B.C. tech | BCBusiness
Yesteryear’s darlings are giving way to a nimble new generation (Return to B.C.'s Top 100 of 2013)
A generation ago, in 1982, the launch of QLT Inc. under UBC cancer researcher Julia Levy ushered in the future of B.C.’s biotech industry. Levy was 48 years old at the time and virtually alone in a B.C. business landscape dominated by forestry heavyweights, mining hopefuls and merchant families with names like Woodward, Pattison and Louie. University research had yet to be recognized as the jobs generator it is today, and spinoff companies such as Quadra Logic Technologies Inc.—later QLT—were making do with whatever support they could find.
Sure, Geoffrey Ballard had founded Ballard Research—today Ballard Power Systems Inc.—in 1979, but the tech boom wouldn’t get started in earnest until the early 1990s. A generation later, those pioneering companies have largely sold off the discoveries that won them fame and made the province’s name as an innovative hub.
QLT sold off Visudyne, its flagship product, in 2012. It had been bleeding money for years despite strong revenues, and the sale provided a kind of closure for a company now a shadow of its former self. Similarly, Angiotech Pharmaceuticals Inc.—maker of the wildly successful Taxus stent—has been grappling with bankruptcy proceedings. Ballard Power Systems Inc. exited the much-touted automotive hydrogen fuel-cell business in 2007 with the sale of its automotive assets to Daimler AG and Ford Motor Co. It has since reinvented itself, focusing its efforts on fuel-cell stacks used primarily in stationary generators and batteries for forklifts.
The new generation of technology companies, like the reinvented Ballard Power, has focused on environment-friendly technologies. Westport Innovations Inc., which specializes in clean and efficient natural gas-powered engines, is now the brightest of the ventures spawned by research at UBC, where life- science ventures once accounted for 60 per cent of spinoffs. Today, life sciences accounts for less than 15 per cent of new ventures from the university.
While the tech sector is increasingly looking like a greener, more sophisticated version of the nuts-and-bolts sectors that drove the province for much of the 20th century, even the clean-tech sector doesn’t offer an easy ride.
Companies like Day4 Energy Inc. rose and just as quickly fell; Carmanah Technologies Corp. saw revenues decline by a quarter in 2012 versus 2011. Wind-energy companies have yet to post significant revenues.
Unfortunately, today’s risk-averse investors do not favour companies with high startup costs and long gestation periods. That means new tech companies have to be nimble and faster to market, with an eye to rapid growth.
While companies like QLT and Westport Innovations took 10 to 15 years to achieve a critical volume of staff and sales, Angus Livingstone, managing director of the University-Industry Liaison Office (UILO) at UBC, hopes companies might be able to commercialize new developments and become enterprises with up to 50 employees in as little as five years.
UBC hopes to accelerate the development of new ventures through entrepreneurship@UBC, a new program supported by Livingstone’s office. Unlike the spinoffs that commercialize innovations stemming from UBC research, and which typically have a gestation period of seven to 12 years, the new program supports ventures by students, staff, faculty and alumni in which UBC has no ownership stake.
“Since these companies are usually responding to a perceived market need, they are quicker to get into the market and mature,” he says, pointing to Recon Instruments, a developer of heads-up display (HUD) systems for action sports goggles. Based on a student project, the company incorporated in 2008 and now has more than 50 employees. Partnerships have been struck with California sports gear manufacturer Oakley Inc.
Elicia Maine, academic director of the Management of Technology MBA at SFU’s Beedie School of Business, studies the formation and growth of science-based ventures and acknowledges that startups attempting to parlay scientific research into viable ventures face tough times.
B.C. has seen its share of venture-capital financing decline dramatically since 2008—more so than Ontario and Quebec, which garner the lion’s share of funding—and many science-based tech startups have entered hibernation until conditions improve. The companies that are thriving are the lithe startups that require smaller venture-capital investments and can deliver a return in five years.
“Technology companies that have less capital requirements and much shorter timeframes—those who are app developers, those who are software companies that can go from idea to profitability in less than three years, sometimes in less than a year—those firms are doing well,” says Maine.
The shorter development timelines mean many of those companies won’t be around long enough to become one of the province’s top 100 companies. Many are snapped up—usually by international players—by the time they achieve $50 million in annual revenues, and sometimes as little as $20 million. They’re attractive because they’ve engaged in innovative developments and proven them at market, but need outside capital to grow. A sale provides that capital, as well as management expertise and new markets for the technology they’ve worked hard to build.
“We have had several multinational firms look in and say, ‘Huh—interesting ideas coming out of Vancouver,’” Maine says. “When a multinational acquires a local science-based venture, it doesn’t mean we have a local company on the Top 100 [but] it still can mean we have R&D intensive jobs here that are valued by and part of international organizations.”