Fewer than 10% of the startups that receive support from NBIF turn it into positive returns
With this year’s prizes just handed out in the New Brunswick Innovation Foundation’s Breakthru competition, the real work is only beginning to convert startups into successful businesses that will help grow the provincial economy.
The big winner this year was CanumNanomaterials, which took both the grand prize and viewers’ choice award, worth a total of $436,000, including $375,000 cash from New Brunswick taxpayers.
The foundation is an independent, non-profit corporation that receives government funding — $14.7 million from the Province of New Brunswick in 2017-18 — to invest in venture capital and research.
Its Breakthru contest offers the richest prizes of their kind in Canada. CBC New Brunswick sponsors the viewers’ choice category.
So far, only eight of the 100 or so businesses NBIF has invested in since its inception in 2003 have been able to leave the nest with positive returns that can then be reinvested in other companies or research.
None of them were Breakthru winners, but some were Breakthru competitors.
“We haven’t hit a billion-dollar company yet with any of them, which is always our hope,” said Raymond Fitzpatrick, NBIF’s director of investments, but about 50 companies are still operating, with support, and showing signs of progress.
Raymond Fitzpatrick, NBIF’s director of investments, says New Brunswick entrepreneurs had a banner year attracting venture capital.
The foundation’s biggest success stories include Radian6, Smartskin Technologies and EhEye.
NBIF invested $350,000 in Radian6, a social media monitoring company founded in 2006, and got about a $10-million payout, when it sold to SalesForce in 2011 for $326 million.
Smartskin Technologies is now operating in Fredericton with about 15 employees and big international clients, including Coca-Cola and Heineken, who use its system for measuring line pressure and orientation in packaging.
Saint John-based EhEye, which developed a surveillance video analytics system, sold to a publicly traded Vancouver company last fall, generating what Fitzpatrick called a “significant” return on NBIF’s investment.
About 50 NBIF-sponsored companies have gone out of business, which Fitzpatrick said is pretty standard.
According to Statistics Canada only 44 per cent of Canadian businesses survive more than 10 years.
But Fitzpatrick pointed to a different measure of success.
NBIF invested $5 million in startups last year, and those startups were able to attract another $70 million in venture capital.
Fitzpatrick called that “a banner year,” that ranks fifth in Canada, behind Ontario, Quebec, British Columbia and Alberta.
“I think that’s a good testament to the companies that we’re growing here.”
‘Not enough hustle’
One former Breakthru winner and veteran of the startup scene said it’s largely up to the entrepreneurs to step up their game if the success rate is going to improve.
“They’ve got hustle, but not enough hustle,” said 2009 Breakthru winner Sally Ng.
“Maybe it’s a hustle in New Brunswick standards, but not when you throw some of these entrepreneurs in the big cities.”
Former Breakthru winner and startup facilitator Sally Ng says big-city entrepreneurs ‘would die for’ the access to experts and angel investors that New Brunswick startups don’t fully take advantage of.
When guest speakers come to town, for example, Ng said local startup entrepreneurs should be Googling them, looking them up on LinkedIn and inviting them out for coffee.
“I can’t quite figure out if it’s people are shy or they don’t think it’s appropriate or if they just don’t think they should.
“If you’re an entrepreneur, you’ve got to do whatever it takes to make it happen — as long as it’s legal, doesn’t hurt anyone, then you’re good.”
Ng and two of her teammates left Chem Green soon after their Breakthru win to pursue other jobs. Researcher KhashayarGhandi said the business is still in operation but did not respond to further questions about its status or location. He appears to have relocated from Mount Allison University to Ontario.
Meanwhile, Ng has since worked as a facilitator with other startups in New Brunswick and at intensive business development events around the world.
She thinks many New Brunswick startups don’t take full advantage of the mentoring opportunities they’re given.
“I remember running the accelerator I had Marcel LeBrun from Radian6.”
“Some of them I don’t think fully appreciated who they had in front of them … because in some cases it’s like, ‘Oh, Marcel’s my neighbour.’
“It’s amazing to be a New Brunswicker and have those relationships. People in Toronto and everywhere else would be dying to talk to Marcel.”
Radian6’s former CEO is now a venture capitalist with a Montreal firm but still based in New Brunswick.
Still going and growing
Coady Cameron is one of the people behind the 2013 Breakthru winner, Total Pave, which developed smartphone technology to collect data on road conditions.
Their business is still going and growing, in low-rent space on the University of New Brunswick campus in Fredericton.
Total Pave CEO Coady Cameron says his company has continued to grow and prosper since its Breakthru win in 2013.
They’re up to four staff members, 45 to 50 clients, and have been tweaking their product and doubling licensing revenue each year, he said.
“You’re swinging for the fence,” he said, describing what it’s like to be a startup.
“There’s a balance that you have to find between you yourself knowing the business and knowing the technology … better than anyone out there. And then also being open to working with other mentors that have been down the road …and have advice on the moves that you should be making.”
Stuck in a bubble
Fitzpatrick said about half of NBIF’s startups, if not more, have received business advice from the entrepreneurs behind Radian6 and Q1 Labs.
“Our entrepreneurs do soak that up and learn from them.”
But he agreed with Ng about the need to get out of the bubble and comfort zone that is New Brunswick.
“We say this a lot: ‘Get on a plane,'” said Fitzpatrick. “They need to get outside the region.
2017 Breakthru winner Lisa Pfister has relocated to Ontario to be closer to her horse-breeder clients.
“Atlantic Canada is not a big enough market. You can’t grow a global company here. You need to be on a plane meeting with your customers.”
“That would be the piece that we’re constantly working with our entrepreneurs to let them know.
“If you’ve been home 25 of the 30 days this month, that’s probably not going to get it done.”
Greener pastures
For some entrepreneurs, getting closer to customers unfortunately leads to a permanent move out of New Brunswick.
The 2017 winner, Pfera, for example, has relocated to Waterloo, Ont., where Lisa Pfister said she has been able to grow her team, secure suitable office and biotech lab space and be closer to her clients, who are horse breeders.
She closed her first sales of Foal Point Essentials last fall — software for tracking mares’ cycles, determining the best time for them to be bred, and scheduling everything around the barn.
A companion product, Foal Point Scanner, which more accurately predicts foal delivery dates, should be out later this year, she said.
Pfister looks back on Breakthru as “a good stepping stone for things to come.”