MaRS slashes top ranks as government-funded innovation agency looks to reset mandate

MaRS Discovery District has slashed its senior ranks and is resetting its business model as one of Canada’s largest innovation support organizations heads into a potential funding crunch and seeks to re-establish its raison d’être.

According to a source familiar with the matter, the Toronto agency cut about 20 jobs including many at the top ranks of the organization. One key departure is chief delivery officer Krista Jones, who emailed dozens of women across the innovation sector Tuesday to say she would be leaving her $346,000-a-year job at the end of June. That is less than two years after she received a promotion and substantial raise from her previous position as senior vice president of venture services.

The Globe and Mail is not identifying the source as they are not authorized to discuss the matter.

“I’m so very proud of the part I have played alongside many of you in creating conditions that help founders, entrepreneurs and their companies grow and succeed,” Ms. Jones wrote in her email.

CEO Alison Nankivell said in a statement to the Globe that MaRS, in an effort to ensure its long-term sustainability, is “resetting our business model, which includes seeking to significantly increase engagement with the private sector and philanthropic circles while we continue to partner with all levels of government. We are also examining how our platform of spaces, programs, and community in the areas of health, climate, and transformative technology can propel Canadian innovation in a shifting global context.”

Ms. Nankivell through a spokesperson declined to confirm the number or scope of layoffs or elaborate further on her plans, but said in her statement: “Our path forward necessitates changes towards a more agile and lean organizational structure that reduces hierarchy and leaderships roles in favour of a reallocation of resources to support programming that more effectively supports founders, fosters even greater ecosystem collaboration, and ultimately increases our impact.”

It’s the first significant move by Ms. Nankivell since taking the helm of the organization in March after leading fund investments and global scaling for Business Development Bank of Canada’s private capital group BDC Capital. When her appointment was announced last December, she told the Globe and Mail, “I don’t think anything significantly needs foundational change,” at MaRS, disputing the assertion that the organization, which had 200 people at the time, had been anything but successful. “It’s more of a nudging of certain aspects of the overall programming and partnership with the community in certain directions of emphasis.”

MaRS occupies 1.5-million square feet on downtown Toronto’s hospital row and 55,000 square feet at a Waterfront Toronto building. It has 120 tenants including startups, venture capitalists and foreign multinational giants and provides advisory services to startups building health and climate technologies.

The organization, which receives nearly two-thirds of its $30-million in revenue from provincial and federal grants, has faced controversy over its real estate and questions about its sprawling mandate and effectiveness in helping Canadian tech startups scale up into large economic contributors. A key question has been whether it is more of a real estate operation or a taxpayer-funded agency that stimulates innovation.

MaRS has experienced a substantial drop in its non-government grant revenues, including fees for services to startups, donations and related party revenues, since 2019, the year before the pandemic began. That bucket of non-government revenues fell to $10.1-million in its fiscal year ended March 31, 2023 from $29.1-million four years earlier.

Total revenues including government funding dropped by 40 per cent from fiscal 2019 to fiscal 2023, while employee costs rose by 2.5 per cent in the period, reaching $23.9-million in the 2023 fiscal year. Several senior executives earned more than $300,000 a year in annual salary.

Meanwhile, MaRS reached the end of a two-year extension of its funding agreement with the Ontario government on March 31 that had seen the province kick in $10-million – more than a third of total revenues for each of those years, while a portion of its federal government funding for a small business-assistance program called MyStartr ran out on Dec. 31. Its future government funding situation is uncertain.

MaRS started as the latest in a decades-long effort to help bring inventions from the University of Toronto to market after the sale of its vaccine production business Connaught Labs in 1972. The University of Toronto Innovations Foundation, launched in the 1980s, aimed to encourage on-campus researchers and professors to take their intellectual property to market, but a university panel in 2004 concluded it was not living up to its mandate and recommended its dismantling and that the institution instead partner with MaRS.

By that point MaRS, founded in 2000, was in its infancy. It was the brainchild of John Evans, ex-chairman of Canada’s first biotechnology company, Allelix Biopharmaceuticals. MaRS originally stood for Medical and Related Sciences and was inspired by Kendall Square, Boston’s biotechnology cluster. The group set out to build a tower on property bought from the University Health Network, but its U.S. development partner bailed after the 2008-09 financial crisis and the province had to step in to complete the project, which drew the ire of the auditor-general. In 2017 MaRS completed a $290-million private financing of the tower project, enabling it to repay three-quarters of the nearly $400-million in loans received from the province to complete the stalled project.

Over the years MaRS expanded its support to startups across all areas of technology including information and clean technology and started a venture capital fund called MaRS Investment Accelerator Fund. It subsequently spun a new private sector venture capital fund in 2022 called Graphite Ventures.

MaRS along with other provincially funded startup hubs have sought to re-establish their relevance in recent years as regional economic stimulators after Ontario’s Progressive Conservative government began scrutinizing their effectiveness.