Podcast Transcript: Boston links the lab to the market
Host: Michael Mancini
Today, we’re going to focus on Canadian companies that are looking to turn their innovative ideas into commercially viable products. In other words, how do you get from the lab table to the marketplace? We’ll meet a number of Canadian companies making inroads in Boston and in the U.S. north east. Welcome to our show, I’m Michael Mancini, editor of CanadExport, the government of Canada’s magazine for entrepreneurs who want to compete, partner and prosper in the global marketplace. Look for our magazine.
Boston, and the U.S. north east, is known as a hot-bed for innovation. It is the largest source of venture capital in the U.S. outside of California; it’s also the second largest bio-science market in the U.S. In this show, we’ll talk to a number of Atlantic Canadian companies about what it takes to succeed in this market, and we’ll speak with an Ottawa company about how to land that key venture capital deal. First, let’s head off to Boston where I joined up with a delegation of more than 175 Canadian entrepreneurs who traveled there in early November. Their goals were to promote the Atlantic region, meet potential partners and buyers, and hopefully make a few deals.
The sounds you hear are of the Boston subway, known here as The T. Although it’s known as America’s walking city, it also boasts a strong local transportation system. As you may know, Boston (or Bean Town) is one of America’s oldest cities. It is a really compact city of some 600, 000 people surrounded by a greater area population of about 4.5 million. I’m on my way to meet up with the delegation from the Team Canada Atlantic Trade Mission, at a hotel in the city of Quincy, south of Boston. The city is also the birth place of the second and sixth U.S. presidents, John Adams and his son, John Quincy Adams. The city also refers to itself as the birth-place of the American dream, so let’s see if that will be had for some of the Canadian companies.
Behind me you can hear the buzz of Canadian and American business people networking and doing business. I’ve tracked down a number of companies to ask them about the opportunities and challenges of doing business in this region. Here’s what they had to say.
Bond Rideout Jr.: My name’s Bond Rideout Jr., I own Neptune Sea Products. We’re a secondary processor of all types of sea food. We’re the only plant in Newfoundland that really caters only to secondary processing. New England has always been Newfoundland’s major partner anyway. There’s a lot of high clientele down here; in a nutshell there’s a lot of mouths to feed, and we’ve got a lot of product to give them. We’re very new; that’s the major problem right now, we’re just getting our name out there. I purchased the company only back in November, so it’s only a year old. The fact that we’re new is the only disadvantage right now, and that will be subsided very soon.
Bruce MacLellan: Bruce MacLellan, Market Access International Canada Inc. Well, I think one of the differences is that things happen a little faster and quicker and people are more to the point about what the business opportunity is. And so the companies have to be prepared for that in the sense that they should go in thinking not only about presenting their product, but with a good sales kind of strategy as to why it’s relevant to the customer and what’s in it for the customer, and approach things from that perspective.
Mike Rudderham: I’m the Director of Government Relations for Advanced Glazings Limited, Basin city, Nova Scotia. Well the U.S. northeast is one of the largest markets, richest markets in the world. It’s also really ahead of the game when it comes to marketing and adaptation of green, innovative building products. Some of the main challenges have been raising product awareness. We have the category killer, a new product that’s innovative and has to marketed, and that has certain challenges. You know, when you are trying to redefine the way that people daylight buildings, it’s incredibly difficult. So our big thing is trying to get in front of architects, and trying to get face time and exposure time for what started as a relatively unknown company, based in Atlantic Canada.
Dave Hankinson: Hi, I’m Dave Hankinson, and I’m Chairman of the Board and Director of Nutri-Sciences for Chemaphor. We’re a bio-technology company based in Charlottetown, P.E.I. The main challenge for us is the regulatory issue, cause we’re working in natural products, and natural products are sort of in that grey area between pharmaceuticals and food. There is no worldwide template for how you go through the regulatory process, and it’s a challenge for us to meet the requirements of the U.S. regulatory group in the nutri-ceutical area.
Ken Kovachik: I’m Ken Kovachik, Director of Business Development for C-Vision Limited, and C-Vision is an Amherst, Nova Scotia based electronics manufacturing and design services provider. One of the big challenges at this point, of course, is the dollar, which is a challenge that everyone faces so it’s something that we have to overcome with your innovation, lean manufacturing, and really tailoring something unique for the customers that you’re trying to reach.
Michael Mancini: The good news for Canadians is we’re well positioned to take advantage of these opportunities; we’re innovative, productive and have cultural ties to New England. And Boston is a mere one hour flight from most eastern Canadian cities. The bad news is the opportunities in New England have not gone unnoticed. Global competition for these opportunities is fierce. In other words, it’s a true buyers market. I tapped into the expertise of a number of entrepreneurs and experts to find out what it takes to make it in Bean Town and the U.S. northeast.
Maxwell Morton: Maxwell Morton, Managing Director of Greyhead Associates. I think that they need to take advantage of the opportunities that their government provides, certainly, but not rely on that. And if they’re looking for capital they need to do what every American company does and sort through the way they want to do it and what are the choices between a venture capital and angels and strategic alliances. And I think they really need to make a concerted effort to look at large American companies to form alliances, and in terms of moving your technology forwards and helping with the marketing, not just in the U.S. but around the world, because clearly, although the U.S. is a very big market, so is China and India and Europe, and they can’t forget them and just focus on the United States.
Pernille Fischer Boulter: I’m the president and owner of a company called Kisserup International Trade Roots. I have a company that does international trade training and export development for SMEs and Government agencies assisting SMEs. I think they have to spend a fair amount of time in preparing. For missions like this, there’s a matchmaking part, that’s great, but it’s not just that you have a face to face meeting, you also need to know what challenges does your potential client have, what are they looking for, where else are they looking with you and in Canada, and what other companies are your competitors to that customer. So a lot more preparedness and research into our market that we tend to think of as our own backyard.
Soo Sheung Wong: Hi, I’m Soo Sheung Wong, and I’m the president of Pareto International; it’s an international marketing and consulting firm. Aside from the research and being prepared, certainly understanding your market is number one. However, you need to have the willingness to invest the time into the effort of research, and building the relationships. Trade missions are wonderful for just an initial view of the market, but really unless you stay at it and keep at it and keep going back and developing those relationships, its not going to really go anywhere. And I think that companies that area really serious about expanding into other marketplaces they really have to understand the commitment and the investment into the time that it takes to get to know your potential partners, or market, and continue to invest and go back and develop those relationships.
Mike Rudderham: [Director of Government Relations for Advanced Glazings Limited]. Be tenacious and not to be scared. If you have properly identified the marketplace and know what you’re going after, there will be considerable uptake, and they can expect success in the market.
Dave Hankinson: Hi, I’m Dave Hankinson [Chairman of the Board and Director of Nutri-Sciences for Chemaphor]. Take advantage of the consulate and the trade missions and everything that’s set up because it’s a wonderful organization. We came down here and some appointments had been made for us. I’ve met some people here who are working on it say, “You should talk to so-and-so”, and that’s doubled the number of people we’re speaking with. So just use the resources that are available for us.
Michael Mancini: Now the words “innovation” and “business” are never far apart in Boston. The city is home to several world class universities and research centers that have forged strong alliances with businesses. I decided to speak with two Canadian post-secondary institutions, one university and one community college, to find out about the innovative work they are doing.
Andrew Kendall: My name is Andrew Kendall, I’m the Industry Liaison Officer for St. Francis Xavier University. Well, we have some, I think, really cool innovative environmental remediation technologies and we hope to find some research collaborators, and with a bit of luck perhaps licensees or people who will help us bring these further towards the market. What I really want to do is make sure that what’s developed at our little university makes it to commercialization, if that’s the path it should take. We’re a small university but we have some first classes and really world class technologies being developed, and it would be shame to see those not developed for lack of contacts being made, or money being found.
They need to get into contact with the universities, they got to seek out the Industry Liaison Officers at the universities, seek out the funding organizations like NSERC and CIHR and ACOA. Ask those agencies, “Where can I find people working on particular projects?” because we need to innovate; and there’s stuff going out right under their noses at the small universities that they should take advantage of. I go to trade shows, I network; I’m trying to instil a culture of entrepreneurial spirit in university, one where more research is done for commercial purposes. And that’s slowly changing. The professors are coming in and they’re really enthusiastic for this sort of thing. As more and more of those younger researches come into the university, I see that changing slowly. And I think that’s a good thing.
A good friend of mine worked for a major industrial player in the Atlantic provinces, and I took him to an NSERC awards dinner, and he had no idea that some of his competing companies were going to universities and having their industry dollars leveraged by NSERC funds to produce commercial products and take their inventions to market. He had no idea. So there is a situation where his competing companies had seen the light, had seen the fact that fantastic research can be done at university with leverage dollars to support their bottom line, to help them develop and grow in the knowledge economy.
Kevin Shiell: My name is Kevin Shiell, I work with Centre of Excellence in Agricultural and Biotechnological Sciences, which is a constituent of the Collège communautaire du Nouveau-Brunswick. We hope to be able to facilitate technology transfer, and right now there’s a bit of vacuum between the university technology transfer and the industry. Part of it has to do with how the traditional universities have operated, and part of it has to do with how Canadian companies operate; they’re not involved in the research process, and, you know, academics tend to do basic research for publications, which may not necessarily be… So the college and can do two things. One is we can take technologies that we might have clients—small and medium enterprises are our clients and especially in our rural regions and a lot of colleges are in rural areas. So, for example, in mine in the Grand Falls area, I might have a grain farmer comes to me and wants to do a value added product from a grain. Well if I know of a technology that had been developed at a university, say Dalhousie or UNB or UPI, then I can talk to those researchers, and get that technology, and then do some extra research to be able to apply it to that application. So a lot of times that’s where I see a role going to be, is really assisting universities in really commercializing their technologies, so for both of us it’s a win-win.
Things have really changed in the business world in the last 10-15 years. Now where the consumer drives the market and it’s not necessarily technology driven all the time; sometimes it is. And I think this has been where a lot of technology being produced is not of value to the current marketplace, and the researchers aren’t necessarily in-tune with where the markets are going. A lot of times too it’s also the mindset of Canadian companies, and I really don’t think they’ve had a culture where they’ve bought technology. They’ve also been traditional, family owned companies, that have grown on a natural resources based, where really they just did the job more efficiently, and you know they did adapt some technology, computerization. But as far as being a technology company, that’s not been a mindset. We have some bigger companies in Atlantic Canada, and they never…because of risk, they’re not risk takers at all. So until something has been proven out. Where American companies are quite different, where they will be in at the beginning, see a technology that they think maybe four or five technologies, and work on them, finance them, and see them out. And it’s often some of them won’t make it to commercialization, and then there’ll be the one that does. So they’re used to taking more risk, and so I think really for things to change in Canada, the entrepreneurial academic is going to have to evolved, and they are evolving. U of T and some of those universities are starting to get more entrepreneurial researchers, like the MITs of this world, and they made a comment when we were meeting here that MIT doesn’t hire somebody, you know the thing in the interview is: Do you wan to commercialize? And if you’re not interested in listening to the market or commercialization you don’t get hired at MIT. This is something that hasn’t happened in Canada and I think will happen. So I think it’s something that we all have to work on as Canadians and I think that we can obviously learn a lot from the American model; they’ve done a very good job at it.
Michael Mancini: Clearly, bringing ideas from the lab to the marketplace isn’t a simple process. I met Rory Francis, Executive Director of the Prince Edward Island BioAlliance, a cluster made up of the private sector, research institution, and government. The alliance is dedicated to building the bioscience based economic sector in PEI. I wanted to learn more about how to successfully commercialize innovative ideas coming out of colleges and universities.
Rory Francis: Rory Francis, Executive Director of the Prince Edward Island BioAlliance. The university community are sort of the publish-or-perish communities, researchers see drive in terms of the rewards system has for the most part been tuned to publications and academic research, and that’s important. If you don’t have that pure research, you can’t have applied research. But there are other opportunities where the science could well allow for a commercial application of a technology and that requires a partnerships between the science and the business community who have the skills to actually take that technology perhaps develop it further, identify markets, find the investment, find the human resource talent to actually move it from the bench to the market. And that’s a big piece of work. University researchers often don’t recognize how much of the work is beyond the research bench; how much has to happen to actually go from that “Eureka!” to actually a revenue back that will pay for the commercialization of the product. The bottom line for the researchers is exploration, knowledge, breakthroughs, innovation. The bottom line of the business community has to be: “It’s a great science, now can we actually make a return on our investment that can now take it to market?” So there are two different value sets. The real trick I think is to find a way of interfacing those two worlds. I think it’s fairly important, but the offices in many universities, the Office of Research and Development, or the Tech-Transfer Office, those are kind of key offices where the two worlds meet, and the licensing, the people who do the licensing, who look for opportunities to move that technology to the market, their skills and knowledge and their ability to build trust between research and business is absolutely key. Part of it is that this, business opportunities based on science and technology, it’s relatively new territory. So the good news is that political leaders in our provinces are recognizing that this has to be our future. We have to get really good at this. We have to find ways of facilitating the relationship between research community and business. And in Atlantic Canada a lot of great small universities, some with strong graduate programs as well, veterinary colleges and so on, where products and technologies are being developed that have commercial potential.
Michael Mancini: We’ll come back to Boston in a moment. But first, let’s turn to Ottawa to learn about how a company there successfully pursued a landmark 35.6 million dollar venture capital deal with a Boston firm. After all, to take an innovative product and commercialize it, you’ll likely need financing. With me on the phone is Egidio Nascimento, Chief Financial Officer of Variation Biotechnology, a Canadian vaccine development company. Thanks for speaking with me today, Egidio.
Egidio Nascimento: Morning Michael, it’s a pleasure.
Michael Mancini: It’s great that I’m talking to you now that flu season is upon us, is your company ready for the onslaught?
Egidio Nascimento: Well, we’ve got our heads down right now and working on our research programs, so we’re certainly working on an influenza vaccine that we hope will be a blockbuster.
Michael Mancini: As I’ve mentioned, your company secured 35.6 million dollars in venture capital. How did you do it?
Egidio Nascimento: Well, I think one of the key things is finding the right VCs [venture capitalist]. We looked around in Canada, in Montréal, Toronto and on the west coast as well, and went into the US typical hotspots for biotech, namely the Boston area and San Francisco. And we also stopped into New York, so we also talked to VCs there as well. The key for us was to find the right VC, to have in-house expertise in the subject matter, in our case in immunology and vaccines.
Michael Mancini: Now, how did you find them?
Egidio Nascimento: We participated in the Ottawa Life Sciences Top Ten Tour, which was also organized by the Department of Foreign Affairs and International Trade; and they organized a couple of presentation sessions in New York, Boston and San Francisco. That was during a February time frame, and during that road trip (if I can call it that) we ran into two of the three VCs that ended up participating in the round. We didn’t start negotiations directly after meeting them, but about six or seven months later we reconnected with them, showed them some additional data that we had received, and that was the basis to get the ball rolling.
Michael Mancini: Now, when you say “find the right VC”, what exactly do you mean?
Egidio Nascimento: If you find a VC that the principals and the partners already know the subject matter, they know the questions, they know the data they’re looking for, and they can kind of get right to the point, make the decision, and move forward with the term sheet, which is what happened with us.
Michael Mancini: But it’s not just about money in the bank, is it? You need to find a venture capitalist that brings additional value to the table.
Egidio Nascimento: That’s right. I think it’s actually very important for the venture partner that a company looks to bring on to have that breadth of knowledge, relationship that they can bring to the company and add value. It’s certainly a lot more than just the money.
Michael Mancini: So what are venture capitalists looking for then?
Egidio Nascimento: They’re looking for opportunities that address very large markets. They are looking for opportunities that are presenting a significant change from the technologies that are out there, and ones that have significant competitive advantages. And then, of course, they’re also looking for a strong management team, and after that you get into specifics. Is it an industry that they’re specifically looking to get into, or is it one that they might already have an investment in and therefore have already made their beds in that space and are looking for opportunities in a new and perhaps related field.
Michael Mancini: Now, how is a venture capital relationship managed?
Egidio Nascimento: Well I think it starts right at the very beginning when you’re negotiating a term sheet. It’s very important when you’re finding that right fit, to refit their portfolio requirements. Can you work with the partner that’s going to be on your board? And starting right with the negotiation of the term sheet, it’s an opportunity for both sides, quire frankly, to assess the other and decide whether the other party is going to have a long term relationship with and be very successful in the long run. So it really is a marriage, and you have to decide whether the other party is a best fit for you.
Michael Mancini: What will this financing mean for your company?
Egidio Nascimento: Well I think we’re in a fortunate position where the company is able to focus on the milestones and the R&D plans and the development plan, and basically put our heads down and not be distracted by perpetual financing rounds; having to find new investors, new presentations, many presentations and many trips and road shows, and basically being away from the lab. This allows the team to not have to worry about future funding, not be distracted, and just focus on delivering, execution, which is what we’re going right now.
Michael Mancini: So well me how the Canadian Trade Commissioner Service helped you.
Egidio Nascimento: Certainly, as I’ve said, Boston, San Francisco and New York assisted us, and I think were key in getting some of those first introductions made at least providing the venue for the opportunity to meet these VCs that we ultimately ended up doing a deal with. So certainly that was a great advantage for us.
Michael Mancini: I wish you all the best, Edidio.
Egidio Nascimento: Thank you very much, Micheal, it’s been a pleasure.
Michael Mancini: Let’s head back to Boston now. When I was there, I spoke with Michel Têtu, Canada’s Deputy Consul General and Senior Trade Commissioner in Boston, about what the Trade Commissioner Service can do to help Canadian companies crack the US northeast.
Michel Têtu: I think there are two elements that we can provide to a company. The first one being visibility, the second one being contacts. We do a lot of work publicly, which means to publicize all the good products and services we have available in Canada, and we can help a company position itself in the market. We have a lot of contacts, we go to so many places, and we can spread the word about what a company does. The second part of my answer is that we can bring people to meet with that company. We do have a lot of contacts, we can invite them to meet with a company, we can give those contacts directly to companies, but we are there to make the link between a Canadian supplier of goods or services, a university, a hospital, which someone here who would be interested to enter into a business relationship with them.
Michael Mancini: So tell me, why are Canadian companies uniquely suited to be market leaders in the US northeast?
Michel Têtu: First you have to look at geography and realize that we are very close to New England. It’s very easy for companies from Canada to supply this market, we can deliver on time. To remain prosperous, New England needs energy, it needs innovation, it needs labour, it needs also quality products at competitive prices, and we can offer all of that to New England. Both parties win, because we contribute to their prosperity, and it creates business for Canada.
Michael Mancini: Now what do you see as the main challenges Canadian firms have as they attempt to secure venture capital financing in the US northeast?
Michel Têtu: Interestingly, they don’t ask for enough money. You have to keep in mind that when you ask a VC for money, they have to do quite a number of effort, it’s a lot of work for them, and they won’t do it for a million or two million. If you ask for 40 million, then they’d be receptive, because that makes sense for them. If I had one word of advice, check your modesty at the door. Be bold. Don’t be shy to brag about the quality of your product and its performance; American buyers are impressed by your level of confidence and the advantages that your region has to offer.
Michael Mancini: The invention process is risky, expensive and slow. What are some ways that Canadian companies can mitigate the risks, cut costs and accelerate progress?
Michel Têtu: There’s a strategy that is used by a lot of companies, large or small, high tech or low tech; and it’s what they call external innovation. Rather than invest a lot of money without having any assurance that this discovery process will come to fruition one day, you can turn to external suppliers of discoveries. If you’re a Canadian company and you need innovation, or if you have innovation to offer, you have to play on that. Go on the website of large companies, like Janssen, Novartis, Pfizer, they all have a tab that’s called partnership. You click on it, and it will discuss exactly what they need to feed their pipeline.
Michael Mancini: Thanks Michel.
Michel Têtu: It was a pleasure and I’m looking forward to welcoming your listeners to Boston.
Michael Mancini: I’ve been speaking with Michel Têtu, Deputy Consul General and Senior Trade Commissioner with the Canadian Consulate General in Boston.
Well, that’s it for our show. I hope you enjoyed learning about opportunities is Boston and the New England area. To learn more about how the Canadian Trade Commissioner Service can help your company, do visit us online at tradecommissioner.gc.ca. You can also visit us at canadexport.gc.ca to subscribe to CanadExport, our twice monthly magazine. I’m Michael Mancini and I hope you’ll join me later this month when we’ll explore doing business in Mexico.
To download our other episodes, just go to www.canadexport.gc.ca or go to iTunes and use the searchword “CanadExport.”
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