and ventureLAB in York Region.

Spark serves Durham Region and Northumberland County.

Spark rents space for its head office in the Core 21 building at 21 Simcoe Street South and has satellite offices in Cobourg, Pickering and Port Hope. The Town of Whitby is in the process of donating space in the Centennial Building to Spark for a satellite office.

Spark is mandated to advise and develop talented entrepreneurs that will build world-class growth companies in Ontario and in this regard, offers a range of services to support entrepreneurs, startups and the commercialization of ideas.

Since its inception in 2011, Spark has assisted 406 clients.

Currently Spark receives funding from a variety of sources:

Province of Ontario $600,000 Region of Durham $100,000 Sponsorships and Programming $100,000

As a not-for-profit corporation, all of Spark’s revenues are expended on programming on an annual basis.

Spark leverages a number of local resources and works collaboratively with the University of Ontario Institute of Technology, Durham College, Trent University, Fleming College and others in the provincial network to offer a broad range of services and opportunities for Spark clients.

Spark also works with the Business Advisory Centre Durham (“BACD”). Spark focuses on the development of technology and innovation businesses while the BACD supports all other entrepreneurial activity.


5.2 The Loft

Spark has identified an opportunity to further drive potential new investment and job growth by developing incubation space to be called “The Loft”.

Similar facilities in other communities have created positive results.

Spark does not currently have the funds to develop and operate The Loft and has requested an annual contribution of $30,000 from the City (see Attachment 1).

On June 16, 2014 the Development Services Committee referred Spark’s request to staff for a report.

The Loft concept is described by Spark in Attachment 1, but generally, will provide space for companies either starting out or in early revenue acceleration mode in a supportive environment that includes mentors, advisors, other entrepreneurs and co-located business resources. The Loft will allow entrepreneurs and inventors to sit, network and learn from committed, experienced partners like Spark, Ontario Centres of Excellence, financiers and other credible start-up mentors, advisors and service providers (some of which are located in CORE21).

Spark proposes to lease half of the second floor (2,500 square feet) of CORE21 for The Loft to accommodate 40-50 Spark clients and staff.

Spark intends to use any City contribution for initial capital and ongoing operating costs and will provide subsidized space for entrepreneurs during their sensitive start-up phase of business development.

Spark believes that downtown Oshawa is the ideal place for this initiative.

5.3 Incubators Create Success

Efforts to support new entrepreneurs and startups are a critical part of any current economic development program given that these individuals and companies represent future growth, jobs and investment in their early days but are vulnerable and may lack sufficient financing, business networks and skilled employees.

The availability of incubation space for entrepreneurs is a critical success factor and is proven to reduce the risk of small business failures by creating an environment that nurtures, develops and sustains start-ups by providing innovative mentors, resources, facilities and expertise to develop their business plans, collaborate and grow their business.

The National Business Incubation Association (NBIA) reports that incubated companies have an 87 percent success rate compared with 44 percent for the average start-up.

Business incubators make a positive difference for many entrepreneurs and start-ups and make business ownership and success possible for individuals and companies that might otherwise never have been able to overcome the barriers to launch their new ventures.


Incubation space improves the opportunity for startup companies to be successful and create new investment and new jobs.

5.4 Municipal Support for Regional Innovation Centres (RIC)

Spark is a RIC.

There are 14 RIC’s in Ontario.

Each RIC is unique and adapts its services to maximize local opportunities and local talent.

RICs are not-for-profit corporations that receive provincial funding, sometimes federal funding and varying degrees of municipal support in order to advance their mandates.

It is common for RICs to receive municipal support. Examples include:

Communitech (Waterloo Region)

Communitech is one of the most well-known incubation models. Founded by a group of entrepreneurs in 1997, Communitech is Waterloo Region’s hub for innovative technologies and is located in the City of Waterloo. Over the years, it has supported and helped build a tech cluster of nearly 1,000 companies that now collectively generate more than $30 billion in revenue.

A second facility, the 44,000 square foot Communitech Hub in Kitchener opened its doors in 2010. The Hub has played a key role in tech company deals totaling more than $500 million and the emergence of hundreds of new digital media companies. The Hub has played an integral role in the renaissance of Downtown Kitchener, including investments by Google and Desire to Learn (850 employees combined).

In addition to provincial, federal and private investment, Communitech receives $90,000 per year from the Region of Waterloo and $30,000 from each of the Cities of Kitchener and Waterloo ($30,000 each).

IDEAHUB (Port Hope)

Located in Port Hope, IDEAHUB is a full-service business incubator for new and emerging entrepreneurial companies. The incubator offers member companies flexible office space, lower start-up costs, support tools, resources and guidance to strengthen their business success and graduation into the community. IDEAHUB is a unique collaboration of private and public partners led by the Municipality of Port Hope. Member companies grow their start-up businesses at IDEAHUB for 1-3 years, after which time they are better prepared to establish within the community, having had the support and guidance of an experienced mentor and the benefit of careful and timely growth. About a dozen companies currently reside in the facility.

Port Hope funded the original leasehold improvements at a cost of $400,000 and continue to pay the salary of the IDEAHUB secretary at a cost of $50,000 per year. In addition, Port


Hope’s Economic Development Office is located within the facility. Spark Centre provides a business advisory role to the IDEAHUB.

Milton Innovation Centre (Milton)

The Milton Innovation Centre was launched in 2013 in a municipally-owned industrial facility that has been converted into an entrepreneurial support space intended to grow and broaden the employment base in knowledge-based industries.

Beyond forgone rent, Milton funded + $100,000 in facility renovations and created a permanent Economic Development Officer position to manage the facility at the net cost of $71,000 a year. The Innovative Centre is considered a first step in developing the Milton Education Village, a 400 acre comprehensive neighbourhood that will include a new innovation centre, a university campus and residential, commercial and recreational uses.

Markham Convergence Centre and ventureLAB (Markham)

The Markham Convergence Centre (MCC) serves as a one-stop innovation hub for entrepreneurs and businesses looking to commercialize their technologies. A key focus of the City of Markham’s 10-year economic strategy, Markham 2020, the MCC provides small and large businesses with a dynamic space dedicated to propelling ideas from concept to market. Markham has been successful in assembling all of the “ingredients” that form an entrepreneur ecosystem such as physical space, business incubation services, partnerships with governments, universities and business organizations and fiscal support.

Along with start-up companies and entrepreneurs, MCC houses ventureLAB (the York Region RIC), Markham Small Business Centre, York University’s Innovation York, Central Counties, Invest in York, Markham Board of Trade, National Research Council, Ontario Centre of Excellence, Seneca College, City of Markham Economic Development, York Angels Investors and York Technology Alliance.

The Region of York provides ventureLAB with annual funding of $100,000 and the City of Markham provides $300,000 annually to ventureLAB for their ongoing operating costs.

Innovation Factory - McMaster Innovation Park (Hamilton)

McMaster Innovation Park is a university-driven innovation ecosystem which is at a much larger scale than the previous examples, encompassing 37 acres and multiple buildings. Innovation Factory (iF) is the Hamilton Area RIC, which is located in the Atrium Building at Innovation Park.

The City of Hamilton has made a recent 3-year financial commitment of $50,000 per year to iF, whose mission is to strengthen Greater Hamilton’s next generation of job and wealth creation by helping entrepreneurs bring new ideas to life and to market, small-to-medium-sized companies get to the next level, and build a dynamic culture and a community of innovation in Hamilton.


5.5 Rationale for Financial Support

It is recommended that the City provide $30,000 annually for the next 5 years to Spark for The Loft initiative, subject to an appropriate performance agreement.

The key reasons for providing the recommended financial support to Spark are:

1. Oshawa is very fortunate to have a RIC and must maximize its effectiveness.

2. Oshawa has a history of great entrepreneurs.

3. A robust program to support and encourage entrepreneurs and startups must be a component of any modern, comprehensive local economic development strategy.

4. Incubators are a proven way to support and encourage entrepreneurs and startups and have a track record of producing positive results.

5. It is consistent with the City’s Sector Analysis and Cluster Development Strategy which notes that small business accounts for 94.6% of Oshawa’s employment, with half of these businesses having only 1-4 employees.

6. It is common for municipalities to support RIC’s and incubation facilities.

7. The City’s investment can be protected by a performance agreement with Spark.

6.0 Financial Implications

Should Council support Spark’s request for annual funding, sufficient funds exist in the Downtown Initiative Capital Project (Project 2834-2-0) to fund the 2014 grant. The ongoing commitment of $30,000 per year would be included in the 2015 to 2018 budgets.

Funding should be subject to a performance agreement being executed to address such matters as: term; amount of annual financial support from City; commitment by Spark to provide a range of agreed upon services relating to innovation and growing high-tech start-up companies; creation and ongoing operation of The Loft; annual reporting on activities, clients served and the results achieved; and requirement for signage and other recognition to be placed in The Loft recognizing Oshawa’s financial contribution.


7.0 Relationship to the Oshawa Strategic Plan

The Recommendation advances the Economic Prosperity goals of the Oshawa Strategic Plan.

Cindy Symons-Milroy, Ec.D., CEcD, Director, Economic Development Services

Thomas B. Hodgins, BES, MA, RPP, MCIP, Commissioner, Development Services Committee

CORE21 Building, 21 Simcoe Street South, Oshawa, ON L1H 4G1 Tel. 905.432.3999 www.sparkcentre.org

DS-14-157Attachment 1

Tuesday, June 10, 2014

Mrs. Cindy Symons-Milroy 2nd Floor, Rundle Tower, City Hall 50 Centre Street South Oshawa, ON L1H 3Z7

Dear Cindy,

Spark Centre is committed and an active supporter of Oshawa’s downtown revitalization strategy, and we are also looking to expand our footprint and brand to help local innovative entrepreneurs leverage business services and collaborative office space in the downtown area.

Spark Centre is actively working with Core 21 to expand into the second floor, with the view of offering a Spark Centre branded area called “The Loft.”

Spark Centre is very excited to develop its own brand as a draw to attract innovation tenants within the

Core 21 facility. The Spark brand has been essential to already attracting an number of start-ups

including IFTech, AirTem and They Innovate and also key partners such as OCE, Durham College and

UOIT. We believe our newly developed "The Loft" branded concept will help Spark attract more

tenants and allow for a deeper innovative type culture....leading to an ever expanding innovation focus

for downtown Oshawa.

We propose to offer a combination of free advisory services, very low cost rent and easy access to

knowledge and advisors as the key value proposition to "The Loft" tenants.

The loft will support entrepreneurs in the various ways, including:

Start-up oriented collaborative office space

Direct daily access to advisors, service providers and key support organizations

An ecosystem bias to innovative type business ventures

Proximity to downtown services and additional office expansion locations

Access to start-up events and activities

Spark Centre would be honoured and would welcome the City of Oshawa’s support of this initiative

with an annual contribution of $30,000 per year, matching Spark Centre’s annual contributions, to

operate “The Loft” in downtown Oshawa.

I am including a detailed attachment of “The Loft” strategy for your consideration.

Sincerely,

Dennis Croft,

Executive Director

Spark Centre

DS-14-157

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Regional Innovation Centre Expands Footprint in Oshawa

Spark Centre is proud to present “The Loft”, our new start-up centre which provides a cultural facility

experience for companies either starting out or in early revenue acceleration mode. The Loft will be

located on the second floor of Core 21 in Oshawa and will offer businesses access to a thriving

entrepreneurial community and co-located business resources.

The Loft is critical to two of Spark Centre’s long-term strategic focus areas.

First, it will provide an attractive transition point to tackle the exodus of post-university and college

professionals and entrepreneurs from the Durham Region. We have a best-in-class university and

college infrastructure providing advanced learning, state-of-the-art equipment, laboratories, on-campus

incubators and intellectual discourse. However, entrepreneurial oriented graduates tend to look

outside the region and eventually leave for more robust start-up centres like Y-Combinator or Extreme

Start-ups. This is a huge economic opportunity loss for the local municipalities. The Loft neighbours the

university and college, becoming the perfect transition point for graduates and youth entrepreneurs to

access the free and deep experienced services that Spark Centre offers.

Second, The Loft is the next step in creating a truly synergistic innovative start-up ecosystem. This will

promote like-minded founders, ventures, entrepreneurs and inventors to sit with committed,

experienced partners like Spark Centre, Ontario Centres of Excellence, financiers and other creditable

start-up savvy mentors, advisors and service providers. It is well documented with success stories like

the City of Kitchener’s “Tannery” or the City of Pittsburgh’s “Thrill Mill”, that co-location breeds

ecosystem benefits like economic acceleration, business to business partnering, cultural and community

expansion.

Situated at the heart of downtown Oshawa and with access to first class services, The Loft will offer a

start-up orientated work space, affordable to the tight or non-existent budgets of start-ups. The

aesthetics and feel is driven by the open-minded needs of today’s virtual, fast tracking entrepreneur,

21

with brain storming areas, open work spaces and social nooks. The Loft leverages a key partnership with

Core 21, who provides exceptional facilities including secure, dedicated reception, meeting, boardroom

and training facilities. Also, The Loft is literally steps away from an abundance of restaurants, pubs,

services, retail stores, theaters, sports and cultural facilities, university and college offices.

The Loft lets you concentrate on what's important, your business. It gives you the opportunity to sit

amongst the most robust, innovative business services available in Durham Region.

Spark Centre would love you and your business to work in our thriving entrepreneurial community. Join

us in The Loft!

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