Communitech has laid off 15 employees following a 30 percent reduction in its provincial government funding, a cut that was larger than the innovation hub had originally anticipated. The provincial government has since released comment on the layoffs, telling Betakit the government has a “great working relationship with Communitech.”
First reported by The Logic, the layoffs affected several departments, including marketing, finance, events, and data were affected. BetaKit has since confirmed that Communitech has made a 14 percent reduction to its staff that previously sat at 105 employees.
Communitech was expecting smaller budget cuts, closer to 20 to 25 percent.
The decision came earlier this week after the hub learned that it was receiving a 30 percent cut in funding from the province. Sources familiar with the situation told BetaKit that Communitech was expecting smaller cuts, closer to 20 to 25 percent.
Cuts were originally pointed to in the Ontario provincial government’s recent budget, which stated that the Ministry of Economic Development, Job Creation, and Trade, (which distributes funding to Ontario innovation hubs like Communitech), was receiving a significantly smaller budget than previous years. In 2017, the department held $1 billion, with $968 million in 2018. In the most recent budget, the ministry’s funding was reduced to $782.2 million for the 2019 fiscal year. That ministry is responsible for funding to a variety of innovation organizations including the Ontario Network of Entrepreneurs (ONE), and hubs like Communitech, MaRS, and Invest Ottawa.
Sources indicated to BetaKit that the Ministry of Economic Development, Job Creation, and Trade told Communitech that while there were going to be cutbacks, its funding would be extended throughout the government fiscal year, but will come under review in the fall. This pending review could mean additional cutbacks for the upcoming fiscal year. The source also indicated that all government innovations programs would be under review.
This 30 percent reduction marks a ten percent cut to Communitech’s overall budget, which was $22 million in 2018. Provincial funding for that year totalled $7.5 million. Communitech’s funding comes from both private and public investors, split almost evenly between the two. In 2018, 42 percent of its overall funding came from public money, with the majority of that being provincial.
In previous years, Communitech had been mainly funded through public money; in 2014, 76 percent of its funding came from the provincial and federal governments. However, over the past few years, it has been able to almost double its private investments, allowing it to rely less heavily on public money.
Communitech’s provincial funding has been extended throughout the government fiscal year, but will come under review in the fall, potentially leading to additional cutbacks.
Chris Plunkett, Communitech’s vice president of external communications, told BetaKit, “we had to make some hard choices,” but stated that the 30 percent cut does not currently affect the organization’s matching federal funding, as the majority of its public money still comes from the province despite the reduction (a portion of Communitech’s funding from the federal government is based on a matching commitment with the province).
The Waterloo accelerator, along with Invest Ottawa, and MaRS also recently received a collective $52.4 million from the federal government through a FedDev Ontario program. Communitech received $18 million of that, part of which is going to University of Waterloo’s Velocity, Laurier LaunchPad, and the Waterloo Accelerator Centre.
Plunkett, who is leaving Communitech (separate from the layoffs) to join Waterloo-based OpenText as its head of global communications, stated that Communitech is still in great health and is well set up for the provincial review that will begin in the fall. He expects the review to look at the organization’s capacity to support research, commercialization of intellectual property, as well as talent.
“We’re pretty confident we’ll be able to make the case,” he told BetaKit, pointing to Communitech’s work supporting job creation in the Waterloo Region.
Plunkett also indicated that the layoffs will not affect programming or True North, the hub’s upcoming tech conference taking place June 19 and 20.
It is also expected that fellow Scale-Up Platform hubs, MaRS and Invest Ottawa, will also be facing funding cuts in light of the Ontario budget. BetaKit has reached out to both hubs for comment.
Upon reaching out to the provincial government, a spokesperson sent BetaKit the following statement:
“Since forming government, we have had frequent, constructive conversations with the tech sector about creating the conditions that will allow companies to scale and grow. Their recommendations have since informed our approach to the sector, in the context of Ontario’s fiscal situation. Every move we make as a government is made for the people. We made the decision to protect what matters most in our budget. That means making sure our province is protecting health care and education, while returning to a path to balance in a responsible timeframe. If we don’t return to balance we put things like hospitals, schools and care for our elderly at risk.
A massive part of our plan to return to balance includes supporting Ontario job creators, by making our province an attractive destination for investment, for companies to scale and grow, and for talent from around the world. We have a great working relationship with Communitech. They want to be self-sustaining. We think that should be the goal and we will work with them to make it happen.”
With files from Isabelle Kirkwood