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Tech hub suspends work amid payment row with Government

Gayle Gorman and Aaron Smith, of Innofund Tech Incubator (Photograph by Blaire Simmons)

An incubator for technology-based start-ups has suspended operations until “some resolution” is found in a dispute with the Government about its support for the project.

In an e-mail to entrepreneurs, Aaron Smith, the chief executive officer of InnoFund, and Gayle Gorman, the cofounder and executive director of InnoFund Innovation Incubator – i3 — said legal action was launched after lengthy talks were unsuccessful.

The Government earlier guaranteed a $2.5 million bank loan to InnoFund, which partnered with a leading technology accelerator based in Toronto and had a meeting with the Premier as plans to help boost business on the island were developed.

A writ filed in the Supreme Court’s civil jurisdiction claimed for loss and damage and alleged that the Government failed to pay for services and products provided after agreements were made.

It is understood that the dispute relates to a number of invoices resulting from work done by BPMS — a mobile software company that would fund the not-for-profit incubator — that were allegedly unpaid.

A finance ministry spokeswoman said this week that the Government could not comment owing to the legal action but will keep working to meet its aim “of creating an environment for tech companies to develop and grow” on the island.

Mr Smith told The Royal Gazette earlier: “InnoFund itself and the ecosystem that we’ve established here was built up to have economic impact and job-creation opportunities for Bermuda.

“It was set up in conjunction with Government, who had similar goals and objectives and we entered into this with the spirit of being a public-private partnership.”

The incubator was designed to act as a one-stop shop to help island founders and those from overseas to build and develop cutting-edge technology while scaling their start-up growth.

It has supported 12 members over 18 months and delivers a programme from Toronto Metropolitan University’s DMZ accelerator, providing access to coaching, capital, an investor network, expert-led workshops and customers.

A venture capital fund was also planned.

Mr Smith said a third element was BPMS, which was to create digital, mobile applications for government services in a single portal.

He added: “The product was developed and continues to be developed.

“It was the mechanism through which revenue was being generated from a source that could then go on to sustain the incubator and the VC fund and other elements of the ecosystem.”

He added: “Revenues from BPMS would be mostly shared and mostly put back to run the incubator.

“Those would then generate more companies that would come to Bermuda that could be invested in; and then the benefit of that would be the economic impact and job opportunities that that would create for Bermuda.

“This is why this system was appealing to everybody — Government, us and especially to those that we were trying to attract to our shores.”

An e-mail from Mr Smith and Ms Gorman last week to participants of i3 said: “It is with deep regret that we are sending you this message, especially at this time of the year.

“As many of you know, we have been in long discussions with our government partners regarding their obligations of support for InnoFund and i3. Unfortunately, these discussions have proven to be futile.

“We have found it necessary to file a writ of summons, staking our claim, as the only legal recourse available to protect our collective interests and will keep you updated as we have any news that we can share.

“Until there is some resolution, we have found it necessary to suspend the operations of the incubator and will not be in a position to provide formal support or programming for current or future cohort members at this time.”

Members were told that the organisations were “continuing to champion” their interests and seeking solutions.

Mr Smith told the Gazette: “We remain hopeful for a resolution with Government but have been compelled to protect the interests of the companies, our cohort members, and our creditors by filing a claim.”

InnoFund launched i3 in partnership with DMZ, which, its website said, has helped more than 760 start-ups to generate upwards of 4,850 jobs.

Entrepreneurs Jamie Thain and Jack Benaim took part in the Toronto programme — the No 1 university-based tech incubator in UBI Global’s 2019-20 World Rankings report — before recommending the development of a similar scheme in Bermuda.

A meeting with government representatives — including David Burt, the Premier — took place in January 2020.

InnoFund said last year that its co-founders Mr Benaim and Mr Thain were eager to help kick-start Bermuda’s third economical pillar.

The three entities

InnoFund Ltd: registered in Bermuda in November 2019 under “financial and insurance activities” with the business description “activities of holding companies”.

Its LinkedIn page said: “Backed by a global network of passionate leaders, we leverage Bermuda's edge to unite the global technology economy.

“Our mission is to cultivate a start-up culture on a local scale, connect communities and enable innovation through powerful relationships.”

InnoFund Innovation Incubator Ltd: registered in Bermuda in June 2020 with the object: “To manage space that will house qualified start-up technology companies”.

Known as i3, it is a not-for-profit, by-membership company, which had a funding guarantee from InnoFund as its initial and only member.

i3 is “powered by” the DMZ at Toronto Metropolitan University — formerly Ryerson University — which said in October 2021: “As a key centre for global trade, the new Bermudian innovation hub will act as a one-stop shop to help founders build cutting-edge technology and scale their start-up growth.”

BPMS Ltd: registered in Bermuda in February 2021 with the business activity description of “computer programming activities”.

An Instagram account said Bermuda Portal Mobile Software was “coming soon” but the last post was 83 weeks ago.

Its first post said: “We are a fully integrated mobile portal system that supports all vendors, businesses, attractions and small business owners in Bermuda.

“Our app will be available to tourists and residents of Bermuda soon.”

Other posts highlighted that the software offered “interactive trails where you can explore and learn about Bermuda” and the opportunity to buy and use transportation passes through “integrated payment options”.

One said: “We are digitising Bermuda's island life while energising the economy.”

Another post declared: “Our application provides stress-free access to everything needed for day-to-day activities, services and community updates.”

Administrative aspects of the Covid-19 pandemic also appeared to be part of the programme.

One post said: “Welcome to Bermuda's world-class vaccination software, where managing your quarantine and vaccination application is a breeze.

“Whether you're a Bermuda citizen/resident or an adventurous traveller, the BPMS's vaccination portal is for you."

The Royal Gazette was told that revenues from BPMS would go towards running the i3 incubator to help generate business opportunities on the island.

A copy of the writ, filed this month, showed that BPMS, InnoFund and InnoFund Innovation Incubator claimed for loss and damage said to be sustained by “breach of contract and tortious conduct of the Government of Bermuda, their servants and agents”.

It added that the claim was about “several agreements between the parties in relation to software and applications and the development of a technology company incubator”.

These were said to include a service agreement dated August 24, 2020, signed by the Premier, another dated April 12, 2021, signed by Lieutenant-Colonel Edward Lamb, the Cabinet Office permanent secretary, and a memorandum of understanding for the project “signed by Premier E. David Burt and supported by a government-guaranteed loan”.

The writ alleged: “The Government has failed to pay the plaintiff for the services and products provided pursuant to the agreements.”

It claimed that “further or in the alternative, the Government made misrepresentations ... that induced the plaintiffs to enter into the agreements and caused them damage”.

The $2.5 million loan guarantee was listed in the 2022-23 Budget statement.

InnoFund confirmed last week that the debt remained its responsibility.

The Gazette asked the Government about what obligations of support it made to the companies and what response there was from the Premier as well as the Minister of Economy and Labour upon learning that i3 had to suspend operations, among other questions.

A spokeswoman for the Ministry of Finance said this week: “A report to the House of Assembly was tabled on July 23, 2021.

“In accordance with Section 2AA (3) of the Government Loans Act 1978, then finance minister Curtis Dickinson informed the House of the issuance of three new government guarantees.

“One of these guarantees was a $2.5 million loan on behalf of InnoFund.”

She added: “Given the legal action mentioned, the Government cannot comment but will continue to work to meet the Government’s objective of creating an environment for tech companies to develop and grow in Bermuda.”

It is The Royal Gazette’s policy not to allow comments on stories regarding court cases. As we are legally liable for any libellous or defamatory comments made on our website, this move is for our protection as well as that of our readers.