Entrepreneur
Nova Scotia call for startups goes global
Looking back, Thomas Rankin says, it was a “crazy” idea. The premise was simple, but it was unclear if anyone would embrace it.
Looking to boost its startup scene, Nova Scotia put out a worldwide call for companies focused on clean technology. Through Innovacorp, a Crown corporation that invests in early stage companies, Nova Scotia offered more than $ 300,000 in funding and services to lure a promising clean tech startup to its shores.
“We thought, ‘Why not just throw open the doors to the world and see what happens,’ ” recalled Mr. Rankin, Innovacorp’s investment manager and organizer of the Nova Scotia CleanTech Open. “It was a bit of a long shot and a bit of an experiment, but one that was based on the thesis that this is a really great place to build a company.”
Mr. Rankin became the CleanTech Open’s “chief salesman,” responsible for promoting the contest and drumming up quality submissions. Initially, there was concern about what the contest would actually yield.
“To be honest, we didn’t know what was going to show up,” he said. “The most difficult part was getting the message out from little Nova Scotia. Entrepreneurs are notoriously difficult to find in your own backyard, let alone in backyards all over the world.”
Innovacorp promoted the competition by sponsoring international clean tech conferences, and by tapping the C100, a network of Canadian technology entrepreneurs largely based in Silicon Valley.
It also secured some distinguished judges to grade its applicants. The five-person judging panel included Danielle Fong, a clean tech entrepreneur who, at age 17, started a PhD at Princeton.
The other judges were Patrick Keefe, Innovacorp’s vice-president of investment; Matthew Nordan, vice-president of Venrock, the venture capital arm of the Rockefeller family; Daniel Marchand, chief executive of the Canadian Renewable Energy Fund; and Mr. Rankin.
A native of Nova Scotia, Ms. Fong is the co-founder and chief scientist at LightSail Energy, a Berkeley, Calif.-based tech company. On her website, she called the CleanTech Open “remarkable not only for being in my home province, but also for its amazing quality, rigor, and prize money.”
Despite his initial concerns, Mr. Rankin received 65 submissions for the clean tech contest. Applications arrived from the United States, Europe, the Caribbean, China and across Canada. Half were from within Nova Scotia.
The submissions were whittled down to a shortlist of 10 startups, including companies from the U.S., Canada, Serbia, the Netherlands and Denmark. For two days in February, the finalists gathered in Halifax and made their pitch to Ms. Fong and the other judges. There was a wide range of ideas: from lighting technology to electric vehicles.
In the end, even with the contest’s international focus, a local company nabbed the top spot.
“Wow, I’m slightly in awe,” said Mather Carscallen after his startup was crowned the winner at a formal announcement in late April.
His two-year-old company, SABRTech Inc., is developing technology designed to make algae a sustainable source of biofuel. Mr. Carscallen, a PhD student at Dalhousie University in Halifax, said the oil from algae can be refined into a biofuel replacement for gasoline and diesel.
Mr. Carscallen said the algae material used in biofuel production is essentially “a giant bucket of green slop that smells like a rotting compost heap.
“Despite the smell and its unappealing look, it is a beautiful little organism that provides a vast majority of the ecosystems on this plant with an energy source,” he said.
“Why not use that same energy source to fuel our cars and our trucks? And even further, why not use that same energy source, which nature has perfected over billions of years, to fuel every single plane across the globe? That’s our dream.”
The use of biofuels would significantly reduce the amount of emissions produced by the aviation industry. Many airlines — Lufthansa and Porter Airlines among them — have experimented with different biofuel blends. But there is a problem: Biofuels are significantly more expensive than their fossil fuel cousins.
Mr. Carscallen said his goal is to drastically boost the production and harvesting of algae, while lowering the costs. Only when it is mass-produced can algae be used to fuel the global aviation sector, he said.
By winning the CleanTech Open, Mr. Carscallen secured more than $ 300,000 in cash, seed investment and in-kind business services. Those resources will be used to build and test a prototype of his technology. If all goes to plan, SABRTech will have a production plant for mass-producing algae up and running within two to three years.
Such success would help put Atlantic Canada on the “global map” for clean tech development, Mr. Carscallen said.
“When you think of this industry you don’t think immediately of the Atlantic region,” he said from his lab in Herring Cove, near Halifax. “It’s time for the Atlantic provinces to step up and show that we have a lot of innovative technology.”
And there could be more.
Mr. Rankin said Innovacorp is in talks with a handful of companies from the CleanTech Open. “We developed a pipeline of companies that we know are interes
Q1 Canadian venture capital investment ‘disappointing’: CVCA
Both the value and number of venture capital deals in Canada were down in the first quarter of the year, according to a report published Thursday.
The CVCA, Canada’s Venture Capital & Private Equity Association, said the $ 263-million invested during the first three months of the year was down 34% from the first quarter of 2011.
The number of companies that secured venture capital financing during the period was 113, a drop of 10%. That left the average venture capital amount invested per company at $ 2.3-million, down from $ 3.2-million during the same quarter last year.
The drop in average deal value comes after an overall increase to $ 3.4-million in 2011 as a whole, up slightly from $ 3.2-million in 2010.
Gregory Smith, president of the CVCA and managing partner at Brookfield Financial, said the results suggest a significant hurdle for emerging growth technology firms particularly when it comes to establishing a competitive global position.
“The disappointing results of the first quarter underscore the importance of taking steps to address this formidable challenge,” he said.
In the first quarter of 2012, high-growth entrepreneurial companies in Canada received 31% as much funding as their American counterparts, according to the CVCA.
For 2011 as a whole, that figure was 37% and in 2010 it was 39%.
The CVCA report follows a survey from PricewaterhouseCoopers LLP earlier this week that also provided some insight on the funding landscape for technology startups in Canada.
Tuesday’s PwC report found that out of the 150 chief executives of emerging technology companies polled for the survey, 44% did not even attempt to raise capital over the last two years while 17% tried but failed, with many citing a lack of available funding as the main reason.
Among the 39% of respondents who did raise capital, 22% raised funds from Canadian venture capitalists, up dramatically from 4% in the previous year’s survey. A further 10% turned to U.S. venture capital funds, but the most significant source of funding was angel investors, with 32% of companies surveyed going the angel route.
Brad Cherniak: Why do you need to understand the valuation of your business?
Brad Cherniak has 20 years of experience in investment research, corporate and investment banking, merchant banking and private equity/venture capital with such firms as CIBC World Markets, Gordon Capital, Bank of America and Chemical Bank. Sapient Capital Partners is a Toronto-based firm that works with small- to medium-sized private companies to build and realize on shareholder value.
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