My wish-list for the Cape Breton startup community in 2020 (or shortly thereafter) is short and sweet – 1. a university computer science program, and 2. an angel group.

These points came up in the discussion after I delivered Entrevestor’s startup data presentation at Cape Breton University’s Verschuren Centre in Sydney last week. The presentation, sponsored by Onside and the Cape Breton Partnership, showed Cape Breton has got good at launching new startups in recent years. We tracked 54 Cape Breton companies last year, 10 of which began in 2018. It’s what you’d expect from a community of 99,000 people (just in Sydney) and a super enthusiastic startup community.

The problem is its companies don’t raise enough capital, and therefore are under-staffed. Cape Breton startups raised $1.2 million in 2018, less than 1 percent of the equity capital raised in Atlantic Canada. And they employed 345 people, with more than half of them working for companies more than 10 years old.

Against that backdrop, here’s what I think the Cape Breton innovation community needs:

A Computer Science Program at CBU

A programming course is already offered in Cape Breton -- the Nova Scotia Community College’s two-year IT programming course at the Marconi Campus in Sydney. What’s needed is a university program to increase tech talent. Dalhousie University allows NSCC students who’ve completed the two-year program to enter Dal computer science in third year. CBU could do something similar.

Enrollment at computer science programs is rising. Dal’s computer science enrollment has been increasing 20 percent annually lately. The NSCC program in Halifax that starts in September 2020 is already full and has a waiting list.

Starting a university program – better still, a faculty – is expensive and difficult. It needs to be supported by administration, faculty and students, it needs funding, and it needs to be staffed. But the demand and the economic reward make this something worth pursuing. A nucleus of Sydney companies – Swarmio, Securicy, Talem Health, Orenda Solutions – will be growing in coming years, and new companies will be coming along. They will need a stable of CS grads to grow.

An Angel Group

Cape Breton companies face challenges in raising capital, and competitions like Spark help to provide companies with as much as $25,000 in funding. That helps, but it’s generally not enough to grow a dynamic business.

There’s a consensus forming that Cape Breton needs its own angel group – something akin to Island Capital Partners on P.E.I. The strength of ICP is that its four principal investors and Operations Director Stefanie Corbett bring a wealth of experience to the organization. They’re top-flight mentors, great community supporters, and – as you might expect – have brought capital to the P.E.I. tech cluster.

To mimic this, Cape Breton's first step should be for a core of tech-savvy investors to step forward and commit to a certain level of investment in local high-growth companies. The good news is Nova Scotia has raised the threshold for its Innovation Equity Tax Credit, so each investor could receive a 35 percent tax credit for investing as much as $250,000.

If private investors commit $500,000, they should go to the Atlantic Canada Opportunities Agency and Innovacorp and make the case for matching funds from those organizations. That would produce about $1 million in commitments. That MIGHT be enough to get started, though more may be needed if the fund hires an investment manager.  

One final point: This fund should aim to back two or three companies a year with at least $100,000 each. The initiative won’t work if it spreads its limited funds around too many companies.