Successful Canadian innovation clusters share some common attributes and drivers

Three successful Canadian tech innovation clusters are each focused on developing very different technologies.

But all three clusters share some common attributes and drivers that led to and help sustain their robust innovation ecosystems, representatives from each cluster told Research Money’s 23^rd annual conference in Ottawa.

The clusters are: the video games industry in Montreal and Quebec; the agri-food industry in Saskatchewan; and the biotech-life sciences industry in Vancouver.

The main element among all three clusters is a focused and deliberate collaboration by industry, government and academia, panelists said during a session on “Regional Canadian successes.” This collaboration includes both federal and provincial support for the clusters.

Montreal’s video games industry got started in 1997 when then-premier Bernard Landry’s Quebec government implemented a multimedia tax credit covering 37 per cent of all salaries that companies paid employees for video production, said Chris Chancey (photo at left), co-founder of Indie Asylum and CEO of video games developer ManaVoid Entertainment.

This generous incentive attracted international video games makers, including Ubisoft, Warner Brothers, Gameloft and others, and “basically everyone was in Montreal making video games,” he said.

The tax credit, which is still in place, was and still is crucial for an industry where it takes two to four years to develop a video game and get it ready to market, before revenues start flowing, Chancey said. Each game – for Chancey’s company which has 50 employees – costs between $3 million to $10 million to create.

Quebec’s universities and colleges started developing talent to serve the fast-growing industry, he said. “We now have 900 people coming out every year who are being pumped into the video game ecosystem.”

 “Everywhere I go internationally for conferences, everyone knows that Montreal and Quebec is the best place in the world to make video games,” Chancey said.

For the agri-food cluster in Saskatchewan, support from both the provincial and federal governments is “absolutely crucial” in focusing and sustaining the ecosystem, said Steven Webb (photo at right), executive director and CEO at the Global Institute for Food Security (GIFS) at the University of Saskatchewan.

 “The province co-invests with industry,” he said. The Saskatchewan government has communicated clear goals to all stakeholders, he added, including wanting to add $10 billion to the value-added portion of the agri-food industry.

Saskatchewan established a goal to achieve $20 billion of agri-food exports by 2030, and the province has already surpassed that goal, Webb noted.

GIFs needs to operate at the scale of industry and partner with academia, to help make the bridge between inventions in university and innovative, marketable products, he said. “These technologies need to be pointed at specific markets and get that value.”

The province’s agri-food industry includes an engineering biology “platform” for innovation in agriculture and food products. Also, the Saskatchewan Food Industry Development Centre provides at-scale pilot facilities and first manufacturing capability for industry.

The University of Saskatchewan, University of Regina, and Saskatchewan Polytechnic are all key players in the cluster which bolsters its academic strength.

“It is discovery research, but it’s focused on specific areas. It’s bang for the buck,” Webb said.

The Regina-based federally supported Protein Industries Canada global innovation cluster, focused on accelerating the innovation and competitiveness of the Canadian plant protein sector, provides a framework to bring more stakeholders together to reimagine how innovation can be done, Webb said.

In Vancouver, the city’s thriving life sciences industry grew from a legacy of provincially supported (including through tax credits for angel investors) pioneering companies such as QLT and STEMCELL Technologies, said Mounia Azzi (photo at right), vice-president, corporate development, at adMare BioInnovations which supports Canada’s life sciences companies.

QLT, created in 1981, became the first biotech company in the world to be profitable, Azzi noted. Although QLT no longer exists, its alumni are still influencing the entire cluster by creating startups and building new companies, she added.

STEMCELL Technologies, created in 1993, now has more than 2,900 employees and plays an anchor role in helping to ensure the growth of the sector in Vancouver, she said.

The B.C. government has mainly supported the cluster's infrastructure, which has complemented federal support for other components, Azzi said.

For example, STEMCELL Technologies received $45 million – divided equally between the federal and provincial governments – in 2018 to build a $138-million advanced manufacturing facility for biologics in Burnaby, B.C.

The federal Strategic Innovation Fund provided $175.6 million to AbCellera in 2020 to expand the company’s efforts related to the discovery of antibodies for use in drugs to treat COVID-19.

In 2023, the Strategic Innovation Fund provided $225 million to support AbCellera’s $701-million project to create a state-of-the-art biotech campus equipped with a new pre-clinical anitbody development facility. The provincial government contributed $75 million.

Some innovation clusters have inherent advantages

Along with government support and collaborating closely with post-secondary institutions, all three innovation clusters had some inherent advantages that helped establish and grow their ecosystems.

For Montreal’s video games industry, it was the city and Quebec’s unique culture and the connectivity among local creative, arts and cultural communities.

The video games industry started as a services industry to large foreign-based companies that essentially used Quebec-based workers to develop huge franchise video games, Chancey said.

In the early 2010s, the barriers for companies entering the sector dropped dramatically and digital distribution came to the fore.

That led to video game startups by Quebecers and the growth of the “indie” industry – the independent video game developer industry, Chancey said. “We were able to make gains with three to 10 [employees], instead of having hundreds of people.”

Fledgling game developers connected with local software programmers, and collaborated with local visual and performing artists, and cultural groups.

In 2015, Chancey co-founded and is board chair of La Guilde du jeu vidéo du Québec (Quebec Video Game Guild). The non-profit cooperative brings together independent and international video game developers, creators, educational institutions and related entrepreneurs based in Quebec.

La Guilde started with 30 video game studios. It now has more than 330 members, including over 300 studios with 15,000 employees, and is the largest initiative of its kind in the gaming world.

Indie Asylum, which Chancey also co-founded, is a non-profit connecting independent game studios and investors, The group involves “extreme collaboration,” including sharing of different services and information, and transparency.

Chancey said the collaborative spirit was always there from the start of Montreal’s video games industry. However, La Guilde, along with Indie Asylum, “has really fostered a spirit of collaboration between everyone in the ecosystem. Everyone is helping each other out when there’s an issue.”

“We’re not really competing against one another,” he noted. “We’re making these big products that are significantly different from one another in terms of art style, genre, target audience, and platforms we’re releasing on.” Also, most of the product gets exported, with 95 per cent of the Quebec industry’s revenue coming from outside Canada.

For Saskatchewan’s agri-food cluster, the most obvious natural advantage is the land, Saskatchewan has 40 per cent of Canada’s arable land, “so when you think about scale, it’s right here,” Webb said. Canada is one of only a handful of countries that are net producers of food.

Multinationals in the agri-tech industry, such as Nutrien, Degelman Industries and Viterra are active in Saskatchewan, including several headquartered in the province.

In addition to post-secondary institutions, the agri-food cluster benefits from two national laboratories – the National Research Council’s and Agriculture and Agri-food Canada’s – on the University of Saskatchewan campus.

Agri-tech-focused venture capital firms, such as InnoTech Fund and Emmertech (Conexus Venture Capital Inc.), along with agri-tech business incubator Cultivator, are all part of Saskatchewan’s cluster.

Last September, Cultivator hit a milestone with companies nurtured through the incubator having collectively raised more than $100 million in private capital since Cultivator launched in 2019.

“Innovation isn’t technology. It’s the application of technology to drive market impact,” Webb said.

In Vancouver, the life science’s industry’s biggest advantage was building on research at University of British Columbia (UBC) and Simon Fraser University (SFU), along with the legacy left by early players in the field.

“Everything starts with good science,” Azzi said. Pioneering companies like QLT, STEMCELL Technologies and more recent arrivals like Acuitas Therapeutics and AbCellera “took discoveries from university and were able to produce products and market them.”

UBC founded the University-Industry Liaison Office in 1984 to help commercialize discoveries made by UBC researchers, and the university still plays a central role in the regional life sciences cluster. UBC leads Canada’s Immuno-Engineering and Biomanufacturing Hub, which brings together 40 organizations across academic, industry, government and non-for-profit sectors – including SFU.

Vancouver is Canada’s fastest-growing biotech cluster, with 8,000 jobs added during the past 10 years.

Several provinces now have strategies for the life sciences sector, including B.C., Quebec and Ontario, Azzi said. At the federal level, there’s the National Strategy on Biomanufacturing and Life Sciences, which has committed more than $2.2 billion over seven years to continuing growing the sector.

Earlier this month, the Tri-agency Institutional Program Secretariat announced nearly $574 million from that funding for 19 projects at 14 research institutions across Canada, through Stage 2 of the integrated Canada Biomedical Research Fund (CBRF) and Biosciences Research Infrastructure Fund (BRIF) competition.

Challenges remain even for successful clusters

While all three innovation clusters in Montreal and Quebec, Saskatchewan and Vancouver are thriving, each still has challenges.

Montreal and Quebec’s video games industry no longer is a services provider to foreign multinationals. The province’s $1.4-billion industry stands on its own and generates its own intellectual property.

However, the creative people who form the core of the industry never learned how to properly run a business, from having a business plan and managing human resources to doing effective marketing and selling, Chancey said.

Quebec’s industry now needs to move from being the “Hollywood of video games” – producing global games such as Laura Croft the Tomb Raider and Assassin’s Creed – to being the “Silicon Valley of video games” with professionally run companies that are investing in the next generation of video game developers., he said.

“If we can teach the developers that we have now how to run their businesses properly, the next wave of growth through the video game industry will really be something to see.”

The industry also struggles to obtain sufficient capital investment. Chancey said he often has to go to games publishers in the U.S. or the U.K., or an investor in China, to secure VC capital.

“It basically devaluates my IP because I’m sending part of the profits overseas, which I think we need to find to find a way to [overcome],” he said.

Also, the Canadian Media Fund currently provides $320 million to help support production of domestic movies and television, but only $40 million for video game production. Yet the investment in video games generates as much revenue as the much larger investment in movies and TV.

“There’s still a lot of people who don’t understand the video ecosystem or the opportunity of it,” Chancey said. Globally, video games are now a $300-billion-a-year industry that eclipses movies and TV put together.

For Saskatchewan’s agri-food industry, one of the challenges is the Canadian regulatory environment, which Webb said is more complex for agriculture and agri-food than it is for the pharmaceutical industry.

Agri-food companies have three different regulatory agencies they must deal with. But even with Canadian regulatory approval for a new product or technology, because companies export they also need approval from nations that Canada exports to.

Very early engagement with the public on novel food products or technologies also is crucial, Webb said, “because food is so important for everyone.”

For Vancouver’s life sciences industry, a big challenge is that the sector is capital intensive over the long term, Azzi said. “We need a lot of money and we need a lot of time to bring discovery into an innovation.”

Currently, some of the government support programs and strategies are focused on the shorter term, including a quick return on investments, she said. “We need the programs and the government to also be patient, and have a long-term strategy to make sure that we are building that innovation and that sustainable ecosystem.”

 Azzi said she welcomed the statement in federal Budget 2024 that encouraged public pension funds in Canada to invest more in domestic tech companies. “This is the best signal that we can send to outside investors and the world – saying we believe in our own ecosystem and are investing in it.”

 Another challenge for the life sciences sector, Azzi said, is not losing the momentum it gained in responding to the COVID pandemic. That momentum saw rapid innovation, regulatory streamlining and industry-government-academia collaboration that resulted in vaccines against COVID-19.

Recent research indicates that because of climate change, within the next 15 years the chances of viruses and other pathogens jumping from an animal to a human could greatly increase, Azzi noted.

“We need to really make sure that our public policy and our government and all of us in collaboration are working to prepare for the next pandemic.”

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