Triple Threat

InNOVAcorp’s three-pronged approach to business incubation includes capital investment and hands-on mentoring in addition to providing specialized facilities for startups

by Peter Moreira

Scott Farrell is a doctor who cares for women with urinary incontinence. Dissatisfied with the treatment options available for this problem, five years ago Farrell had an idea for an invention, a device that would support the bladder and stop the leaking. Since as many as 50% of women worldwide suffer from incontinence at some point in their lives, the potential market was huge.

Farrell is trained as a physician, not as a businessman. While he and his colleagues were able to achieve a great deal since embarking on this new entrepreneurial endeavour, including achieving a Canadian patent, finding a manufacturer, and conducting scientific tests of the product, the business-development component of the project was a challenge.

“We’ve been working toward our goal for five years,” he says. “We started with an idea and reached a stage in our development where we realized we needed help.” He found it in InNOVAcorp, the Nova Scotia government’s innovative business-incubation organization.

“We have a unique model,” says Dan MacDonald, InNOVAcorp’s president and CEO. “Around North America, you’ll find lots of incubators, but they’re real estate plays mainly, providing an office or a lab. There may be some mentoring, but almost never do you find the investment that we put into the companies.”

MacDonald says that investment comes in three potential forms. Altogether, they comprise a package that MacDonald and InNOVAcorp have trademarked as High Performance Incubation HPi . First, InNOVAcorp plays the traditional business-incubator role of providing research and lab space, as well as office and industrial space. It owns three facilities in the Halifax area that it rents out to startups that are too small to finance the construction of a dedicated research facility on their own.

The organization goes beyond facilities rental. The second facet of HPi revolves around mentoring and advice: InNOVAcorp has 35 employees, 20 of whom work directly with entrepreneurs and innovators, mentoring them in such things as marketing, management, and finance. It was help in this area that Farrell says was especially important to him. “One thing we realized is that we needed help from many different individuals,” he says, “and InNOVAcorp helped put us in touch with those individuals.”

If MacDonald and InNOVAcorp are especially taken with one of the businesses they’re dealing with, they’ll trigger their third form of support: capital investment. Farrell’s proposed product seemed so solid—and its potential market so vast—that InNOVAcorp, along with the federal government’s Business Development Corp., have invested $1.5 million into Farrell’s company, EastMed Inc. Before that significant injection of cash, EastMed had managed to raise about a quarter of a million dollars from friends, family, and angel investors.

With InNOVAcorp’s help, the product and the company could become big. EastMed is now in the process of achieving Health Canada approval for its product before releasing it. That approval should come by next summer. The new product will be released first in Atlantic Canada, where EastMed expects to sell between 500 and 600 sets. It will be available over the counter in drugstores and through the Internet. From Atlantic Canada the product will be released across the rest of the country while awaiting approval for distribution in the United States.

Farrell and EastMed have been able to tap into all three of InNOVAcorp’s programs. “EastMed really shows our stripes,” says MacDonald.

Spreading the wealth

InNOVAcorp began as the Nova Scotia Research Foundation. It had been established in 1946 to encourage research and development by local enterprises. Over the years, its mission, method, and name have all changed. MacDonald came to InNOVAcorp in 2005 after a decades-long career in information technology in such hotbeds of innovation as California and Ottawa. A native of Prince Edward Island, he was happy to return to his roots in Atlantic Canada.

As specialists in devising business plans, MacDonald and InNOVAcorp have written their own plan, with several ambitious targets in the next fiscal year: 10% to 15% growth of the $120 million in annual revenue generated by current client companies, and an increase in the number of people working for client companies from 860 to between 900 to 1,000 people.

The partners also want to attract more clients. In fact, they’ve set a target of 15 new clients in 2006-07, which would be an increase over the 12 clients taken on in 2005-06. InNOVAcorp is also hoping that in 2006-07 the amount of money invested in companies backed by the Nova Scotia First Fund will rise to between $97.8 million and $102.8 million from the current level of $92.8 million. These figures include investments made by third parties, and the fund aims to attract three dollars in outside investment for each dollar it invests.

Ambitious targets, but MacDonald is confident they can be achieved. Especially if he and InNOVAcorp are successful encouraging entrepreneurship and innovation outside the Halifax area. Right now, up to 70% of InNOVAcorp’s clients are based in Nova Scotia’s largest city, as might be expected given the high concentrations of universities in the area.

To highlight entrepreneurship in Cape Breton, for example, InNOVAcorp this year held an I-3 Technology Start-Up Competition for innovative companies see “Vital spark” on next page . I-3 stands for idea, innovation, and implementation. Eighteen companies entered, and the winner got $100,000 to help implement its business plan. The winner was a Mabou-based company called Halifax Biomedical Devices, whose main product is a spinal-fusion-assessment system to help orthopedic surgeons appraise the success of spinal-fusion surgery. With more than 500,000 surgeries of this nature each year in the U.S. alone, the market for this type of noninvasive, low-cost, high-accuracy diagnostic is large.

It’s an innovative idea, something MacDonald insists is in strong supply all over Nova Scotia. “If Nova Scotians knew about the excitement and potential of these companies,” he says, “they’d be taken aback.”

MacDonald is talking about companies such as EastMed and Halifax Biomedical or Dartmouth’s Ocean Nutrition, another graduate of InNOVAcorp programs. The Clearwater subsidiary is pulling in revenues of up to $100 million by selling omega-3 fatty acids extracted from fish. Then there’s Innovascreen its name is similar to InNOVAcorp’s but they’re not related , a firm that is renting lab space from InNOVAcorp as it works to perfect its new drug-testing technologies.

“If we were able to line up these entrepreneurs so each could tell their stories for five minutes,” says MacDonald, “people’s jaws would drop.”