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Why Toronto won by losing its bid for Amazon’s new headquarters

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Toronto’s bid for Amazon’s second headquarters, known as HQ2, lost out to not just one location, but two — New York and northern Virginia — yet the Canadian city may be better off without the American retailing giant.

Amazon’s initial HQ2 pitch promised as many as 50,000 jobs wherever they ultimately picked. As it turns out, those jobs will be split in two, with 25,000 in each new hub, along with another 5,000 jobs to a third city, Nashville, Tenn.

Some people in Toronto’s tech sector, however, say they were worried Amazon would be a very big fish in a small pond — capable of eating up much of the talent in the pool.

“We already have a significant talent shortage, and Canadian growth companies need the talent that multinationals like Amazon will consume,” said Anthony Lacavera, the founder of Toronto-based Globalive, a company that helps entrepreneurs grow their startups through investment and partnerships in an email.

Toronto’s reputation as a tech hub is growing: it’s thriving off of early investments in artificial intelligence and financial technology, a strong university research community, and an ecosystem that supports startups.

According to commercial real estate and investment firm CBRE, for two years in a row Toronto has been North America’s fastest growing tech market, adding 28,900 tech jobs last year, up 13.6 per cent from the year before.  

But it’s yet to be home to a Canadian-born Amazon equivalent.

The arrival of an 800-pound gorilla like Amazon would be more likely to squash Toronto’s thriving ecosystem than help it grow, said Lacavera, who also founded his own startup in Toronto, WIND Mobile, which later sold for $1.3 billion US.

“Canada needs to build its own global winners and end the branch plant economy once and for all,” Lacavera said.

Selling Toronto

Still, Toronto’s bid laid out why it was “ready to become the home for Amazon’s HQ2.” It promoted Toronto’s strong, diverse and affordable talent, quality of life, competitive corporate tax rates, and the country’s universal health care.

We know that health care costs are top of mind at the company. In January, Amazon teamed up with Berkshire Hathaway and JP Morgan to create a new venture aimed at bringing down health care costs for its employees.

But health care wasn’t the only sales pitch. Organizers touted what Toronto had to offer by bringing together multiple different perks from different places in and around the region.

The city’s pitch had the backing of nearby cities such as Hamilton, the tech hub of Kitchener-Waterloo and many more to tout the abundance of high skilled workers — all of whom could be hired for far less than American workers paid in U.S. dollars would demand.

Toronto’s bid had the backing of other nearby cities that, collectively, are home to almost 8 million people across the region. (Toronto Global)

Markham, Ont., which was part of Toronto’s bid, tried to get Amazon’s attention by adding “Possible Future Home of Amazon HQ2” to its welcome sign.

 

There’s something Toronto didn’t do, though: woo Amazon with financial incentives. 

Even though Amazon was worth more than $1 trillion US earlier this year, as the battle between cities heated up, some tried to lure the company with billions of dollars in tax breaks and other enticements.

In the end, both cities that will share the new Amazon HQ2 were more than willing to ante up to play the game, with New York offering around $1.525 billion US in tax breaks and wage subsidies, and Virginia kicking in $573 million worth of incentives of its own.

“It’s disgusting,” said Richard Florida, who was on the board to craft Toronto’s bid, but resigned in order to speak out against cities that were putting expensive carrots on the table, and to try to convince them to compete on merit only.

However, he says the mayors he spoke with insisted they couldn’t do that.

“If everyone would’ve behaved like Toronto and Ontario, this would’ve been a much better process,” said Florida, likening the competition to American Idol.

An influx of thousands of workers could create costly problems for a city, from driving up housing prices, to crowding public transit.

“If Amazon’s going to come you don’t want to give them anything — you want them to be a partner in addressing many of the issues they’re going to create,” said Florida. 

Incentives that don’t pay off

Cities that compete for professional sports teams often roll out a red carpet and offer incentives such as subsidizing new stadiums. But according to Stanford economics professor Roger Noll, it’s never worth it. 

“In terms of local economic activity, there’s essentially zero benefit,” said Noll.

The Amazon case is more complicated though, because unlike a sports franchise, Amazon will derive most of its revenue from outside the chosen city and attract a high-end labour force that pays more taxes and spends money locally.

“It’s probably better for a community to buy Amazon, than a basketball team … but it’s still a huge amount of money to pay and extremely unlikely to be worth it,” Noll said.

Toronto likely would’ve needed to match the other cities’ massive incentives in order to win, which would’ve been a bad deal for the city, he said.

“It’s never worth multiple billions, and Toronto should be proud of itself that it didn’t win this.” 

Toronto’s consolation prize

Last week, Toronto Mayor John Tory said the city already got its payoff for its Amazon bid: the proposal it posted online has been downloaded more than 17,000 times.

“The other 16,999 that read that book beyond Amazon are people that today are making decisions about coming to Toronto…. This city is a beacon for investment, for people, for companies,” Tory told reporters.

On Tuesday, the mayor added that Toronto’s bid organizers are still in contact with the company and are “pursuing follow-up opportunities,” with Amazon that could lead to more investment down the line.

 

Toronto may have already landed a headquarters of sorts, if the Sidewalk Labs project that plans to transform a neighbourhood in downtown Toronto goes ahead, according to Florida. Sidewalk Labs is a sister company to Google.

“We could have a Google HQ2,” said Florida. “People don’t think of that.” 

If the Sidewalk Labs project is able to address concerns over data privacy and other issues that come up in public consultations, Florida is optimistic that it would benefit Toronto more than an Amazon headquarters. 

“For Toronto’s sake, I think it’s better it ended up this way,” said Florida

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The ‘Maple Majestic’ wants to be Canada’s homegrown Tesla

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Look out Tesla, Canada has a homegrown electric sedan on the way. Well, that’s if AK International Motor Corporation can drum up enough investment to make its EV a reality. Dubbed the “Maple Majestic,” the vehicle is a battery-electric designed to “excel in extreme climate performance without adversely affecting the climate, as befits a vehicle from Canada,” according to its website.

What’s in a name? — The company says the maple leaf is a “symbol of Canada’s warmth and friendliness towards all cultures,” while “majestic” refers to the country’s “status as a Constitutional Monarchy.”

That patriotism carries over into Maple Majestic’s parent company’s lofty goals. AK Motor founder Arkadiusz Kaminski says he wants the company, which he founded in 2012, to become “Canada’s first multi-brand automotive OEM,” and that the “Maple Majestic is intended to be Canada’s flagship brand of automobiles on the world stage.”

Partnerships are key — “We acknowledge that the best chance for the Maple Majestic brand to succeed, lies in continuing to build the relationship with Canada’s parts suppliers and technological innovators, whether they be academic institutions, corporations, or individual inventors,” the company explains. “We are currently seeking partners in automotive engineering, parts manufacturing, automotive assembly, electric propulsion technology, battery technology, autonomous technology, and hybrid power generation technology.”

In other words, don’t expect to be able to buy a Maple Majestic any time soon… and don’t expect to pour over 0-60 mph times, power output, range, or other key stats, because those don’t currently exist. For now, all we have are pictures and a short video clip. But at least those are arresting.

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PE-backed Quorum Software to merge with Canadian energy tech firm

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Houston-based energy technology company Quorum Software will merge with a Canadian tech firm to bolster its presence in oil and gas services.

Quorum announced Feb. 15 it plans to merge with Calgary, Alberta-based Aucerna, a global provider of planning, execution and reserves software for the energy sector. The combined firm will operate under the Quorum Software brand.

Gene Austin, CEO of Quorum Software, will continue in his capacity as chief executive of the combined firm. Austin, former CEO of Austin-based marketing tech firm Bazaarvoice Inc., became CEO of Quorum in December 2018.

Aucerna co-founder and CEO Wayne Sim will be appointed to the Quorum Software board of directors. Both companies are backed by San Francisco- and Chicago-based private equity firm Thoma Bravo.

“Over the last 20 years, Quorum has become the leading innovator of software deployed by North American energy companies,” said Austin. “Today, Quorum is expanding the scope of our technology and expertise to all energy-producing regions of the globe. Customers everywhere will have access to a cloud technology ecosystem that connects decision-ready data from operations to the boardroom.”

In addition to the merger announcement, Quorum Software announced it had entered into an agreement with Finnish IT firm TietoEvry to purchase TietoEvry’s entire oil and gas business. The agreement, which includes hydrocarbon management, personnel and material logistics software and related services, is valued at 155 million euros, or $188 million, according to a statement from TietoEvry.

“Our three organizations complement each other — from the software that our great people design to the energy markets where we operate,” said Sim. “Our new company will be able to deliver value to our stakeholders, while accelerating the growth of our combined business and the energy industry’s software transformation.”

The combined company will serve over 1,800 energy companies in 55 countries, according to the announcement. With its headquarters in Houston, Quorum will continue to have a significant presence in Calgary and in Norway, the headquarters for TietoEvry’s oil and gas software business. Quorum will have other offices throughout North America, Latin America, Europe, Asia and the Middle East.

As of Sept. 30, 2020, private equity firm Thoma Bravo had more than $73 billion in assets under management. In late December 2020, Thoma Bravo agreed to acquire Richardson, Texas-based tech firm RealPage in a roughly $10 billion acquisition.

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Piece of Kitchener technology lands on Mars on Perseverance rover

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KITCHENER — A piece of Kitchener technology has landed on Mars, thanks to NASA’s Perseverance rover.

The rover settled on the planet’s surface on Thursday afternoon. It’s been travelling through space since it was launched from Cape Canaveral, Fla. in July.

“The whole idea of being on a device that we’re sending to another plant with the express mission of looking for traces of past life, it’s pretty mind boggling actually,” said Rafal Pawluczyk, chief technical officer for FiberTech Optica.

The Kitchener-based company made fibre optic cables for the rover’s SuperCam that will examine samples with a camera, laser and spectrometers.

“The cables that we built take the light from that multiplexer and deliver it to each spectrograph,” Pawluczyk said.

The cables connect a device on the rover to the SuperCam, which will be used to examine rock and soil samples, to spectrometers. They’ll relay information from one device to another.

The project started four years ago with a connection to Los Alamos National Lab, where the instruments connected to the cables were developed.

“We could actually demonstrate we can design something that will meet their really hard engineering requirements,” Pawluczyk said.

The Jezero Crater is where the Perseverance rover, with FiberTech Optica’s technology onboard, landed Thursday. Scientists believe it was once flooded with water and is the best bet for finding any evidence of life. FiberTech’s cables will help that in that search.

Ioannis Haranas, an astrophysicist and professor at Wilfrid Laurier University, said the rover isn’t looking for “green men.”

“They’re looking for microbial, single-cell life, any type of fossils and stuff like that,” Haranas said. “That’s why they chose a special landing site. This could be very fertile land for that.”

“It’s very ambitious,” said Ralf Gellert, a physics professor at the University of Guelph.

Gellert helped with previous rover missions and said it’s the first time a Mars rover has landed without a piece of Guelph technology on it. While he’s not part of Perseverance’s mission, he said the possibilities are exciting.

“Every new landing site is a new piece of the puzzle that you can put together with the new results that we have from the other landing sites,” he said.

“It’s scientifically very interesting because, even though we don’t have an instrument on that rover, we can compare what the new rover Perseverance finds at this new landing site,” he said.

Now that Perseverance has landed on Mars, FiberTech is looking ahead to its next possible mission into space.

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