National Post (National Edition)
No true Breakthru yet, but maybe soon
N.B. STARTUP COMPETITION IS NOW A DECADE OLD
Last month at a gala dinner in Fredericton, N.B., prizes were awarded in the sixth running of the Breakthru startup competition.
According to the New Brunswick Innovation Foundation (NBIF), the venture capital agency that organizes the competition, Breakthru is now the richest startup contest in Canada, with $1.1 million in cash and in-kind professional services handed out this year.
The decade-old competition — held every two years — has grown significantly in the number of applications received and the size of the prize pot, yet it has so far failed to achieve one of its primary goals: to help build startups that actually provide a return on investment.
Breakthru, which is focused on early-stage startups with global potential — many of them still in the idea phase — started in 2007. That year there were 31 applications and roughly $250,000 in prizes. None of the prize winners from that year is still in existence, all having fizzled.
Breakthru has awarded prizes to 15 startups through five competitions between 2007 and 2015. Nine of those startups still exist.
“We’ve got more than half of them still going and growing. So we’re pleased with the outcome,” said Calvin Milbury, NBIF’s president and CEO.
Milbury said the goal of Breakthru is to foster a culture of innovation and entrepreneurship in New Brunswick.
“We have a lot of amazingly talented people with good ideas. However, they’re a little timid to jump at it and start their business,” he said. “Breakthru acts as a carrot to draw them out of their comfort zone and try their hand at entrepreneurship.”
He added: “It’s really becoming a lightning rod for entrepreneurship in our province.”
The competition, however, has yet to deliver a financial return for NBIF, a not-for-profit corporation funded by the New Brunswick government. Since 2003, NBIF has put $73 million into New Brunswick startups; all Breakthru prize money includes an equity investment from NBIF.
“We do have a goal of making money on every investment and that is true for the Breakthru winners,” Milbury said.
He notes the competition has “generated a lot of deal flow,” but, so far, no major successes.
He says the Breakthru startup with the “highest likelihood” of success is Smart Skin Technologies, a prize winner from 2009.
“Breakthru really shone a spotlight on us,” said Kumaran Thillaina-darajah, Smart Skin’s founder and chief technology officer. “More investors were interested in talking with us. It really propelled us forward.”
Smart Skin has developed a nanotechnology film or “skin” that can measure the pressure applied to it. The technology helps measure pressure on aluminum cans and glass bottles as they roll through filling lines. The technology reduces the number of broken bottles and dented cans, thus lowering costs for brewers and drink makers.
Thillaina-darajah says Smart Skin’s client list includes five of the world’s six largest beverage makers (that list consists of Coca-Cola, Pepsi, and four brewers, including Anheuser-Busch InBev and SABMiller). The objective is to expand the use of Smart Skin’s technology across the operations of all six big beverage companies.
“Our goal is to get this into every plant in the world. And we think that’s realistic,” he said.
Achieving that goal would make Smart Skin an acquisition target.
“That’s obviously the goal for us,” Thillaina-darajah added. “I think the race is on to be the first (Breakthru company acquired), and I think we’re definitely a contender for that.”
The most recent Breakthru competition netted 61 applications, similar to 2015, including more than a dozen for a new national category. Applications for the national category were received from as far away as Ontario and Nunavut. The hitch: the winner has to start their company in New Brunswick. (Newpy, an app startup from Prince Edward Island, claimed the national category).
Lisa Pfister’s startup, Pfera, won the main Breakthru category (which is limited to New Brunswick startups). Pfera is developing two pieces of technology: an electronic health record for horses, and a test that narrows a horse breeder’s ability to predict the birth window of a mare, down to 12 to 24 hours.
Pfister, a University of New Brunswick student, won $375,000 in cash investments and in-kind services, including legal, accounting and marketing.
“It really kick-starts everything,” Pfister said, noting she can now hire employees and launch a pilot project.
“It’s an extremely encouraging experience … considering I really only started this about seven months ago.”
Opening a Breakthru category to applicants from across Canada was an experiment for the 2017 competition, and Milbury says he’s leaning toward simply running a single Canada-wide category for the 2109 competition.
As for the potential for an exit that would give NBIF its first Breakthru payoff, Milbury is optimistic.
“Many of the past Breakthru winners continue to grow and expand … We believe any one of this year’s winners could be the next big exit for us,” he said.
“It’s only a matter of time.”