How Nanaimo Got Its Groove: Politics and Progress in Harbour City

Once known as a rough-and-ready city, home to loggers and longshoremen, Nanaimo has now become a darling of the tech set thanks to its great climate, proximity to major centres and real estate prices that still seem, well, reasonable. Now if only its politicians would play nice...

76
Photograph by Arrowsmith Aerial Photography.

An aging blues hack, battered guitar case in hand, strides through the door of the storied Queens Hotel on Victoria Crescent in downtown Nanaimo. Next door at Square One, an open-concept shared office, tech nerds stare intently at computer screens or socialize with their lattes and cappuccinos in the upstairs lounge with a view of the harbour two blocks away.

You couldn’t find a more a vivid contrast of old and new Nanaimo. On the one hand, there’s a blues bar in a hotel whose foundations were laid in 1892 when Robert Dunsmuir was building his Island coal empire. On the other, there’s a cooperative work space for entrepreneurs in Nanaimo’s emerging tech and entrepreneurial economy that is causing people to see this city of roughly 85,000 and its traditional forest and fish economy in a bright new light.

The New Nanaimo
On a sunny September day that could sell Nanaimo to anyone, I meet Ron Hartman, president and co-founder of iDUS Controls, at Square One, where his company rents a desk for one of its employees for the easy-to-stomach rate of $250/month. A sticker on one of Square One’s office windows reads “Do Epic Shit.” It’s as good a motto as any for the new Nanaimo.

Hartman and his two partners sell their innovative soil-moisture-monitoring technology to some of the globe’s biggest players in food technology, including Monsanto and Syngenta — and it all started here in Harbour City.

Rather than sitting indoors, Hartman invites me to putt around the harbour aboard his sailboat, Sunfish, and learn more about his company and why he loves this city. With its lean business model and distributed workforce, iDUS Controls may be the classic 21st-century enterprise. In 2005 Hartman, a surveyor turned land developer came to Nanaimo to break ground on the Ocean View Terrace subdivision. He was interested in water conservation and wanted to introduce grey-water recycling for irrigating Ocean View with a water-saving device called the Conservepump. But his partners were lukewarm to the idea sohe moved on.

Not long after, he met an old schoolmate, self-taught tech wiz Terry St. Hilaire. Then, in 2008, along with a third partner, Lori Barlow, iDUS Controls was born and pivoted into agriculture with technology that allows farmers to monitor soil moisture content and adjust irrigation accordingly. Wineries were the early adopters, but the market has since expanded into all forms of agriculture.

“Water conservation is at the core of the technology, but it boils down to farmers wanting to make more money,” Hartman says. A business opportunity first attracted Hartman to Nanaimo; lifestyle and entrepreneurial spirit made him stay. “Let’s face it,” he says, “you can do tech anywhere. I live in a 100-year-old heritage house blocks away from downtown, and I can ride to work and walk to my sailboat from Square One.”

The Shadow of Politics
iDUS Controls is just one of the innovative companies that’s causing people to view Nanaimo as much more than bathtub races and Nanaimo bars; it’s also a place where bright business ideas are born. However, the city’s business successes are too often being overshadowed by news headlines highlighting Harbour City’s monumentally dysfunctional municipal council. While community leaders work hard to put Nanaimo on the business map, Mayor Bill McKay and city councillors swap insults in a reportedly negative environment where accusations of bullying and personal attacks have become the norm.

Observers like Ken Hammer, a former instructor in Vancouver Island University’s business department and now a realtor and management consultant who helped launch Startup Nanaimo, says this all makes the city look like a bush-league backwater where personal politics trump the efforts to promote business.

In the latest fiasco at city hall, the board of the Nanaimo Economic Development Corporation (NEDC) fired its CEO John Hankins after less than a year on the job when he issued an op-ed letter on October 24, criticizing an in-camera decision by city council to pull responsibilities for tourism marketing from the NEDC’s mandate. The decision was taken despite a $230,000 taxpayer-funded consultant’s report that said NEDC was performing well. Since Hankins’s dismissal, at press time, 10 members of the 17-member NEDC board had quit.

“With such an adversarial and negative environment at city hall, it’s hard to build community in a positive way,” Hammer says. “How is firing the CEO of NEDC going to help economic development?”

Mayor Bill McKay has been in the hot seat since swearing the oath to office in 2014. In an interview with Douglas magazine, he admits “theatrics” have overwhelmed city council. “I’m at my wit’s end. I have no doubt that all this reflects poorly on Nanaimo,” he says.
He’s right. Andrea Rosato-Taylor is sales development manager at Black Press and a member of the organizing committee for Vision 2020, a group focused on gathering stories about the city’s business successes and projecting a more positive image. She says instead of being proud of mayor and council, citizens “are disappointed and embarrassed.” Donna Hais, general manager of the construction firm R.W. (Bob) Wall Ltd., is a lifelong Nanaimo resident and associate of Rosato-Taylor’s. She also sits on Vision 2020’s organizing committee. Hais and her team are planning to make a presentation to council at an undisclosed time in the new year with a get-your-act-together message.

“We’re going to ask council if they know about what Nanaimo businesses are doing, and if so, what are they doing to help. And if they don’t know these stories, we’ll ask them why don’t they know about them,” Hais says.

Business Beyond Barriers
Thankfully, business often succeeds in spite of politics. Hyas Infosec is one of the good-news business stories that Hais and her colleagues at Vision 2020 want to get people talking about. As it was with iDUS Controls’ Hartman, lifestyle was the dealmaker for veteran cybersecurity entrepreneur Chris Davis when he decided to relocate to his hometown of Nanaimo three years ago to launch his fourth startup, Hyas.

Davis was a teenage hacker who parlayed his skills into a successful career in Internet security, working for big names like Dell in Austin and Damballa in Atlanta, as well as starting and selling three businesses. His last stop was Ottawa, where he launched two startups, Defence Intelligence and later Morrigan Research, which he sold three years ago to Irvine California-based CrowdStrike.

“My wife and I didn’t want to stay in Ottawa and we looked around and thought about Austin, which I really enjoyed. In the end, we decided on Nanaimo. It’s affordable, close to my family and big enough to have most of the consumer conveniences you could want,” Davis says over the phone a few days after another meeting with venture-capital funders. In this case, talent follows talent. Founded in 2014, Hyas employs 10 full-time people, two of whom it attracted from Atlanta and another from Chicago, as well as five contractors. In late September, the company, whose customers include A-listers like Bank of America and PayPal, went live with its first commercial security software, aptly named Comox, staying true to Davis’s intention to make Hyas a West-Coast-branded business.

More than a Pretty Face
But it takes more than just cheap real estate, pretty parks, oceanfront walkways and other lifestyle perks to build a tech-based economy, says Paris Gaudet, executive director of Innovation Island.

As part of the BC Innovation Council’s network of venture-acceleration program partners, Innovation Island serves a huge area, from the Malahat to the tip of Vancouver Island and the Sunshine Coast, advising companies in the tech space, connecting entrepreneurs with business mentors and helping secure financing to bring ideas and innovation to market. Cloudhead Games, a fast-growing virtual-reality gaming company based in Qualicum Beach, is one of Innovation Island’s poster children.

Lifestyle is an important factor. To someone from Vancouver, let alone Silicon Valley, real-estate prices that might appear to be missing zeros are attractive. So is Nanaimo’s seaside setting, hiking, biking and other amenities. But many communities can lay claim to similar attributes and “you can only play that card so many times,” Gaudet says. Investors, entrepreneurs and venture capitalists will eventually look under the sheets for extras and incentives, see what supports and programs a city can offer, what, if any, tax benefits exist and how well integrated post-secondary training is with the needs of technology entrepreneurs.

According to Gaudet, earning the title of tech hub is dependent on three key factors: talent, access to capital and achieving a critical mass of entrepreneurs that begins to generate a vibrant ecosystem and creates success. It’s still a work in progress in Nanaimo.

“Is Nanaimo a tech hub? Not yet. But there are some exciting things happening,” she says. “It took 25 years to build a tech ecosystem in Victoria and Vancouver, and many of these larger centres still struggle with talent recruitment.”

Take Vancouver, for example. Recently Cody Green, CEO and founder of the online car-loan business Canada Drives, spoke about the struggles of finding talented engineers and other tech staff, despite moving his company from Saskatchewan to Vancouver in 2014 and growing it from a skeletal operation of a half dozen employees to a thriving enterprise of 200.

A Quiet Revolution
So though Nanaimo may not yet be vying for the title of Silicon Valley North, it is quietly becoming an entrepreneur-friendly city where unique business ideas are coming to life. On the Canadian Federation of Business’s annual ranking of Canada’s most entrepreneurial communities, Nanaimo leaped from 77th to 39th in 2015, before dropping slightly to 42nd out of 121 cities in 2016. Cities are ranked on scale and growth of business ownership, optimism and growth plans and government policies on taxation and regulation.

A key part of Nanaimo’s entrepreneurial ecosystem is Vancouver Island University, a growing post-secondary institution with 17,000 students, including 2,100 international learners. Startup Nanaimo, a chapter of the nationwide organization Startup Canada, brings in regular guest speakers and provides space for entrepreneurs to share successes and failures.

In conjunction with VIU, Startup Nanaimo hosts an annual Dragons’ Den-style business-plan competition for budding student entrepreneurs like Patrick Whelan and Jessica Reid, who in 2014 turned their passion for tiny-home construction into a winning pitch that netted them a business coach and a cheque for $2,000. It wasn’t exactly a windfall for a startup, but it was enough of a confidence boost to launch Rewild Homes, which, according to Reid, now manufactures six to eight tiny homes annually for Pacific Northwest and Alberta customers.

Nanaimo’s port is also getting some attention; in 2015, the Nanaimo Port Authority purchased a Liebherr mobile crane for $4 million as part of a $9.3-million series of improvements, including a new barge berth and expanded cargo capacity. The Diver Lake Innovation and Technology Park, still at the blueprint stage, will be a 70,000-square-foot centre aimed at IT and R&D firms located in the heart of Nanaimo.

And the Nanaimo Economic Development Corporation (NEDC) is responsible for launching the small tech hub Square One, which is serving iDUS Controls’ Hartman and his partners well as a low-cost workspace and is also where they met local tech entrepreneur Michael Reid, who now runs the company’s web service. I had met NEDC’s former CEO John Hankins in late September, during happier times when he was still holding down his $130,000-a-year job as the organization’s CEO. Despite being fired, he says he still believes Nanaimo is the place to be on the West Coast.

“We’re close to Vancouver but affordable; we have a great lifestyle, a deepwater port and a very interesting mix of companies that people don’t know much about,” Hankins says.
During Hankins’s tenure at NEDC, Chris Seals, an Austin, Texas-based economist, was hired to produce a report released in September on Nanaimo’s clean-technology and green-energy sector. Seals admits that before diving into his research, Nanaimo wasn’t on his radar and might as well have been the name of another planet. What he found surprised him.

“Nanaimo is a bit of an undiscovered jewel. And what makes it different is that there are companies making plays in a variety of clean-technology fields,” Seals says.

Hankins says he hopes Nanaimo can capitalize on its diverse clean-tech sector now that clean technology is booming worldwide (in 2014, clean tech generated $1.7 billion in revenue in B.C., and according to the United Nations Environmental Programme, in the same year investments in clean energy across the planet topped $270 billion) and Canada has ratified last fall’s Paris Agreement that establishes a long-term goal of keeping global temperature increases at 2˚C.

Seals is likely not the only one to be impressed by the array of players in the agriculture, energy and transportation sectors in the Nanaimo region. Along with iDUS, there’s Pacific Coast Wasabi, which grows a finicky crop in computer-controlled greenhouses. Inuktun Services and SEAMOR Marine both manufacture remote-operated vehicles (ROVs), the former focusing on applications such as nuclear-reactor and pipeline inspection, the latter specializing in underwater applications. SRM Projects and Barkley Project Group are experts in run-of-river hydropower development. And for 25 years, Canadian Electric Vehicles has been designing and manufacturing electric vehicles in Errington, north of Nanaimo.

However, Nanaimo is not a household name among venture capitalists and angel investors. In fact, access to capital is the Achilles heel of many a startup in B.C., though that picture may be brightening. In December 2015, the B.C. government announced a $100-million tech-focused venture-capital fund.

Hartman of iDUS Controls calls it tough slogging for entrepreneurs wanting investment capital to grow beyond startup phase. He and his partners still managed to raise an initial $100,000 from friends and family and a second round of $1.2 million from friends and associates.

Hyas’s Davis says he’s lucky enough to be working in a tech space that venture capital favours, especially in an age when cybersecurity is top of mind. In February 2016, his company secured seed financing from Wesley Clover International. Still, he says, if you choose to start up anywhere outside of Silicon Valley or other so-called tech hubs, you’ll pay a “tax.” Venture capitalists like to keep companies they invest in close at hand, where they can meet regularly, socialize at industry mixers and help connect them with potential customers.

Business Has Nanaimo’s Back
After battling rush-hour traffic north through shopping-mall sprawl, another one of Nanaimo’s enduring stigmas, I meet Hammer at the Chapters Starbucks before he has to rush off to a real-estate showing. Though Nanaimo can feel hectic and at times disjointed, like a mid-sized city experiencing growing pains, the entrepreneurial community is tight knit and brimming with a sense of opportunity.

Hammer will seize any opportunity to trumpet Nanaimo’s entrepreneurs and tech innovators. But he’s also realistic, well aware of how shenanigans at city hall are doing nothing for the cause.

“In some ways we’re like a teenager, a little gangly, growing into ourselves and looking for our identity. But we mean well,” Hammer says. And maybe one of the best things Nanaimo has going for it is a business community that is so passionate about pushing through to success, despite the politics. When it comes to cheerleading entrepreneurs, Hyas’s Davis is also happy to play that role.

“When I meet with Google, Facebook, Amazon and other companies, I’m going to be talking up Nanaimo, even if they can’t pronounce it,” Davis says with a laugh. “I really think Nanaimo has the potential to be so much more than it is.”