In light of the recent announcement that the Ontario government cut 30 percent of its funding to Communitech, other innovation programs are beginning to learn how provincial cutbacks might impact their organizations.
BetaKit has learned that the more than 30 percent cut in provincial funding to MaRS Discovery District, first reported by The Globe and Mail, may, in fact, lead to layoffs at the organization the coming weeks.
“As we restructure departments in upcoming weeks, there may be a small staff reduction.”
“We understood that this government’s priority was to make material changes to deal with their deficit, so MaRS anticipated cuts and built resilience into our plans and budget,” MaRS told BetaKit, noting, however, that similar to Communitech the cuts were “deeper than expected.”
The more than 30 percent budget reduction in MaRS’ funding marks a $2 million cut from the provincial government, according to The Globe, just less than 10 percent of the hub’s overall operating budget. While MaRS had previously stated that it was expecting the cuts, it called the cutback an “unplanned funding reduction,” stating that the higher than expected number may cause it to take action.
“In the near term, MaRS is mitigating the cuts through a number of internal measures. We are expecting to retain most staff by covering vacancies internally; however, as we restructure departments in upcoming weeks, there may be a small staff reduction.”
MaRS did not disclose to BetaKit the size of the staff reduction or what departments it would affect, or when the layoffs might take place. The Globe reported that MaRS CEO Yung Wu stated that while he always expected the cuts, MaRS had prepared for it and had no plans to let anyone go.
While MaRS stated that it “expects to maintain its level of service” to the entrepreneurs it supports, it is unclear how the surprisingly higher cutback will affect MaRS’ overall programming, which includes administering programs on behalf of other Regional Innovation Centres (RICs). RICs (which include organizations like MaRS and Communitech) are organizations operating across the province that offer business advisory services and resources to entrepreneurs in order to help tech startups accelerate. Other RICs include Innovation Guelph, the RIC Centre in Mississauga, and Tech Alliance in London, Ont. There are a total of 17 RICs operating across the province.
The provincial funding cut is part of a series of larger reductions facing Ontario’s RICs, accelerators, incubators, and innovation hubs that are funded by the Ministry of Economic Development, Job Creation, and Trade. The ministry, responsible for supporting job creation, innovation, and economic growth in the province, received a 19 percent decrease in its funding when the Ontario government released its most recent budget.
Last week, Communitech made the decision to lay off 15 employees following a similar 30 percent reduction in its provincial government funding, a cut that a source told Betakit was larger than expected. Communitech was expecting cuts closer to 20 to 25 percent, and saw a 14 percent reduction to its staff, that previously sat at 105 employees.
Other programs including the Ontario Centres of Excellence (OCE) and Ontario Scale-Up Vouchers Program are also facing cutbacks in light of the provincial government’s attempts to achieve a balanced budget. The Globe reported that the OCE is expected to see a 40 to 50 percent reduction in its provincial funding. And the Ontario Scale-Up Vouchers Program, a four-year, $32.4-million initiative funded by the ministry and delivered through MaRS, Communitech, and Invest Ottawa, is expected to be on the chopping block.
BetaKit has now also learned that unlike Communitech and MaRS, fellow Scale-Up Platform partner, Invest Ottawa will not be receiving any cuts to its provincial funding.
“At this time, we have received confirmation that the specific provincial programs and funding lines that Invest Ottawa receives alongside all Ontario Regional Innovation Centres will not be reduced,” the organization said in a statement to Betakit. “Building on our strategic plan and governance model, Invest Ottawa consistently strives to optimize our diverse mix of funding to support sustainable operations, deliver high quality programs and services, and maximize impact on the entrepreneurs and firms we serve.”
BetaKit has reached out Invest Ottawa for more information, and also to the OCE to confirm its budget cuts, but had yet to hear back from the latter organization by the time of publication.
Christine Wood, press secretary for the Minister of Economic Development, Job Creation and Trade, called the government cutbacks a responsible approach to balancing the province’s budget.
“We’re doing our part to address Ontario’s fiscal situation, while continuing to invest in measures that will lead to good jobs in the tech sector across the province. We are ensuring that we get the basics right, by measuring outcomes whenever taxpayer dollars are spent,” she told BetaKit.
She indicated that the cuts were a way to ensure that the government continues to invest in critical programs like “health care, education, and other services that the people of Ontario rely on every day,” however it should be noted that the government has also announced significant cuts to both healthcare and education sectors in the province.
“At a time when the province is facing more disruption than ever before in sectors such as traditional manufacturing, MaRS is doubling down on its effort to support scaling companies, the most promising startups that are creating new, high-paying jobs and opportunities,” Wu said in a statement to BetaKit. “Ontario is at a positive inflection point in the innovation economy, we see this in the acceleration of positive economic outputs from the MaRS entrepreneurial community.”
He stated that Canada’s digital economy is now bigger than traditional sectors such as mining, oil and gas extraction, agriculture or forestry, noting that the province is seeing momentum as a growing global tech centre. Despite the cutbacks he said, “[MaRS] looks forward to the province being an active partner in helping us build the next generation of global companies that will create thousands of high-paying jobs for the people of this province.”
Jean Francois Gauthier, CEO of Startup Genome, which released its most recent report today, called the provincial cutbacks concerning, noting they may halt the growth of the Toronto-Waterloo region’s startup ecosystem.
“Something that worries me is when I see the new government of Ontario cutting investments,” Gauthier told BetaKit. “This will spell a drop in ranking for [Toronto-Waterloo].”
Following publication of this story, MaRS reached out to BetaKit looking to clarify its original statement, which read, “MaRS is mitigating the cuts through a number of internal measures. We are expecting to retain most staff by covering vacancies internally; however, as we restructure departments in upcoming weeks, there may be a small staff reduction.”
Potential layoffs would not be related to budget cuts, MaRS has now told BetaKit.
“We are naturally reorganizing because we are setting ourselves up to deliver on new contracts (FedDev Scale program) and we now have an increased emphasis on corporate partner revenue,” MaRS stated, referring in part to the $17.5 million it recently received from the federal government.
A MaRS spokesperson noted that the organization had been planning to restructure internally before cutbacks were announced, and that restructuring might lead to some staff being let go.
MaRS did recently lose its president of venture services, Salim Teja, who left the organization to become partner and general manager at Radical Ventures, the VC firm led by Jordan Jacobs, former co-founder of the Vector Institute and Layer 6, who also recently left his position at TD Bank to focus on the running the fund.
MaRS told BetaKit that because of some of these recent staffing changes internally, the organization needs to move some people around, and that restructuring may or may not lead to some reduction in its staff.
With files from Isabelle Kirkwood
Updated: this story has been updated to reflect that MaRS has reached out to BetaKit looking to clarify its original statement.