RIM was the Beatles of Waterloo’s tech sector, but not its foundation
By Gary Will
A few weeks ago, I mentioned that—according to the recently-released 2011 National Household Survey—the Kitchener-Cambridge-Waterloo census metro area (CMA) had passed the Ottawa CMA for percentage of residents working in software & IT & computer and communications manufacturing. I noted that a lot of that was due to RIM/BlackBerry, and that becomes clear if you back out the communications equipment manufacturing component.
According to the NHS, KCW (not exactly the same as Waterloo Region, but close) had 40% of all communications equipment manufacturing workers in Ontario—that is, people working in any role for companies in the communications equipment manufacturing sector.
That’s really an amazing number. There are very few sectors where the Toronto CMA wasn’t in top place for total numbers, which is what you’d expect from a region that comprises 44% of Ontario’s population. It was even number one among CMAs and CAs for farm workers. But not only was communications equipment manufacturing an exception, KCW dominated the category, far ahead of Toronto’s 29% and Ottawa’s 13%.
Not only did the number dominate other regions, it also dominated KCW’s tech sector. NHS figures showed KCW with nearly 50% more people working in communications equipment manufacturing than in the software/IT sector. Not all of that was due to RIM (these are 2011 numbers, remember), but that was by far the biggest chunk.
At the most granular, four-digit NAICS level of analysis, communications equipment manufacturing was the second biggest employer in all KCW in 2011, behind only elementary and secondary schools and ahead of insurance, universities, and grocery stores (the next three on the list).
When you look just at software and IT companies, KCW drops to third place behind the Ottawa CMA and the Toronto CMA for percentage of the workforce in those industries. It was also third in total numbers, with the Toronto CMA home to more than three-fifths of all people working for software/IT companies in Ontario.
Third isn’t as nice as first, but when you consider that this is discounting any contribution from RIM, that’s not too bad. KCW runs well ahead of the larger Hamilton CMA and has double the numbers of the similarly-sized London CMA.
These numbers provide some perspective on recent discussions around BlackBerry and its place in the Waterloo tech sector.
For years, Waterloo’s tech rep was built around UW. Then RIM became the standard bearer and Waterloo’s rep soared to new heights. RIM’s success created a halo effect around the entire region’s tech sector and, as I wrote last year, “thanks to RIM, people were ready to believe that a lot more was going on in Waterloo than was really the case for many years. We put that belief to good use, attracting the resources needed to help the reality catch up to the belief.”
But it was only Waterloo’s rep that was build around RIM, not its tech sector. I spent years working in the Waterloo startup community and hardly had any contact with RIM and very limited contact with ex-RIMers doing startups (there was Ali Asaria, Dave Kruis, Ian Russell, and undoubtedly some others I no longer think of as RIM guys, but it wasn’t many). There’s more of them now, but RIM wasn’t a feeder system for Waterloo tech companies and was only a major customer or partner for a tiny number of the area’s tech companies. Waterloo Region’s tech community wasn’t built upon RIM and RIM was certainly not the foundation of the startup community.
We may now be in the homestretch of BlackBerry’s run as a standalone company. That’s led to a lot of things being written about Waterloo Region over the last year, ranging from is-Waterloo-the-next-Detroit (no) to pfft, we’ve-got-hundreds-of-tech-companies. And Waterloo Region does have hundreds of tech companies—and the regional tech sector is one of the biggest in Ontario (and Canada) even with NO contribution from RIM. At the same time, there’s only been one RIM and we may never see another one in our lifetime.
For years, I said that people in Waterloo asking who their next RIM was going to be was like people in Liverpool asking who their next Beatles were going to be. I think it’s okay to acknowledge that RIM was the Beatles of Waterloo’s tech scene, while accepting that this doesn’t mean that Waterloo’s tech sector is on the verge of collapse or that there will be any fewer companies launching and growing in the years ahead.
We’ve already seen evidence of how strong and diverse the Waterloo Region tech community is. According to the National Angel Capital Organization, GTAN was the most active angel group in Canada last year (by dollars invested). When FedDev Ontario ran its Investing in Business Innovation program in 2011-12, it placed more than $16 million in 20 high-potential companies in the area in just a 15-month period. I believe that only the Toronto area had more companies funded, and most other comparable communities didn’t come close (Ottawa did well too, Hamilton had one company receive IBI funding, London had none). None of the funded companies was related to RIM and this level of activity suggests that Waterloo Region’s tech sector will continue to be strong, with or without RIM.
It’s highly unlikely that any of them will ever be what RIM was, and it was good for Waterloo’s tech rep to be able to cycle in the draft created by RIM. But the community used that time well and is well-positioned for whatever comes next.
Gary Will is a Communitech Executive in Residence. This post was originally published on his blog on Sept. 18, 2013.