How Kitchener-Waterloo became an unlikely innovation hub
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Its Roots Run Deep
A year ago I made the big move from Toronto to Cambridge – part of the Kitchener-Waterloo region located an hour away from Toronto. It’s a beautiful part of the world that is safely removed from the gridlocked hustle and bustle of its big city neighbour. But what’s interesting is that, while the Kitchener-Waterloo region, also known as the Tri-Cities region, has become a global hotspot for entrepreneurship, it has much less to do with Blackberry than I ever realized.
Before getting into why, I was surprised&to find out that in just the past five years alone, nearly 2,000 startups (most of them high tech) have emerged in this traditionally blue-collar region of barely 550,000 people. That is a massive number for such a small place. But it turns out, KW, as it is called, has a rich and deep history of technology innovation.
The smartphone was invented here. The touchscreen display was invented here. Google’s G-mail was invented here. Google Chrome is being perfected here. (Thanks mainly to the Google engineers living and working in Kitchener-Waterloo, it is evolving from a browser into a browser-based operating system.)
How did a region boasting three small cities become such a global technology powerhouse? Was it simply by riding the coattails of Blackberry? That would be the easy answer, and the wrong one. KW would be a ghost of its former self if that were the case.
KW became&an innovation hub well before Blackberry
The reality is, KW was an innovation hub well before Blackberry became a household name. How did it come to be that way? Was it one person’s singular vision? Was it a collective effort by government and business? Or was it, perhaps, just pure luck – nothing more than a random series of events?
Since I had recently moved to the region, I wanted to find out. What I learned is that an innovation hub is like a great tree – or rather a cluster of trees, as famed startup financier Fred Wilson likes to . It takes time and nourishment from multiple sources, along with a good location, for something to grow from a sapling into a colossus that now spreads its branches all over the world.
But it didn’t begin in 1997 when RIM went public. Or even in 1984 when RIM began as the brainchild of Mike Lazaridis and his engineering partner Douglas Fregin.
It all started in 1953, when a young man named Gerry Hagey left his executive communications position at B.F. Goodrich to become the president of a tiny post-secondary institution named Waterloo College. Hagey and his boss, B.F. Goodrich President Ira Needles, shared a vision. They wanted to create a world class educational facility that would feed the business community with talent and in turn be fed by the businesses it helped build and launch.&
To make their vision a reality, they were determined to transform sleepy Waterloo College into a high performing, business-oriented science and engineering facility. A key turning point was the decision to convert the college into a co-op university, one of the first of its kind in North America. Waterloo would combine classroom education with real world work experience, and shockingly at the time, a degree would take five years, not four.
During these early years, Ralph Stanton, the head of Waterloo’s math department, sensed that his field – numerical analysis – might become a key engine of modern business. He turned out to be right, because numerical analysis spawned the algorithms that underlie modern day computing. When Stanton and his colleague J. Wesley Graham established its Computing Centre in 1960, “suddenly math had a practical application,” Don Gillmor reported in an& in Walrus Magazine.
The University of Waterloo's reputation spread&across the globe
And so the University of Waterloo became known to engineers and computer scientists across the world for its academic excellence. Today, UW has “arguably the largest pool of math and computer science talent in the world” and has spawned more than 250 science and tech companies. When
if there was one thing that, if it disappeared, would make Waterloo disappear as a tech ecosystem, Ted Livingston, CEO of a fast-growing KW startup called Kik, was quoted as saying, “That one thing, and one thing only, is the co-op program at the University of Waterloo.”
If UW was the driving force behind Waterloo’s current ecosystem, what other forces combine to help an ecosystem like this one grow and flourish? Startup ecosystems have access to a steady stream of talent and funding, for one thing (make that two). Entrepreneur and business professor Daniel Isenberg goes much deeper. He says the entrepreneurship ecosystem consists of six domains: a conducive&culture, enabling&policies and leadership, availability of appropriate&finance, quality&human capital, venture-friendly&markets&for products, and a range of institutional and infrastructural&supports.&
Writing on the blog of KW startup incubator , John Lorinc says that successful startup ecosystems need the right combination of developmental features and evolutionary traits. They must have “ready access to a full range of funders, from angels to ventures” combined with “the expanding presence of firms that will entice talented expats to return after working elsewhere.” BlackBerry has been an “angel” investor for over 30 years, and despite its downsizing, it remains an enthusiastic investor. But for the Kitchener-Waterloo ecosystem, there’s more to it than that.
“There’s less competition than in the Valley, where everybody is trying to hire,” says Thalmic Labs’ Aron Grant in a recent Toronto Star interview. Government funding and tax credits are also a big help, including a federal tax credit program that reimburses up to 60 per cent of an engineer’s salary. (In fact, government funding is important, some might say crucial, to startup ecosystems. For example, did you know that Silicon Valley required millions of dollars of government funding to get started? And that it happened not in the 1980s or 1990s, but way back in the 1940s and 1950s[i], as entrepreneur
points out in a fascinating video.)
Silicon Valley didn't spring out of an entrepreneur's mind
No one company can create an ecosystem. It didn’t happen in Silicon Valley and it didn’t happen in KW. In fact, much of the recent growth of KW as a true innovation ecosystem would have been hindered&if Blackberry had remained dominant, says Iain Klugman, CEO of Communitech. Although Waterloo “has really become a major startup centre, and tech centre,” Klugman points out&in a Toronto , “there is no single dominant technology in the region — companies do everything from robotics, telecom, digital imaging to wearable technology.”
But ultimately the University of Waterloo is the river that feeds the ‘techbelt’ that is&KW today. And that institution and vision that created it may be Kitchener-Waterloo’s greatest strength – next to KW's&talented group of engineers and mathematicians and computer scientists.
by Steve Blank.&
Stanford University helped feed the techbelt that is now Silicon Valley. It nurtured the innovators that populated the campus and the labs. The university administrators actually encouraged students and professors to get out of their ivory towers and into the real world. The University of Waterloo created a similar nurturing environment. Their philosophy for students and faculty alike was, ‘you create it, you own it.’ The university gets no cut. The entrepreneur gets sole ownership of all patents and intellectual property.
U.S. venture capitalist Paul Graham points out that “there are no technology hubs without first rate universities. If you want to make a Silicon Valley, you not only need a university, but one of the top handful in the world.”[ii]&The University of Waterloo certainly qualifies.
But a world-class university is necessary but not sufficient for success as an innovation hub. There are always intangibles at work, including maybe a bit of luck. So as an increasingly wider group of cities and regions across the world aspire to become innovation centres, at the end of the day there is no guaranteed recipe for success. But one thing is certain. Because the roots of KW’s innovation run deep, the region’s identity as an innovation hotspot is unlikely to diminish for years and probably decades to come.
[i] Defense funding during World War II and the Cold War, along with one Stanford professor, set the stage for the creation and explosive growth of entrepreneurship in Silicon Valley.
[ii]&. Ernestine Fu, Tim Hsia.
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