Eyebrows raised over big government loan to Sault tech start-up

Questions are being asked about an $800,000 FedNor loan to one of Canada's "hottest and most innovative tech companies."

Skritswap Inc., founded in 2015 by Saultite Melissa Kargiannakis, uses artificial intelligence to make complex online documents easier to understand by changing the reading level.

Kargiannakis has shown remarkable success in attracting buzz and venture capital to her start-up.

In 2015, she was one of three Canadians chosen to receive the Queen's Young Leaders Award from Her Majesty Queen Elizabeth II.

In 2016, she was one of four tech founders from around the world chosen to participate in the Women's Startup Lab in Silicon Valley in 2016. 

Last year, Skritswap was named to the Canadian Innovation Exchange (CIX) Top 20, recognizing the nation's "hottest and most innovative tech companies."  

"Some people say it takes a village to raise a child, but it has taken an entire province to raise me; with adoptive 'families' and education/experience spanning a 1,000-kilometre radius," Kargiannakis says on her Linked In page.

"I am a half-Italian, half-Greek creative thinker and hobby opera singer. I transcend expectations and take risks to tomorrow."

"From those humble beginnings in Sault Ste. Marie, Skritswap is now a Silicon Valley, venture-capital-backed Canadian startup with paying clients and Canadian angel investors," she says.

Last month in Ottawa, Sault MP Terry Sheehan announced an $800,000 interest-free FedNor loan to Skritswap, as well as $100,000 from the federal Women Entrepreneurship Strategy to help obtain patent protection and support the company’s growth into the United States.

FedNor is the Canadian government's economic development organization for northern Ontario, providing financial support to projects that lead to job creation and economic growth in the north.

Skritswap operates in Waterloo, Ontario and the San Francisco Bay area, but the company's website lists its main office as the sixth floor of 99 Foster Drive.

That's Sault Ste. Marie Innovation Centre's space in the Civic Centre.

However, a site visit by SooToday last week found little evidence of Skritswap's main office there.

The company became an Innovation Centre client three years ago when Skritswap was known as Heuristext.

It also received early assistance from Sault Ste. Marie Economic Development Corp.'s Millworks Centre for Entrepreneurship.

Like other local success stories, Skritswap has outgrown its initial incubator support, but Innovation Centre staff told us Kargiannakis is still allowed to share a desk or two and sometimes uses the boardroom when she's in town.

That, and forwarding her mail, pretty much sums up the Innovation Centre's current involvement with her start-up company.

Last week, Peter Bruijns, Innovation Centre executive director, sent an email to Tracey Forsyth, his usual contact at the Sault Ste. Marie office of FedNor.

Bruijns tells SooToday he wrote Forsyth out of concern for FedNor's financial support to Skritswap when the company has done little, if any Northern Ontario recruiting for new positions.

Skritswap.com indicates the firm is currently hiring for three positions, none of which are specifically located in Sault Ste. Marie or northern Ontario.

"I don't known what's behind it," says Bruijns, indicating "we're available to help" in any recruiting of northern Ontario staff.

Here's what the FedNor website said about its loan to the company in a June 12 posting:

Skritswap Inc., a small information technology business based in Sault Ste. Marie will build, test and commercialize an artificial language platform to convert complex information into plain everyday language, thanks to a FedNor repayable contribution of $800,000. The goal is to help people understand technical documents such as a mortgage, will, tax code or medical instructions by converting the content to three or four lower reading levels, making the information more accessible by removing the barriers posed by lower literacy skills. This project is expected to create seven positions.

Responding to a SooToday inquiry, FedNor communications director Brian Williamson said Kargiannakis "is currently seeking talent to fill three positions, two in development and one in engineering."

"One of the identified work locations is Sault Ste. Marie," Williamson told us.

Other possible work locations mentioned in Skritswap's current career postings include Waterloo, Toronto and San Francisco.

Ten days ago, only one of Skritswap's postings about the three positions referred to the possibility of working in the Sault. 

"Her business is growing rapidly and attracting the right talent is a challenge," Williamson says.

Kargiannakis didn't respond to repeated interview requests from SooToday prior to the writing of this article.

"We have not had any concerns directed to me," Sault MP Terry Sheehan tells us, indicating he's nonetheless investigating further to clarify Skritswap's intentions for northern Ontario.

For now, Sheehan points to a quote provided by Kargiannakis to his office prior to last month's FedNor funding announcement:

I would like to thank the Government of Canada, through FedNor, for its support to help take my business to the next level. In a year and a half, we have doubled in team size creating jobs in artificial intelligence right here in Ontario. As a young, female founder who started this company in my hometown of Sault Ste Marie, I am grateful for the resources from the government of Canada to continue building on Skritswap’s momentum.