Vancouver has a strong entrepreneurship ecosystem, and Vancouver’s entrepreneurship ecosystem is especially strong when it comes to sustainable technology or “CleanTech”. Punching well above its weight in its contribution to CleanTech in Canada, the data clearly shows Vancouver is a magnet for CleanTech / sustainable IT investment in Canada, attracting 19% of the CleanTech project value despite only having 7% of the Canadian population.
Concentrated in three sectors: the forestry value chain, transportation, and power generation, businesses developing in Vancouver include the conversion of wood waste into biogas and biofuels, hydrogen fuel cells, and converting diesel engines to run on natural gas, just to name a few. Some of the Vancouver CleanTech cluster’s strength can be tied to Vancouver’s traditional industries, forestry is one such example. In this article we describe the Vancouver CleanTech cluster through data analysis and examples, and discuss the potential there for entrepreneurs and investors alike.
Vancouver: An Entrepreneurial Centre of Excellence
Vancouver has a strong entrepreneurship ecosystem, it ranked 9th and 18th in the 2014 and 2015 Global Startup Ecosystem reports; however, Vancouver’s entrepreneurship ecosystem is especially strong when it comes to sustainable technology or “CleanTech”. Vancouver is world renowned as a “green-city”, hosts the largest CleanTech conference in North America and has multiple Universities with a history of spinning off CleanTech companies. Most Vancouver startup accelerators/incubators such as Alacrity have some CleanTech involvement; Foresight, an accelerator based in Greater Vancouver, is Western Canada’s first accelerator who focuses solely on CleanTech. Vancouver also hosts the offices of sizable CleanTech focused funds administered by groups such as Chrysalix Energy Ventures, Evok Innovations, Yaletown Partners, RE Royalties and Timia Capital Corp.
The Vancouver CleanTech ecosystem is incredibly valuable to the BC economy, generating the vast majority of the $1.7 billion in revenue (2014) from BC-wide CleanTech each year; a number that is only expected to grow as the world deepens its commitment to sustainability. However, CleanTech has many unique challenges. The technologies take significantly longer to commercialize than investors are used to and it can be dependant on governments to craft policies such as those that put a price on carbon pollution. To provide this intelligent government policy and private sector support we need to have a deep understanding this sector. Part of this understanding is identifying the strengths and risks in our local CleanTech clusters.
“[Entrepreneurship ecosystems] are usually the result of intelligent evolution, a process that blends the invisible hand of markets and deliberate helping hand of public leadership that is enlightened enough to know when and how to lead as well as let go the grip in order to cultivate and ensure (relative) self-sustainability.” Daniel Isenberg, Forbes.com 2011.
As we discussed in our recent article about CleanTech, this industry is more of a common objective spanning many sectors of industry rather than an sector unto itself. Every cluster will have aspects of the Green Economy in which it is stronger and in Vancouver’s case those sectors have a lot in common with its traditional strengths around the resource economy. To support this statement we have analyzed some data from Sustainable Development Technology Canada (SDTC), one of the largest CleanTech funds in the world.
Vancouver CleanTech: Green Forestry / Power / Transportation / IT
The mandate for SDTC’s CleanTech investment fund covers the entire CleanTech sector. Fortunately, because it receives support from the government of Canada, SDTC provides an excellent data set containing the value and location of projects it has funded over its lifetime. Because it’s mandate is so broad and it is not required to distribute its funds equally across the country, we can assume it’s investments are somewhat representative of the geographic distribution of each CleanTech sectors across Canada. In the chart below we have used the SDTC data to look at the economic activity in the Greater Vancouver across seven CleanTech sectors.
The data clearly shows Vancouver is a magnet for CleanTech investment in Canada, attracting 19% of the CleanTech project value despite only having 7% of the Canadian population. Vancouver’s strength is concentrated in three sectors: the forestry value chain, transportation as well as power generation. British Columbia is also strong in agriculture (a sector that includes fisheries) although the sector is understandably not concentrated in Greater Vancouver.
Sustainable IT / CleanTech: Making Gas from Wood
Let’s take a closer look at the Forestry, Wood Products and Pulp & Paper sector. Greater Vancouver’s main CleanTech projects in this sector have involved the production of biofuels and biogas using wood waste as the feedstock. One such project was led by Nexterra Systems, one of the more prominent names in Vancouver CleanTech. Their biomass gasification system (turning wood waste into a fuel gas) has already been commercialized, having built multiple plants including a ~$105 million CAD plant currently under construction in the UK.
Because of its size, ties to local business development associations and relationships with universities, Nexterra could be considered one of the ‘anchor organizations’ of Vancouver CleanTech. The 2014 Entrepreneurial Ecosystems and Growth Oriented Entrepreneurship report from the OECD describes the role this type of organization can play.
At the heart of an entrepreneurial ecosystem typically there is at least one, and usually several, ‘large established businesses’, with significant management functions […] as well as undertaking R&D and production activities. These businesses will also be rich in technology. They play significant roles in developing the ecosystem. First, they are ‘talent magnets’, recruiting large numbers of skilled workers, many of them recent graduates, from outside the area (Feldman et al, 2005). Second, they provide business training for their employees and enable them to progress up the corporate hierarchy. It is through this process that staff who were initially recruited for their technological know-how acquire management skills to become technology managers. This represents a valuable resource for small firms. Third, they are a source of new businesses as some staff will leave to start their own companies. […] Fourth, large exogenous firms play a major role in developing regional ecosystems, especially in peripheral regions, developing the ecosystem’s managerial talent pool (Adams, 2011) and providing commercial opportunities for local businesses. For example, SMEs in the UK’s oil and gas ecosystem in Aberdeen have been able to sell to the multinational energy companies operating in the North Sea and in many cases also ‘piggyback’ on these relationships to access other oil and gas markets around the globe (Raines et al, 2001; Mason and Brown, 2012). Large companies can also make a variety of other contributions, including the provision of space and resources for local start-ups, the creation of programmes to encourage start-ups and the development of companies that enhance their own eco-systems. They also put the ecosystem ‘on the map’. Indeed, as Isenberg (2013) states, “you simply cannot have a flourishing entrepreneurship ecosystem without large companies to cultivate it, intentionally or otherwise.” But for these benefits to occur requires the businesses to be open and collaborative.
Greening of the Sustainable Industries
It is worth noting that established organizations in traditional sectors can serve as ‘anchor organizations’ for CleanTech as well. A great deal of the talent, knowledge and funding needed for projects like those Nexterra carries out comes from traditional players in the forestry industry. Many of these players were motivated to find a use for the large amount of poor quality logs they had on hand as a result of the pine beetle problem, but this is just one example of how the objectives of the green and traditional economy are increasingly becoming one and the same. After all, things like energy efficiency saves money. As carbon emission becomes more and more expensive, alternative fuels save money. This trend is already playing out in many other industries and it will be interesting to see how it develops. Vancouver is also home to some of the largest mining companies in the world and companies such as the Alacrity backed Minacore are just scratching the surface of what is possible to reduce energy consumption and otherwise ‘green’ that industry. Vancouver’s CleanTech cluster is strong because its entrepreneurs, investors, business leaders and politicians recognize the potential created as the “green” economy just becomes the economy.
“The “green” economy is often passed off as a sector or subset of the rest of the economy. More correctly, the focus should be on the “greening” of all industries and all sectors, a more broad-based approach that is essential to accelerated investment attraction and job growth.” The West Coast Clean Economy report, Mar 2012