Cuts to Communitech 'a wake-up call' for tech companies, industry watcher says

A 30 per cent funding cut followed by layoffs at Communitech is just the start of change at the tech hub, says industry watcher Douglas Soltys.

"I think it is a wake-up call to the tech industry," said Soltys, the editor-in-chief of tech industry website BetaKit.

He said the cuts are a sign to the entire innovation economy that when it comes to the province making cuts, they won't be spared.

He also said the province has already given companies like Communitech, MaRS Discovery District in Toronto and Innovate Ottawa indications that more change is coming.

"I think the real thing to look for is not the cuts that are happening now, but the notice that these organizations have been given that they're under review for go-forward funding and how that might affect it," he said in an interview with CBC Kitchener-Waterloo.

"We don't really know the criteria to which they'll be evaluated or how much [the province] is willing to commit," he said. "This happens with new governments coming in, but the extent to which it will affect this ecosystem definitely remains to be seen." 

Ian Klugman, the president and CEO of Communitech, confirmed the layoffs in an email, saying the people who were laid off from 15 full-time roles were informed on May 1.

He said Communitech knew they were going to see cuts, "given the fiscal situation in Ontario" and the 30 per cent cut from the province equals a 10 per cent reduction in the overall annual budget of Communitech.

He said they "look forward to working with the provincial government" on the review this fall "and think we will have some helpful ideas to contribute."

Province wants Communitech to be 'self-sustaining'

A spokesperson for Minister of Economic Development, Job Creation and Trade Todd Smith said the government is having "frequent, constructive conversations with the tech sector" to help companies scale-up.

In the emailed statement, Christine Wood also said the province has "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," Wood said.

Klugman noted half of the funding for Communitech is currently from the private sector with the rest coming from municipal, provincial and federal governments.

"Communitech is a public-private partnership, and the support the federal and provincial governments provide is integral to much of the work we do, especially with startup and scaling companies," Klugman said.

"We do have a great working relationship with the province, and look forward to engaging with them on the business support review outlined in the budget, highlighting the impact Communitech programming has on economic growth and job creation. We expect to continue our partnership with the province in the years to come."

Still, the news of the budget cuts and resulting layoffs aren't good for the region, Kitchener Centre MPP Laura Mae Lindo said.

"Every single organization in every single sector has this inside fear that cuts are coming," she said.

Lindo said for a government that touts being open for business, she's surprised they would make cuts to Communitech, which focuses on bringing industry to Waterloo region and helping companies grow.

Those kinds of companies "should be one of the first things we invest in," she said.

Waterloo mayor disappointed

Waterloo Mayor Dave Jaworsky is a former Communitech board member and says he's seen how the company has helped the local economy.

The provincial deficit is an important issue, he added, but there are other ways to make cuts or create revenue.

"In my view, Communitech makes great use of every dollar it has, and I'm pleased that the province has also seen the value in continued investment, although I'm disappointed it's at a lower rate," he said.

Kitchener Mayor Berry Vrbanovic echoed those sentiments and said the city has seen the importance of partnering with Communitech. They've made strategic investments in the tech hub and they have a civic innovation lab there.

"I'm confident that through all of us continuing to be key partners, the team at Communitech will be able to make the adjustments necessary and will continue doing the great work that they've been doing," he said.

Regional Chair Karen Redman said knowing the government has wanted to cut costs, she's not surprised by the news.

She says she's sorry people lost their jobs, and recognizes Communitech has done a lot to help startups get off the ground after the downturn of Blackberry impacted the region.

She says she's also certain Communitech will weather whatever is next in terms of the provincial review.