Notman House Is In Trouble. Whats Next For The Home Of Montréal Tech?

Notman House, a Montreal startup hub that operates in a historic 187-year-old building, is being put up for sale as public creditors claim years of unpaid debts. Le Devoir first reported that OSMO, which owns and operates Maison Notman, owes $323,000 in unpaid mortgage payments to the Business Development Bank of Canada (BDC) and Investissement Québec (IQ).

The news surprised those familiar with Notman House in the local startup ecosystem, including those who rent space at the center, who told BetaKit they were unaware of the potential sale until publication of the article in Le Devoir. Many are now wondering what Notman's uncertain future means for Montreal Tech.

Since its founding in 2011 by Real Ventures and the OSMO Foundation, Maison Notman has served as a nexus for the city's thriving tech industry and is currently the only center of its kind in Montreal. It serves as a corporate meeting space, coworking and event space rental, and is also home to the popular OSMO Café.

“The community cares deeply about the Notman House because they built it with blood, sweat and tears.”

Emma Williams
Former Director of the Notman Campus

According to the suit, BDC and Investissement Québec have provided Osmo with loans totaling $6,853,630 since 2012 and the company now owes more than $323,000 in unpaid mortgage payments. They are demanding that the Notman House be sold under court supervision for at least 75% of the market value, which has not been announced.

Federal, state, and municipal governments, as well as private donors, initially provided grants to OSMO to finance the acquisition of the historic building. In February 2023, OSMO requested additional funding from the Quebec government, but this request was rejected for reasons that remain confidential, a media spokesperson told BetaKit in an email.

According to Philip Tilio, Startupfest founder and OSMO board member, OSMO never made a profit under Notman's leadership and often faced financial difficulties due to the scale of its debt and of the cost of renovating the historic building. Today, inflation and rising interest rates have further increased costs.

“It would be helpful to pay off more of our debt sooner,” Tilio told BetaKit. “But it’s a bit utopian (...) I’m not sure we had a mechanism to reduce our debt burden before the pandemic.”

According to John Stokes, president of the OSMO Foundation and co-founder of Real Ventures, a combination of political obstacles, a global pandemic and macroeconomic pressures have brought Notman House to its current position.

Stokes explained that Notman House lost major sponsors just before the pandemic, forcing the team to scramble to find sponsors at a time when no one was interested in renting physical space.

“During COVID we couldn't rip off anyone and obviously no one could pay,” Stokes said. “It was kind of a double whammy.”

However, BDC and Industries Qatar recognized these financial obstacles by changing their payment plan from paying interest and principal to paying interest only.

“Governments are very good at creating programs that you have to follow, and then they reward you or not for the program,” Tillio said. "There is no program [...] allowing entrepreneurs to finance infrastructure projects."

The question now is whether players in the startup community will step in to continue the legacy of innovation of the Notman ecosystem and purchase the property, or whether the building will find new owners in another sector.

“The financial situation is not so great that it is impossible to imagine someone coming to save it,” Tilio said. “In that sense, yes, it is entirely possible for an individual or a group of people to come together and figure out how to solve their financial problems.”

For now, despite the upheaval, the Notman House team will continue to manage the building and carry out its core operations until the sale is completed, Stokes said.

A preliminary hearing between lawyers for BDC, IQ and OSMO was scheduled for December 5, but was ultimately postponed to December 15.

New basics

Even if the founders of OSMO are optimistic, the future of Maison Notman remains uncertain. Stokes confirmed he would cooperate with the sale, but no one has yet expressed interest in acquiring the position. A startup hub could soon appear in the city.

A new initiative with a similar mission called Ax-C, scheduled to launch in December 2024 at an undisclosed location, has raised about $40 million in government support. Like Notman, the project aims to create a hub of collaboration and innovation in emerging technologies for entrepreneurs. However, Ax-C is part of Quebec's 2022-2027 strategy to support research and investment in innovation and is developed by the École Technique Supérieure (ÉTS), a non-existent institutional branch of Notman.

Stokes said he and the OSMO Foundation plan to take advantage of the post-pandemic reopening of the Notman House when he assumes the presidency in January 2023. As he strategizes, news regarding the Ax-C project and its government funding became public.

“It is to its credit that this government has recognized the need to invest money in infrastructure,” Stokes said. “It’s too late for us.”

“As a builder of the black community, [Notman House] has been my greatest ally. »

Phil J. Joseph, Representative Affairs

Ax-C has a larger footprint than Notman, allowing the project to grow to fit Montreal's startup scene.

Some fear starting from scratch with a new accelerator like Ax-C, rather than building on an existing project that needs support.

Notman is disappointed by the prospect of a sale, said Scott Long, a partner at Panache Ventures. “I have always believed that Maison Notman Montréal was or is an organic expression of the emerging entrepreneurial spirit,” he said. Its location outside the city's central business district and near residential areas popular with founders, students and artists gives it "a level of accessibility to people that is very different from some of the other facilities that exist to support the city ". Own."

Gabriel Lesperance, co-founder of Trabolin.ai and Wavo.me, said in an article published in Le Devoir that if the startup community is built brick by brick, losing Notman “is like destroying our foundations.” We've all been trying to build for decades.

“I'm new to tech, but the Notman House has adopted me and become my second home,” Phil J. Joseph of Real Ventures told BetaKit. Joseph founded Rep Matters, a Real Madrid-backed project that runs monthly breakfast clubs in Notman. “As a builder of the black community, [Notman House] has been my greatest ally. »

“The community cares deeply about Notman House because they built it with blood, sweat and tears,” said Emma Williams, Xenia’s director of marketing and communications and former campus director of the Notman House. “I think this will create a big gap in the startup community.”

Startup Montreal, a non-profit organization dedicated to supporting the city's startups, often collaborates and organizes events with OSMO and Maison Notman. In a statement to BetaKit, the Montreal startup said it was aware of OSMO's financial problems but was "deeply saddened to learn of their extent."

Others feel that Ax-C offers something that House Notman does not. Elias Benjelloun, co-founder of the non-profit MTL NewTech, said Montreal tech needs a bigger space with strong international and commercial ties. He added that ideally the two nodes would “talk to each other.”

“It’s a value chain that can feed the community,” Benjelloun said.

Currently, the OSMO Foundation Board of Directors does not question the possibility of a symbiotic relationship between Notman House and Ax-C.

“I find it great that Montreal has such a modern place that highlights and highlights the wealth of new Montreal economic businesses,” said Tilliot. “It’s not at the expense of the Notman House.”

The problem with Ax-C's planned opening is that there is still a significant gap between Notman's sale and the new location's launch in December 2024, Stokes added.

“What Notman represents is ecosystem-driven innovation,” Stokes said, as opposed to government-driven innovation. “It has always been a playground or testing ground for ecosystem players to experiment and try new ideas.”

I think what worries me is that we're going to lose him. “And I wish it was just the two of us.”

MLTR - This is why I left