Maybe it’s not a coincidence that the lone Atlantic Canadian company named to the Canadian Innovation Exchange this year is from the smallest province.

Maybe – or should we say probably – it’s the result of a methodical, multi-year strategy to improve the startup ecosystem in Prince Edward Island.

The Toronto-based CIX said last week its 20 laureates for 2018 include Island Water Technologies, the Charlottetown company whose two products treat water in remote locations – one product is for residential homes and the other for larger complexes.

IWT has been nurtured in the P.E.I. ecosystem and recently secured funding from the province’s new investment group, Island Capital Partners. Its success is an emblem of the Island’s ability to develop an ecosystem in a range of sectors – not just its traditional life sciences space or its burgeoning IT sector, but also the cleantech group, which includes IWT.

The support system for innovation companies has strengthened greatly in the past five years. In 2013, P.E.I. boasted a robust life sciences industry led by the PEI BioAlliance and a smattering of tech companies like public display provider Screenscape and digital archival company DiscoveryGarden. Today, there is a fabric of interconnected work spaces, labs, mentorship organizations and funding bodies that support a diversified group of companies.

“Over the last couple of years, there has been a very noticeable increase in energy and growth in the entrepreneurial ecosystem in P.E.I. as a result of investment by both the government and private sector,” said Alex MacBeath, Managing Partner of Island Capital Partners. “A combination of increasing support for early stage companies, access to capital with the launch of Island Capital Partners, and the growth of the bioscience cluster through the BioAlliance is attracting talent and has created a very dynamic ecosystem.”

For the last five years, Entrevestor has collected and analyzed data on Atlantic Canadian startups. In Prince Edward Island, what we’ve noticed is a development of the ecosystem that has created more companies than in the region overall. So far, the economic gains have been muted, but that could change in the next year or two.

By year-end 2017, Entrevestor was following 42 startups in Prince Edward Island, up 121 percent from our first study in 2013. In that same time, the number of startups across Atlantic Canada has only risen 85 percent. More impressively, in P.E.I, that growth has taken place in all startup sectors – no mean feat in a province of fewer than 150,000 people.

The reason for the growth: the ecosystem has made advances in three critical (and intertwined) areas: facilities, mentorship and funding.

The most visible progress is found in two facilities in downtown Charlottetown that house a variety of companies. Startup Zone on Queen Street opened two years ago, and offers work space and programing for new companies, both innovation companies and ventures in more traditional areas, like food production.

"P.E.I is a particularly fascinating ecosystem where startups, businesses and government are working together to promote innovation,” said Patrick Farrar who became the Startup Zone’s CEO in June. “I’ve been watching the boom of Atlantic Canada’s entrepreneurial community over the past few years, and I am excited to return to the East Coast to actively support this growth.”

In the past year, Innovation PEI has also opened LaunchPad PEI on Great George Street, which provides office space to growing companies, like IT companies RevIQ, Onset Communications and Forestry.io.

The life sciences community, meanwhile, has also enhanced the infrastructure for its companies. Improvements include: expanded facilities on the 65-acre BioCommons Research Park; a 57,000-square-foot research complex added to the Atlantic Veterinary College; and a new natural products extraction facility at the Bio Food Tech Centre in Charlottetown.

“The bioscience cluster in P.E.I. has shown continued growth over a number of years due to the highly connected Island business ecosystem that integrates concurrent research and innovation processes with a public-private-people partnership, said Martin Yuill, the Director of the Emergence Bioscience Business Incubator.

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Just as Startup Zone and Propel ICT have increased mentoring programs for IT companies and others, the life sciences sector has seen increased programing with the growth of the Emergence accelerator and Natural Products Canada.

The ecosystem had been lacking funding vehicles. Until recently, PEI was the only province in the region without its own pre-seed funding body. That changed in the last year when Island Capital Partners launched and began making investments. One company it backed was Island Water Capital, which also received investment from Natural Products Canada.

So where does the Island startup community stand now?

It is lagging the rest of Atlantic Canada in a couple of metrics, but that could change soon.  In 2017, employment at the island’s startups increased 12 percent to 208 while startup revenues (based on nine companies that provided data) increased 17 percent. Both numbers underperformed the Atlantic region overall.

However, as the chart below shows, there were several fundings in the first eight months of 2018, showing that funding is on the upswing on the Island. 

In addition to this, Somru BioScience has said it is working on a $7 million raise, and already announced the $4.4 million non-dilutive component, suggesting the equity portion will be worth about $2.6 million. 

The experience in Newfoundland and Labrador shows that increased funding leads to improvements overall in employment and revenues. Startup funding on the Rock averaged about $4 million the last two years, and as a result employment growth in NL was 33 percent last year while NL startups' revenues rose 178 percent. 

Founders seem to believe the seeds have been sown and now is the time to witness the growth.

"Start-up companies require structures that can support changing activities over extended timelines,” said Patrick Kiely, the CEO of Island Water Technolgies. “It will typically take more than five years for any early-stage technology company to make any significant revenue milestones. P.E.I is now very well positioned and has all of the key pieces in place that allow early-stage companies to progress through key milestones.”