Harbouring Ambitions: Nanaimo’s tech scene shines above government bickering

Northern Biomass founder Talby Mckay did his homework before deciding where to move his company last summer. The winner? Embattled but thriving Nanaimo

Credit: Nik West

Northern Biomass Consulting founder Talby Mckay plans to build a biochar plant in Nanaimo

Nanaimo has quietly reinvented itself as a destination for innovative startups. The Vancouver Island port town may not become a tech mecca anytime soon, but it’s thriving despite city hall squabbles that critics say have thwarted economic development

Talby Mckay, founder and president of Northern Biomass Consulting, folds heavily tattooed forearms over his chest and gazes at a scale model of an industrial facility that he hopes to break ground on this summer in Nanaimo. At full capacity, the joint venture between Northern Biomass and Colorado-based Biochar Now will produce roughly 70,000 kilograms of biochar a day at its six-hectare site. Known mostly as a soil conditioner, this material has other applications, from clothing insulation to water filtration.  

“Availability of wood fibre and a deep-sea port that gives us access to markets,” Mckay says when asked what prompted his company’s move from Prince George to Nanaimo last summer. “We did a feasibility study, and Nanaimo came out on top.”

The pilot facility is the first of six plants that Northern Biomass plans to build in Western Canada as it seeks to capture a share of the US$8-billion North American market for biochar, a carbon product derived from wood waste via pyrolysis (using heat to alter the chemical composition of organics in the absence of oxygen). When Mckay talked to BCBusiness in May, he had secured land at an undisclosed location but was still busy with financing—so busy that he hadn’t finished moving into his new digs on Nanaimo’s waterfront.

The same office was home to Nanaimo Economic Development Corp. (NEDC) until late 2016, when then-CEO John Hankins penned an op-ed criticizing city officials’ decision to remove tourism marketing from NEDC’s mandate. The city fired Hankins before closing the development corporation that December. There’s perhaps no better metaphor for Nanaimo, which seems to be succeeding in spite of itself: a company takes over the premises of a defunct municipal agency aimed at luring businesses.

Northern Biomass is one of the new players in an emerging entrepreneurial economy that is making people reconsider this city of 90,000, which has traditionally relied on fishing, mining and forestry. For many, though, the Harbour City is still best known for its namesake confection, the Nanaimo bar, shopping mall sprawl and the Loyal Nanaimo Bathtub Society (whose annual bathtub race, which takes place from July 20 to 22, is a favourite summer event). And, unfortunately, for civic chaos.

For the past three years, business triumphs have been routinely trumped by headlines highlighting Nanaimo’s monumentally dysfunctional municipal council. Like they’re watching a car wreck in slow motion, citizens find it hard not to gawk as the news cycle dishes out salacious reports of bullying and insult swapping among Mayor Bill McKay and city councillors, questions about the mayor’s business dealings and a lawsuit involving a former city staffer.

Andrea Rosato-Taylor, one-time publisher of the Nanaimo Daily News and a sales manager with Black Press, is one of the organizers behind Vision 2020, a rally first held in 2011 and again in April 2017 to show Nanaimo as a welcoming place to launch a business. In other words, to counter the flow of negativity from city hall.

“We’re all just holding our breath until this council is done,” Rosato-Taylor says at a coffee shop on Commercial Street, which winds through Nanaimo’s historic downtown. The core, where homelessness and poverty collide with the Vancouver Island Convention Centre, art galleries and boutique shops, still has the gritty edge of a port city.

Until October’s municipal election, it’s a case of grin and bear it for companies like Inuktun Services, a designer and manufacturer of remotely operated vehicles (ROVs). This understated Nanaimo tech outfit employs 60 people in Canada and the U.S. Customers worldwide use its robots to perform search-and-rescue operations, survey pipelines for damage, inspect the radioactive innards of nuclear power plants—and even shoot big-budget reality TV shows.

Los Angeles–based Gurney Productions recently rented one of Inuktun’s specialized inspection cameras to film an episode of the series Shark Week. “They needed a robust HD camera, and we were able to provide an off-the-shelf model,” says Inuktun CEO Colin Dobell.

As for the noise from city hall, Dobell is frank: “I think the city infighting diminishes Nanaimo’s reputation overall, which can have a negative effect on recruiting talent, or even on customer and investor perceptions.”

Credit: iStock

A busy port, Nanaimo has also become a haven for businesses outside its traditional resource industries

Beyond the Nanaimo bubble

But in some ways, Nanaimo is selling itself—by default. Lifestyle and affordability are big draws. Like elsewhere on Vancouver Island, the local real estate market has been hot, with the average price of a single-family home surging 16 percent year-over-year to nearly $540,000 as of April, according to the Vancouver Island Real Estate Board. But for anyone used to Vancouver’s seven-figure listings, Nanaimo’s commercial and residential property is a bargain.

Add the seaside setting, hiking, biking and other recreational amenities, and the city starts to shine, especially given the difficulty some Lower Mainland companies often face recruiting and retaining young employees in a perennially super-heated housing market.

When Kent Flint, chief operating officer at Real Estate Webmasters (REW), first came to Nanaimo in 2013 to visit his retired parents, he fell in love with Vancouver Island, he says. So Flint left a successful career in the Ottawa tech sector and moved west with his wife and three children. In early 2016 he joined REW, which has a staff of 150 spread between a three-building campus in Nanaimo and a downtown Vancouver office and provides software and web solutions to 60,000 realtors throughout North America. Flint believes the company’s success in the years ahead will require thinking outside the Nanaimo bubble.

“When I first arrived at REW, they were comparing themselves to other Nanaimo-based employers, but we’ve redefined ourselves as a high-tech employer, and this has played a pivotal role in shaping a more tech-like culture at the company,” he says. “We are the big fish in a small pond in Nanaimo and had to do a bit of a reality check when we opened our office in Vancouver, joining 100 other tech employers fighting for talent.”

Lifestyle also sold Chris Davis in 2015, when he was searching for a place to relocate with his family and launch his latest cybersecurity startup, Hyas Infosec. The Nanaimo native, who spent his teenage years as a hacker in the basement of the family home, geeked his way into a successful Internet security career in the U.S., working for big names like Dell and Damballa before starting Defense Intelligence and later Morrigan Research.

For his third venture, Hyas, Nanaimo fit the bill: close to extended family, affordable and offering most consumer conveniences without being too big, even if he knew it could pose extra challenges to attracting venture capital and talent.

Two years in, Hyas employs 10 full-time staff and five contractors. This January the company launched its debut cybersecurity platform, named Comox; its client list includes American Express, the U.S. government, investment houses and two major accounting firms. In March, Hyas released its next software product, Salt Spring, which Davis says got an early boost thanks to “a pre-order from the cyber intel team at Deloitte HQ in New York.”

A few blocks away, Ron Hartman, co-founder of iDUS Controls, sits at a desk at Square One, a cooperative, open-concept workspace next to the storied Queens Hotel, which has been serving pints of beer since logging and coal formed the resource foundation of Nanaimo. The decade-old business is another homegrown success story. The company,   whose software and hardware let farmers monitor soil moisture content and adjust irrigation, has customers across the globe, including food technology heavyweights like Monsanto Co. and Syngenta.

The business could have located anywhere, but in Nanaimo, Hartman lives in a heritage house blocks away from a quaint downtown of brick and stone buildings, rides a bike to work and walks from Square One to his sailboat. It’s as if to say: Put that on a billboard, why don’t you?

Alongside Nanaimo’s IT pioneers, the city has a small but diverse cleantech sector. In green energy, there are SRM Projects and Barkley Project Group, which both specialize in run-of-river hydropower development. For 25 years, Canadian Electric Vehicles (CANEV) has been designing and making electric vehicles in rural Errington, north of the city. The company’s flagship product is the Might-E Truck, a light-duty, electric-powered service vehicle found in the fleets of airports and of municipalities like Tofino and Ucluelet.

In early 2017, founder Randy Holmquist sold CANEV to Alberta mechanical engineer Todd Maliteare, but he’s staying on the payroll at least until the end of this year. CANEV’s production volume is modest: in 2018, the company will roll out a dozen of its Might-E Trucks from Holmquist’s backyard shop.

Still, you need much more than lifestyle perks to declare yourself a technology hub, like some Nanaimo boosters tend to do these days. According to one industry insider who spoke on condition of anonymity, if you walked into a venture capital mixer in Palo Alto and touted Nanaimo as a tech centre, “you’d be laughed out of the room.”  

It took decades for Vancouver and Victoria—the latter now home to roughly 300 firms generating a combined $4 billion in annual revenue—to make that claim. Kelowna also has a booming tech sector that has grown roughly 30 percent since 2015 and is leading the charge in the Okanagan, where more than 650 such companies do business. By comparison, Nanaimo is still a diamond in the rough.

“Over the past few years, it has been very exciting to see several local and regional technology startups break through the early stage,” says Graham Truax, acting executive director of Innovation Island, which services Vancouver Island (outside of Victoria) and the Sunshine Coast, and belongs to a network of tech incubators established by Crown agency the BC Innovation Council. “Tech is starting to measure here, slowly but surely. The challenge for most of these companies is that the tech sector is a global marketplace.  This means competing for capital, customers and talent with larger centres that often have far more resources.”

Most tech investors can’t pronounce Nanaimo, let alone pinpoint it on a map, Truax says. For now, he advises, it’s best to dispense with labels like “tech hub,” and “get down to business.”

Credit: Nik West

Local businessman Bob Moss started the Mid-Island Business Initiative after becoming frustrated with city hall

Playing the long game

At a time when the city’s star appears to be rising, Nanaimo’s official economic development efforts have shown little progress lately. In November 2017, the city announced that it was folding that file into the real estate and business development section of community development and that staff would develop a “work plan.”

Bill Corsan, deputy director of community development, had few details about the work plan to share with BCBusiness. Tourism promotion for the city has been outsourced to the regional destination marketing organization, and longtime city staffer Amrit Manhas is now economic development officer in a lonely one-person outpost at city hall that faces an uphill battle to regain public confidence.

Sheryl Armstrong is a tough-talking ex-RCMP sergeant who won election to city council with nearly 50 percent of the vote in a byelection last July. Armstrong said she ran for office because she’s interested in politics and was disgusted by the drama and negativity at city hall. Last December, Nanaimo launched a lawsuit—since dropped—against Mayor McKay over accusations of leaking confidential information. This March, the Crown laid criminal charges against chief administrative officer Tracy Samra for allegedly threatening staff and council, and the investigation is ongoing.

“The sad thing is that council is so divided that they have forgotten to put the city first,” says Armstrong, who at press time hadn’t decided if she would run in this fall’s election. “I know that some businesses have opted not to locate in Nanaimo because of the turmoil and that others are holding off on expanding until there’s a new council.”

Armstrong believes Manhas is doing her best, but economic development is stalled, she reckons.

In early 2017, this lack of confidence prompted a group of local business leaders headed by Bob Moss, president and founder of real estate brokerage NAI Commercial Central Vancouver Island, to form the Mid-Island Business Initiative (MIBI). A decade ago, Moss helped lobby the city to create an independent economic development office; its decision to kill the arm’s-length organization frustrated him, he says. But these days being exasperated by civic politics comes with Nanaimo citizenship, so he moved quickly.

“I knocked on doors to see if there was interest in creating a privately funded organization, and I got a great response,” Moss recalls. More than a dozen businesses and institutions now back the initiative, including Vancouver Island University (VIU), web design and Internet marketing firm Array Studios and Kristo Zorkin Group, the development firm behind the rejuvenation of Nanaimo’s old downtown quarter. “We’re competing with a lot of communities, and we want to get the message out about Nanaimo,” Moss says.

MIBI hired John Hankins as its CEO, a half-time position, and in 2017 it hosted two events in downtown Vancouver. This past April, the group welcomed guests to the Terminal City Club for another of these gatherings, which Hankins describes as “invite-only meet-and-greet, awareness- building and myth-busting sessions,” aimed at highlighting Nanaimo’s affordability, lifestyle and business-friendly attributes.

“We’re not here to point fingers, but whatever is happening business-wise in Nanaimo these days is in spite of city hall,” Hankins says.

Odai Sirri, director of operations at Waterfront Holdings, rolls his eyes at the mention of MIBI during a meeting at the Grand Hotel Nanaimo, a property developed and owned by Waterfront in the north of the city that serves a mostly business clientele. He prefers the Graham Truax approach: forget the cheerleading, roll up your sleeves, and get down to work.

Waterfront got its start in West Vancouver 30 years ago, when Sirri’s Iraq-born engineer father turned his focus to property development. With two and a half decades’ experience in Nanaimo, the company has been involved in a variety of projects and partnerships there, among them a redevelopment of the Moby Dick Oceanfront Lodge and Marina, a motel with a rough-and-tumble past that was originally developed by Frank Ney, one of Nanaimo’s most colourful former mayors.

In 2012, Waterfront signed an economic development agreement with the local Snuneymuxw First Nation focusing on joint ventures and investment in tourism, hospitality, marine services and education, and including plans to grow tourism businesses on Newcastle Island, a scenic park accessible by water taxi from the harbour.

Waterfront’s latest venture is the Diver Lake Innovation and Technology Park, similar in spirit to Kelowna’s Innovation Centre, which opened last year. The proposed 70,000-square-foot facility, aimed at IT and R&D firms and located in the heart of Nanaimo, is still at the blueprint stage. Sirri says Waterfront hopes to start building once the project reaches 70-percent tenancy commitment.

The idea for the technology park emerged from a conversation that Sirri had with the city’s Amrit Manhas several years ago about robot maker Inuktun needing to move to a new space: “Amrit told us that Nanaimo definitely wants to keep a company like Inuktun.” But getting shovels in the ground is proving to be a test of endurance. Nanaimo is a city that doesn’t “understand itself and lacks political maturity,” Sirri says.

“We know there are good businesses here; we know that we’re a fast-growing community. But everyone is sick of hearing about how Nanaimo has so much potential,” he adds. “Nanaimo is really about playing the long game.”

The long game, and the lifestyle game. For Hyas Infosec founder Chris Davis, despite the drawbacks of being away from venture capital hubs like Silicon Valley, the pros of Nanaimo still far outweigh the cons. He’s prepared to pay what he calls a “de facto tax” for setting up shop in the city.

“Our employees are all absolutely loving it here. They are engaged in the community, going to local events, bitching about the city government and getting out to explore every chance they get,” Davis says. “Much like most people who live here.”