Good morning. Originally a fishing outpost, St. John’s may seem like an unlikely place for a tech boom. In focus today are the factors that have helped Newfoundland stem the brain drain – and what the rest of Canada can learn from the province’s success.
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In the news
Resources: Sources say that Ottawa will approve construction of Canada Nickel’s Crawford mine as part of major projects push.
Labour: The union representing WestJet flight attendants said its members will go on strike if a deal is not reached with the airline by Sunday.
Deals: Ottawa launches “strategic exports office” as it gets hands-on with deal-making in strategic sectors.
Retail: Couche-Tard is expanding its European footprint with the $8.7-billion purchase of Polish retailer Zabka
Spellbook chief strategy officer Chris Gardner walks up Signal Hill, which overlooks the harbour in St John's, N.L., on June 10.Greg Locke/The Globe and Mail
In focus
Something in the water
Hi, I’m Alexandra Posadzki, and I cover financial crime and cybercrime for The Globe.
When I learned that financial-crime technology company Nasdaq Verafin was founded in Newfoundland – a place far from every global financial centre – I was intrigued. I teamed up with The Globe’s technology reporter Sean Silcoff, who has penned several pieces about the hot tech scene in St. John’s, to explore what’s driving the phenomenon.
Verafin uses cutting-edge technology to help financial institutions automate the more repetitive, burdensome aspects of financial-crime compliance. Founded in 2003 by three engineering students from Memorial University, the company made an early pivot from building software for mining robots to building software for banks.
Its rise is a feel-good Canadian success story. In 2019, Verafin announced a $515-million financing deal that was, at the time, the biggest venture-funding deal in Canadian history. A year later, it struck a deal to be acquired by Nasdaq Inc. for US$2.75-billion – one of the largest exits by a Canadian tech company of the past 25 years.
Today, Verafin continues to grow in St. John’s, where it employs more than 900 people and recently opened a second office. Its success has emboldened a new generation of tech entrepreneurs, proving that one can build a billion-dollar tech company anywhere.
Stephanie Champion, head of Nasdaq Verafin and Rob Norris, senior vice-president and head of product.Greg Locke/The Globe and Mail
I recently visited St. John’s to tour Verafin’s office and meet with local tech entrepreneurs (and to hike the North Head trail, a 1.7-kilometre coastal loop so stunning that I walked it three times). Everywhere I looked, I found the telltale signs of a thriving tech hub: Patagonia vests, industrial buildings transformed into cafes or coworking spaces, and busy professionals talking into their AirPods.
So what contributed to Newfoundland’s tech sector success? From what we learned, here are some of the most important ingredients:
Education
Memorial University of Newfoundland is a highly ranked school with a well-regarded engineering program. Some years, Verafin has hired virtually its entire cohort of computer science grads. Stephanie Champion, executive vice-president and head of Nasdaq Verafin, told me: “The talent that comes out of Memorial has helped us build our business.”
Early-stage financing
Local investors such as Killick Capital and Pelorus Capital have played a key role in many of the early-stage financings that have launched Newfoundland’s tech stars. To attract venture capitalists, a company must already have some traction, such as a rapid rate of growth or prominent customers. “Without Pelorus and Killick, you might not even get that opportunity, so they’re a critical piece of the whole ecosystem here,” said Chris Gardner, chief strategy officer at legal AI software provider Spellbook, which was founded in St. John’s.
A global mindset
Because Newfoundland and Labrador is such a small place, the province’s entrepreneurs are acutely aware of the fact that they’ll have to sell to international markets in order to succeed. That can help them scale quicker – a dynamic that has also driven prosperous but small tech ecosystems in places such as Israel and Estonia.
The lifestyle
Pretty much everyone I met with in Newfoundland who had chosen to stay in the province, or returned after some time away, emphasized the appeal of the lifestyle: short commutes (nothing is ever more than 10 minutes away), fresh salty air, easy access to world-class hiking trails, and house prices well below the national average.
A culture of giving back
Some believe that Newfoundland’s success might not be replicable in other parts of the country. Ed Martin, president and CEO of Genesis, Memorial’s business incubator, said the degree to which the province’s successful founders give back to the community is unique, and likely attributable to the fact that it’s a remote island. “I think there’s this mentality of, we’re in this together and we want to see Newfoundland really succeed on this bigger scale,” he said.
Perhaps the most resounding lesson we can take from the success of Newfoundland’s tech sector is this: Canada may be a country of natural resources, but we shouldn’t be reliant on them.
You can read the full story from Sean and myself today, to get the full picture on how St. John’s is fighting the lure of Silicon Valley.
Charted
Chipmaker checkup
Shares of global chipmakers have taken a sharp fall recently, but despite the scale of the declines, some argue it doesn’t affect the underlying case for investing in AI-related companies.
Quoted
Some things are simply too important to sell. The FIFA World Cup belongs to football. It always will. And so long as Europe has a voice, it will never be for sale.
— Europa League statement
European nations agreed to boycott the World Cup and all other FIFA competitions to protest Gianni Infantino’s plan to sell stakes in soccer’s biggest tournament to private equity investors. The Asian and North American soccer bodies also rejected his plan.
More files we’re following
By the numbers: Today we’re watching for data on Canada’s monthly real GDP for May. An advance estimate will also be released for June.
Before the bell: Some energy heavy hitters release earnings, including Brookfield Renewable Partners LP, Cameco Corp., Chevron Corp., Enbridge Inc., Fortis Inc., Imperial Oil Ltd. and TransAlta Corp. We are also expecting reports from Magna International Inc. and AbbVie Inc.
Morning update
A late-week rally in global shares left them on track for weekly gains after earnings from some U.S. tech giants eased concerns about AI returns.
Wall Street and TSX futures pointed up after major U.S. indexes ended sharply higher on Thursday.
Overseas, the pan-European STOXX 600 was up 0.62 per cent in morning trading. Britain’s FTSE 100 rose 0.54 per cent, Germany’s DAX gained 0.72 per cent and France’s CAC 40 advanced 0.85 per cent.
In Asia, Japan’s Nikkei closed 4.03 per cent higher, while Hong Kong’s Hang Seng edged up 0.10 per cent.
The Canadian dollar traded at 71.34 US cents.