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In Ottawa Stephen Naor and his team are challenging a century old technology. They are creating an engineering prototype for a revolutionary light bulb based on semiconductors instead of Edison's filament.
The implications are staggering. About 20% of the world's electricity goes to create light. Mr. Naor's company, Group IV Semiconductor Inc., expects to have bulbs on the market within three years that could slash that consumption by half.
In Quebec City Eric Bergeron may be about to revolutionize airport and building security. His company, Optosecurity Inc. has received its first orders for a made-in-Canada solution to scanning the contents of luggage and parcels for threats. No more relying on the judgment of human operators. His creation is fast, accurate and automatic.
Both may play a vital role in Canada's future, says Robert Inglese, Vice President of Technology Seed Investments for BDC, Canada's business development bank. As the world moves towards globalization of trade, Canada's continuing prosperity depends on its ability to create and commercialize new technologies, economists predict. Work done in research labs today will be the spark that ignites future job growth, productivity gains and Canadian business ability to compete on world markets.
According to BDC, new technology companies are increasingly born global in nature. Both Group IV Semiconductor and Optosecurity are prime examples. They represent the best in Canadian research and are on the path to becoming significant export products.
BDC happens to be one of the very few financial institutions investing the necessary seed money to lift new technologies from a concept in a research lab to a marketable product.
"Since 2002, BDC has provided the financing that allows start-up companies to do research into commercialization," explains Robert Inglese. "Our investments help fund market research, identify viable products and markets and help bring in new partners or consultants - people with experience bringing products to market."
That funding is crucial, says Optosecurity's Mr. Bergeron.
"We simply could not have gotten to this stage without BDC's investment," he says.
To date BDC has invested $75 million in 35 new ventures led by its Technology Seed Investments Group, says Mr. Inglese, and has committed to other fund initiatives for its seed money war chest.
"We normally invest between $1 million and $1.5 million and purchase between a quarter to a third of the equity but we are willing to wait seven to 10 years before taking advantage of an exit strategy," he says.
"That patience makes an enormous difference. Most venture capitalists look for a payout in half to one-third of that time frame. The result is a crucial lack of seed money for start-ups in Canada."
Yet Canada's future as an exporting nation depends on the creation of new technology. Both Mr. Bergeron and Mr. Naor are well aware of the lack of start-up financing available even for the best ideas.
Mr. Naor's solid state light bulb comes from an original concept intended to amplify light traveling through telecommunications glass fibre cables.
"The inventor of this technology, Steven Hill, contacted me for business advice. He was working on his dining room table on ways to structure silicon to amplify light," he explains.
"We quickly realized there was no market for the amplifier, however. That led us to look at other markets and once we realized that the technique could enable silicon to generate light efficiently the potential implications were enormous."
The company was founded by Mr. Naor and Mr. Hill in 2003 and through a combination of grants, family and friends and a 2004 investment by BDC, Group IV managed to forge ahead and to attract venture capital financing. The engineering prototype should be in hand within two years and a commercial product on the market within three, Mr. Naor predicts.
Mr. Bergeron, by comparison, had been involved managing venture capital investments and made the decision to find his own start-up. He approached INO in Quebec City, Canada's largest independent optical research laboratory. He looked at 12 products and decided the scanning technology held the greatest potential.
He went to his basement, drafted a business plan and in 2004 approached BDC. With a $1.5 million investment he was able to advance his plans and in 2005 raised $5.1 million in new financing to create a proof of concept device.
The company now employs 23 people, has its first orders and expects to reach the break-even stage in 2008.
"To date the companies BDC supports have been able to raise $225 million in venture capital financing," says Mr. Inglese. "I think you can take that as a first measure of our success."
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