Following the success of Radian6’s recent sale, there is a renewed interest in Atlantic Canadian IT start-ups. More regional thinking would also enhance the sector’s progress

Last winter, Jevon MacDonald set out to raise cash for his most recent start-up, GoInstant.com. In just three months, MacDonald pulled in more than $1.7 million from some of the biggest names in the North American tech sector, including LinkedIn co-founder Reid Hoffman and billionaire Internet investor Yuri Milner, whose investments span from Facebook to Groupon.

MacDonald’s past success as a tech entrepreneur no doubt helped him attract such prominent investors. Originally from Charlottetown, the 29-year-old launched his first start-up, a web-development company, in 1998. Since then he has founded five web-based start-ups and worked as a senior partner at Dachis Group, a social media company based in Austin, Texas.

Yet MacDonald’s pursuit of investor cash was also aided by a lucky coincidence: the multi-million-dollar sale of Fredericton-based Radian6, whose technology allows companies, including more than half of the Fortune 500, to monitor what’s being said about them online. Salesforce.com, a San Francisco-based cloud computing company, announced its plan to buy Radian6 in March. The deal was sealed in May, with Salesforce paying roughly $350 million in cash and stock to gobble up the five-year-old New Brunswick company.

The buyout was impressive by Canadian tech sector standards, never mind New Brunswick standards. The side benefit for MacDonald: a sudden interest in the start-up landscape of Atlantic Canada, just as he was seeking cash. “What’s changed hugely is the willingness of Montreal and Toronto and even New York and Boston investors to invest in the local tech sector. Radian6 had a huge impact on that,” says the Halifax-based entrepreneur. “The question of whether you can build a big company here is moot because it has been done. And there’s a real opportunity to leverage that momentum.”

The question now is simple: What will be the long-term impact of the Radian6 deal? Will it significantly advance the Atlantic Canadian tech sector, an industry many are hoping will deliver economic growth to a region in need of a boost? News of the buyout certainly aided MacDonald’s hunt for investment cash. The hope, for those in the sector, is that Radian6’s afterglow will continue to lend credibility to Atlantic Canadian tech entrepreneurs. Yet the massive deal also revealed a parochial undercurrent, one that tech sector leaders insist must disappear before their industry can fully bloom.

The Radian6 sale, first announced on March 30, was immediately hailed as a regional tale of success by Gerry Pond, Radian6’s first investor and original CEO. “It’s a great win for us in the Maritimes,” Pond said at the time. “This is intellectual property that was created here, local
angel investors put up the initial funding, and the management team was drawn
locally.” Pond is currently the chair of Mariner Partners, a Saint John tech company that has helped launch Radian6 and three other tech start-ups.

Yet in an editorial two days later, the New Brunswick Telegraph-Journal took issue with sharing Radian6’s triumph. “The company’s sale to a larger business is being hailed as a Maritime success story, though it is more properly a New Brunswick story,” stated the April 1 editorial. “The company’s history is a testament to the creativity and determination of New Brunswickers. Moreover, it demonstrates that homegrown New Brunswick firms can be leaders in a global, increasingly digital economy.”

Pond, however, continues to classify the rise of Radian6 as a Maritime story. Yes, the company is headquartered in the New Brunswick capital, but many of Radian6’s 350 employees are stationed at offices in Saint John and Halifax. In fact, Pond notes that Radian6 excelled at sales and marketing primarily because it expanded to Halifax.

The desire to trumpet Radian6 as a New Brunswick story is a symptom of the “tribal thinking” that often dominates the Maritime region, Pond argues. “Instead of competing against the world, we’re competing against ourselves. It’s sad but it’s true,” he says from his Saint John office. “There isn’t enough regional co-operation.”

Pond refers often to the Maritimes’ “six cities of IT”: Saint John, Fredericton, Moncton, Bathurst, Halifax, and Charlottetown. Those centres combined possess the workforce necessary to launch sizeable top-notch tech companies, he notes. And the chance of success is greatly increased if each city views itself as part of a region, not as an individual competitor. “It’s now city against city,” says the former Aliant Telecom president and NBTel CEO. “We always say, ‘Come to Fredericton or Moncton or Saint John.’ We never say, ‘Come to the Maritimes.’ But that’s what we should be saying. We have to do this together. If we don’t
co-operate, we’re going to sink.”

By unifying its strengths, the Maritime tech sector could partner in breaking into Asian markets, attracting more immigrant workers, and fostering more top-rung companies such as Radian6. “That’s where I see Radian6 taking us as a region—to the realm of being a global IT player,” says Pond. That goal, however, won’t be realized without changes, he insists. For instance, the region’s universities must produce more electrical engineers and computer science graduates, as well as offer courses in social media. “The next generation of social media could be invented in Fredericton or New Brunswick or in the Maritimes,” says Pond. “Radian6 has given us a head start, but we need to transfer that tech knowledge to a larger population base.”

Regarded as the godfather of New Brunswick’s tech scene, Pond isn’t alone in calling for more tech sector support. In February, a report from the New Brunswick Information Technology Council argued that the province must do more to cultivate its tech industry. The report, signed by more than 30 concerned individuals, including many of the province’s top tech names, presented some impressive numbers.

Most notably, it concluded that New Brunswick could create 10,000 jobs and add $1 billion to its economy by tapping the full potential of the Information and Communication Technologies (ICT) sector. But to do that, the report noted, New Brunswick must first address its shortage of ICT talent—a shortcoming that is causing many businesses to bypass the province. Among the report’s recommendations: an ICT scholarship fund, a “fast-track citizenship program” for ICT workers, and a three-year personal income tax holiday for new ICT immigrants and recruits.

In September of 2010, another earlier report from the IT Council called on the province to create a department specifically focused on the tech sector, such as a Ministry of Innovation or a Ministry for the Digital Economy. According to the Council, the ICT sector fuels 4% of the New Brunswick economy, compared to a national average of 5%. That 4% figure outstrips traditional sectors such as mining (1% of GDP) and agriculture (less than 2%) but trails manufacturing (11%) and retail trade (7%).

In all, New Brunswick’s ICT workforce has expanded by 149% over the past decade, with 8,100 New Brunswickers now working in the sector in positions ranging from software designers to cable distributors. “While there have been some notable successes…New Brunswick is dramatically under-utilizing the ability of the sector to generate economic growth,” wrote report author Larry Sampson, the CEO of the IT Council. “New Brunswick’s productivity and levels of ICT investment are the lowest
in the country.”

In Newfoundland and Labrador, Paul Dubé is hoping to soon produce a similar report, detailing the potential of his province’s tech sector. Dubé, who chairs the Newfoundland and Labrador Association of Technology Industries, says it’s essential to look beyond the province’s current petro-fuelled boom. “We have to be prepared for the future, when our non-renewable natural resources become depleted,” he says. “My fear is that we’ve become very dependent on the royalty revenue stream, and that we may be losing sight of other industries that have more long-term potential. If you’re going to bet on something, bet on the technology sector.”

But like New Brunswick, Newfoundland and Labrador suffers from a shortage of tech workers. That shortage is partly the result of the dot-com crash of the early 2000s, which caused an exodus of local tech workers. “We lost a lot of good people back in those days,” says Dubé. “How do we get them to come home? How do we show them the technology sector is again strong, vibrant, and full of opportunity?”

Back in Halifax, Jevon MacDonald says the key is to keep expectations realistic. Atlantic Canada only requires a handful of Radian6-esque successes to boast a thriving tech sector. “There’s never going to be a Silicon Valley Atlantic, and there’s never going to be a cluster. That’s not in the cards,” he says. “What we can do here is support, in a very pragmatic way, a couple of really great entrepreneurs and their ideas.”

MacDonald recently spent a year as entrepreneur-in-residence at Innovacorp, a provincially funded incubator for early stage Nova Scotia companies. It was at Innovacorp that MacDonald developed the idea for GoInstant, technology that allows users to instantly link their computers and surf the web together. Without downloads or plug-ins, GoInstant provides a “shared web experience.” When linked with GoInstant, two computers essentially become one: What appears on one computer appears identically on the other; scroll the mouse across one screen and it moves in unison across the other. In other words, the two computers become intertwined, making it possible to access the online world in tandem with a partner.

MacDonald, who with partner Gavin Uhma co-founded GoInstant, says their fundraising haul shows what can be achieved by Atlantic tech entrepreneurs. “I don’t want to sound cocky, but very few Canadian companies have raised a round of financing with this calibre of investor,” says the MacDonald, who also co-founded Startupnorth.ca, dedicated to Canadian tech sector start-ups. “We’re the first ones to put together a syndicate of A-list players in our first round. And I think what’s blowing people’s minds is that we did it out of Nova Scotia.”