Safety in Numbers : An Accountant by Necessity
Aaron Bast is a talent scout, but the candidates who audition for him don’t dance, sing or shoot a hockey puck. Instead, they write algorithms, tinker with robots and push the limits of artificial intelligence.
Bast is the MaRS Discovery District’s face in Waterloo Region. We’re not talking the Red Planet next door, but the biggest tech organization in Metro Toronto. And the only thing even remotely astronomical about his job is the size of his cheque book. With the stroke of a pen, Bast can set a startup on the road to glory, furnishing the funds that can make the difference between success and failure.
The weird thing about him is that he never set out to be a numbers guy. When Bast enrolled in the business program at Wilfrid Laurier University in the fall of 2002, he saw himself majoring in marketing or business operations. Course titles like “International Business”, “Supply-Chain Management”, and “High-Tech Marketing” sounded a lot sexier than “Accounting 101” which conjured up images of dull, bespectacled poindexters huddled in cubicles reverently murmuring about pivot tables.
But during talks with his father Philip Bast, he gradually woke up to the idea that financial accounting should be a "tool in my tool belt," — maybe the most important tool. Though his dad, who died in 2014, was a longtime arts editor at the Waterloo Region Record, he had always had a good head for business and had tried to start a homebuilding business at one point in his career.
Accounting was the most challenging “sub-stream” in the business program at Laurier, and did not have the cachet of courses like “high-tech marketing." Hollywood didn't make movies about accountants, but Bast decided there was no getting around the fact he needed it on his resume. Besides, there was the looming issue of job security. No CPA designation behind your name, Mr. Bast? Sorry, next candidate.
He plunged into the accounting courses at Laurier, doing well enough to attract the attention of accounting giant Ernst & Young, which hired him as a co-op student in its Kitchener office. But post-graduation, Bast still had to run the gruelling gauntlet of the Chartered Professional Accountant exam to receive his CPA designation.
The pressure was on—looking over his shoulder were his bosses at Ernst & Young. The co-op term had turned into a part-time position while he was still at Laurier, but obtaining the CPA designation was crucial. Failing the exam might scuttle his EY job and adversely alter his career path. True, accountants are rarely silver screen heroes, but for aspiring CPAs the exam is a challenging struggle fraught with dramatic tension worthy of the Hollywood treatment. “They put you through the wringer,” says Bast. “It’s a pressure-cooker environment by design.” So with his nascent career on the line the young graduate rose to the challenge of the three-day, heart-pounding, brain-busting marathon and proved that he had the chops to make it as a certified numbers geek, ultimately emerging from the ordeal as Aaron Bast, CPA.
Ernst & Young and The Restless
With the CPA notch on his belt, Bast was hired full-time at Ernst & Young in 2006. The audit department was his first gig. He would review the books of corporate clients from the previous year, ensuring that statements met accounting standards. At first life was good. He joined a team handling a major corporate client, Manulife, and even travelled to Halifax when the company acquired Maritime Life. But gradually he chafed at the audit side of the ledger. Looking backwards at historical results and pointing out mistakes wasn’t popular with clients.
Bast moved over to the tax department at EY. It was more to his liking. He could look forward and help clients save money with good planning. Now he was a hero instead of a villain. “Clients would come back and say thank you instead of, ‘Get out of the room.’ ”
As time passed at EY, something began to trouble him. The firm’s roster was dominated by large corporate clients including Research In Motion. Yet RIM was teetering as its BlackBerry smartphone lost ground to the iPhone and the Android suite of devices. Meanwhile, the tech startup scene was starting to pick up steam in Waterloo. A handful of promising firms was emerging, aided and abetted by better and more nimble coaching from the Accelerator Centre. Shouldn’t EY be getting a piece of this action, Bast wondered? Another RIM could be lurking in this group. If EY “could catch some of the up and comers” the payoff could be huge, he said.
The trouble was, EY wasn’t set up to woo baby tech firms. Its fee structure was geared toward large clients. Working with the managing director of the local EY office, Bast began to spend half his time on what he calls “intrapreneurship.” Acting like an entrepreneur within the firm, he would develop a tech practice tailored to startups, featuring a plan to address the new market and financial offerings that made sense to tech toddlers given the stage they were at.
Part of his strategy included getting involved with EY’s Entrepreneur of the Year competition. By researching and nominating founders for the award, he could get to know some of the rising stars in the startup community. Over time, he began to see results. “We built a nice little tech practice of emerging companies.”
Miovision: Trafficking in Innovation
Through his work wooing smaller tech clients, Bast met Kurtis McBride, co-founder and CEO of a promising four-year-old startup called Miovision. It specialized in hardware and software to optimize traffic flow and analysis in urban areas. McBride was impressed by Bast’s business savvy. “We need a guy like you to shore up our management team,” McBride told him one day in 2009.
Bast mulled over his options. Miovision was a small company with just 25 employees and no significant earnings. It would be a big risk leaving a large stable company like EY. Yet McBride and crew were young and hungry. And they had a suite of products on the cusp of significant traction. Something else was eating at Bast. EY was too comfortable. He needed to prove to himself that he could make it in a true entrepreneurial setting. In early 2010, he joined Miovision as chief financial officer.
At first he wondered if he had made a huge mistake. The hours were punishing. The Miovision team was working 60 to 70 hours a week, sometimes even more, as it went flat-out to build a customer base. Jobs like this took over your life. Yet once he got used to the frenetic pace, Bast found it exhilarating. “We were a tight-knit team, all driving for growth as aggressively as we could and having fun doing it.”
The hard work paid off. During his four years at Miovision, revenues grew 15-fold, the workforce jumped to 125 people, the company opened a German sales office in Cologne and raised $20 million in venture capital financing. Raising that kind of money was complicated process. Bast had to tap a number of sources, including Golden Triangle Angelnet, the Business Development Bank of Canada and a bunch of private investors.“In Canada, you can’t go to just one VC fund. You have to go to a number of sources. There was a lot of piecing together.”
The financing ecosystem was less mature in those days, he says, and typically lags the startup ecosystem. A critical mass of startups must be established before the funding infrastructure can take shape. Despite the breakneck pace, Bast valued his time at Miovision. “It’s something I wouldn’t trade for pretty much anything.”
There was a lot of pressure to succeed. Miovision was a poster child for the Accelerator Centre, he noted. “We were building what we thought would be and ultimately is now a big business in this region.”Today Miovision has 17,000 urban clients worldwide, including the cities of Toronto, Detroit and Chicago, raised $120 million CAD in financing early in 2020, and is considered one of Waterloo Region’s leading tech companies.
Unicorns, Angels, and "MaRSians"
In 2014, Bast began looking around for new opportunities. His wife had just had a baby—they now have three children—and he needed a change. The tech world is small. Word that he was available reached the MaRS Discovery District, the not-for-profit corporation that manages and leads the Toronto tech sector.
Founded in 2000, the MaRS name initially stood for medical and related sciences, the corporation’s focus in the beginning, but it has since broadened its mandate to include all manner of tech firms. It’s the equivalent of Communitech in Toronto. Part of the MaRS portfolio includes managing a $100 million kitty called the Investment Accelerator Fund (IAF), created by the province at the tail end of the last recession to invest in tech startups at the seed stage. When managers of the IAF heard Bast was available they checked out his credentials, then offered him a job. He didn’t have to think long about it. “It was a really interesting opportunity, too good to pass up.”
Though the MaRS office is based in Toronto, Bast would serve as its eyes and ears in Waterloo Region. Commuting from Toronto wouldn’t cut it. “It’s different if you’re a member of the community,” he says. His job is to write cheques of up to $500,000 for young firms meeting the following criteria: a product or service showing early-market traction, no significant revenues or assets and no other institutional investments.
Five hundred thousand may not seem like much over the long run when firms with the latest killer app can raise tens or even hundreds of millions of dollars. But at the seed stage it is vital, says Bast. Angel investors typically invest $25,000 to $50,000, the first stage of funding for a startup. At the next level—the seed stage—startups typically look for $1 million to $2 million from a variety of sources. $500,000 “is a big piece of that,” he says. If that half-million-dollar seed is not planted, a startup may not germinate into a plant that makes it rain dollars down the road. “We’re a catalyst.”
Since Bast joined the fold, MaRS has invested in more than 20 tech startups in Waterloo Region and area, spanning a variety of sectors— everything from biotech and wearable technology to construction software and wireless video. Dejero, Intellijoint, Voltera, Nicoya Lifesciences, FunnelCake and Bridgit are among the companies in its portfolio.
Bast describes the MaRS portfolio, which includes more than 180 investments in total, as “agnostic” or “generalist.” Clients must be capital-efficient with a strong team and a large business opportunity “that fits into the changing market landscape.” The IAF team has 12 members. Apart from Bast in Waterloo and another member in Ottawa, the rest of the group is based in Toronto. Investments are generally recouped if a startup is acquired, goes public or raises more funds from a downstream investor.
Ryan Denomme, founder and CEO of Nicoya Lifesciences, says the Kitchener-based company would not exist without the funding it got from the IAF. It was the first capital raised by Nicoya and anchored the company’s seed round of financing, one of the hardest to secure.
Almost important as the cash was the vote of confidence by Bast and his crew in Nicoya. “Their reputation in the community as well as the work they put in to support their portfolio was critical to us being able to fill out the seed round and also raise additional rounds in the future,” says Denomme, a University of Waterloo grad in nanotechnology and mechanical engineering.
Founded in 2012, Nicoya develops sensor technology to measure bio-molecular interactions and to increase the affordability and effectiveness of scientific instruments. Customers include pharmaceutical companies, biotech firms and medical researchers in 40 countries.
MaRS pumped $250,000 into Nicoya in 2014, then added more in subsequent rounds. Nicoya used the initial funding to fill out early orders and make key additions to staff, which currently numbers more than 70 people.
Drawing from his experience at Miovision, Bast understands business from an operator’s perspective as well as an investor’s viewpoint, says Denomme. Not only that, Bast is skilled at strategic financing. “He has a lot of hands-on experience in raising capital from different sources and in different structures and understands how to leverage these at the right time,” adds Denomme.
Raising funds can be a tense experience, but Bast doesn’t get rattled. “No matter what crazy problems you bring him, he doesn’t overreact or get stressed out, and is always ready to help you find a solution,” says the Nicoya boss.
The philosophy of the MaRS team was set early by Barry Gekiere who was hired as managing director in 2010. He believed the fund should be run like a private entity, getting the same terms as a private venture capital fund. For the fund to work, it needed to bet on companies that would attract bigger dollars down the road. The IAF reached “evergreen” status in 2018 thanks to Gekiere’s leadership. In other words, it no longer required provincial support, says Bast. Gekiere “set the tone … He was a great guy.” Sadly, he died of cancer in May at 68. The fund is now run by managing director Lance Laking, with Bast and Craig Leonard serving as senior investment directors.
As a member of the MaRS team, the 37-year-old Bast is uniquely positioned to compare the Toronto and Waterloo tech sectors. The Toronto sector is “more frenzied” and more
competitive. Deals happen more quickly and at higher volumes, but investors there work less collaboratively than in Waterloo. The tech community here is tighter. “Everybody knows everybody.” He attributes Waterloo’s co-operative spirit to the “barn-raising tradition” established by local Mennonites.
He cautions local techies not to get too excited about the recent flurry of unicorn events. Startups such as Applyboard, Faire and Arctic Wolf—based in Waterloo or with a Waterloo connection— have stunned the community by raising hundreds of millions of dollars in venture capital investment, much of it from the U.S. The tsunami of cash has elevated them to valuations of more than $1 billion, the official benchmark of a “unicorn.” In Canada they are also known as “narwhals,” named after the Arctic whale with a large tusk.
Unicorn status is not necessarily a definition of success, says Bast. It’s really just a valuation on paper. More important is the “stability of the organization.” Is there a real business there and can it sustain itself over the long run, he wonders?
Despite the decline of BlackBerry, the Waterloo tech sector is doing just fine, he says. It has spread out from a base around the University of Waterloo and moved into downtown Kitchener. In the last five years, the Velocity incubator has “stepped into its own, Communitech has gotten to another level” and the sector is pumping out a high volume of emerging tech companies, aided by a maturing venture capital ecosystem.
The key is having a high volume of promising startups at the top or wide end of the funnel so that enough durable firms with large-market potential emerge at the bottom, Bast says.
The recent Covid pandemic, which he calls a “black swan event,” required a lot of triaging by the IAF team to ensure its client companies pulled through. There have been zero failures and some firms have even accelerated their business, he says. Mergers and acquisitions paused in the early months of the pandemic, but then picked up over the summer. That’s a “very positive” sign, Bast says.