Notman House, the Montréal startup hub run within a 187-year-old heritage building, will likely be put up for sale as government creditors claim years of unpaid debt. First reported by Le Devoir, the OSMO Foundation, which owns and operates Notman House, owes $323,000 in unpaid mortgage fees to the Business Development Bank of Canada (BDC) and Investissement Québec (IQ).
The news came as a shock to those in the local startup ecosystem familiar with Notman House, including some who had rented space in the hub, telling BetaKit they were not informed of the potential sale until the Le Devoir article was published. Many are now concerned about what Notman’s uncertain future means for Montréal tech.
Since its founding by Real Ventures and the OSMO Foundation in 2011, Notman House has served as a nexus of the emerging tech industry within the city—currently the only such hub in Montréal. It acts as a collaborative meeting place by renting out co-working spaces and event spaces, and is also home to the popular Café OSMO.
“The community cares a lot about Notman House because they built it with blood, sweat, and tears.”
Emma Williams,
former Notman campus manager
According to the claim, BDC and Investissement Québec lent Osmo a total of $6,853,630 since 2012, of which they now are claiming over $323,000 in unpaid mortgage fees. They are demanding that Notman House be sold under the control of the court at a minimum of 75 percent of the market value per a recent evaluation, which has not been made public.
The federal, provincial, and municipal governments all initially provided grants to OSMO, alongside private donors, to help finance their acquisition of the heritage building. In February 2023, OSMO applied for additional funds from the Québec government, but this request was denied for reasons that remain confidential, a media spokesperson wrote in an email to BetaKit.
OSMO was never making a profit by operating Notman and often faced financial struggles, given the size of their debt and the cost of refurbishing a heritage building, according to Philippe Telio, Startupfest founder and OSMO board member. Now, inflation and interest rate hikes have driven up costs further.
“Scrubbing out more of our debt earlier might have helped,” Telio said in an interview with BetaKit. “But it’s a little bit utopic [….] I’m not sure that we had any mechanisms to reduce our debt load before the pandemic.”
According to John Stokes, board chair of the OSMO Foundation and Real Ventures co-founder, a combination of political headwinds, a global pandemic, and macroeconomic pressures contributed to the situation Notman House finds itself in now.
Stokes explained that Notman House lost major sponsors right before the pandemic hit, forcing the team to scramble to secure sponsors at a time when no one was interested in renting physical space.
“We couldn’t entice anyone during COVID, and obviously, no one could pay,” Stokes said. “That was sort of a double whammy.”
“This government, to their credit, has realized that money does need to be invested into infrastructure. It’s just too late for us.”
John Stokes, OSMO Foundation chair
BDC and IQ, however, acknowledged these financial hurdles by switching the repayment plan from interest and capital repayment to interest only.
“Governments are very good at creating programs that you need to adhere to, and then you either get awarded under the program, or you don’t,” Telio said. “And there is no program […] to fund infrastructure projects for entrepreneurs.”
The question now is whether players within the startup community will step in to continue Notman’s legacy of ecosystem-led innovation and buy the property, or if the building will find new owners in a different field.
“It’s not like the financial hill is so large that it’s impossible to imagine that somebody could come in and step in and save this,” Telio said. “So in that sense, yes, it’s very possible that an individual or a group of individuals can come together and figure out how to solve the financial issues.”
For now, Stokes says that despite the upheaval, the Notman House team will continue to operate the space and do their essential work until any sale is finalized.
An initial court hearing between BDC, IQ, and OSMO’s lawyers was scheduled for Dec. 5, but was ultimately postponed until Dec. 15.
New foundations
While OSMO’s founders remain hopeful, the future is unclear for Notman House. Stokes confirmed that they will cooperate with the sale, but as yet no one has publicly expressed interest in acquiring the hub. The startup hub may soon find itself replaced within the city.
A new initiative with a similar mission called Ax-C, which is set to open in an undisclosed location in December 2024, has garnered nearly $40 million in government support. Like Notman, the project also aims to provide a hub for tech startups to collaborate and entrepreneurs to innovate. However, Ax-C is part of the province’s 2022-2027 Québec strategy to support research and investment in innovation and is being developed by the École de technologie supérieure (ÉTS)—an institutional tie that does not exist at Notman.
Stokes said that when he took over as board chair in January 2023, he and the OSMO Foundation had plans to capitalize on the post-pandemic resurgence of activity at Notman House. While they were strategizing, though, the news about the Ax-C project and its government funding went public.
“This government, to their credit, has realized that money does need to be invested into infrastructure,” Stokes said. “It’s just too late for us.”
“As a Black community builder, [Notman House] has become my strongest ally.”
Phil G. Joseph, Rep Matters
Ax-C is set to boast a larger space than Notman, bringing the project to scale with the size of Montréal’s startup scene.
Some worry about the optics of starting from scratch with a new accelerator such as Ax-C rather than building on an existing project in need of support.
Scott Loong, a partner at Panache Ventures, expressed disappointment at the prospect of Notman’s sale. “I always felt that Notman House was or is an organic expression of Montréal startup entrepreneurship,” he said. Its location, outside of the downtown financial district and closer to residential areas popular with founders, students and artists, lends it “a level of accessibility to people which is a bit different from some of the other facilities that we have in the city to support entrepreneurship.”
In an opinion piece published in Le Devoir shortly after the news broke, Gabriel Lespérance, co-founder of Trampoline.ai and Wavo.me argued that if a startup community is built brick by brick, losing Notman “is like destroying the foundations we’ve all been trying to build for decades.”
“As a newcomer to the tech space, Notman House welcomed me and it became my second home,” Real Ventures associate Phil G. Joseph told BetaKit. Joseph founded the Real-backed Rep Matters project, which hosts its monthly Breakfast Clubs at Notman. “As a Black community builder, [Notman House] has become my strongest ally.”
“The community cares a lot about Notman House because they built it with blood, sweat, and tears,” said Emma Williams, head of marketing & communications at Zinnia and former Campus Manager at Notman House. “I think it will be a big hole in the startup community.”
Startup Montréal, a nonprofit that aims to support startups in the city, has frequently collaborated and hosted events with OSMO and Notman House. In a comment to BetaKit, Startup Montréal said they were aware of OSMO’s financial problems but were “very sorry to hear about the extent of them.”
Others see Ax-C as offering something Notman House doesn’t. Ilias Benjelloun, co-founder of the nonprofit MTL NewTech, noted that Montréal tech needs a larger space with strong international and business connections. He added that both hubs could ideally “feed into the other.”
“It’s a value chain that can feed into the community,” Benjelloun said.
The prospect of a symbiotic relationship between Notman House and Ax-C is not currently a contentious one for the OSMO Foundation board.
“I think it’s great for Montréal to have a very modern space that showcases and demonstrates Montréal’s economic startup wealth,” Telio said. “It’s not to the detriment of Notman House.”
The problem with Ax-C’s scheduled opening, Stokes added, is that it leaves a considerable gap between the sale of Notman and the rollout of the new space in December 2024.
“What Notman stands for is ecosystem-catalyzed innovation,” Stokes said, in contrast to government-catalyzed innovation. “It’s always been a canvas or a sandbox for players in the ecosystem to test and try new ideas.”
“I think my concern is that we would lose that. And I would love it to be that we have both.”