National Post - Financial Post Magazine
GRANT A WISH
Turned down for initial funding by private investors, Chipcare turns to grant money to get its medical device off the ground
An electronic miniature lab of sorts that tests a drop of blood for white-blood cells — a key measurement of health for those with HIV— housed in a device the size of a scientific calculator, should be an easy sell. But James Dou and his company Chipcare Corp. found out investors felt the business idea and product were a bitter pill they did not want to swallow. “As soon as you’re pitching something for resource-poor Africa, or lower-middle-income countries, they’re not interested,” Dou says. “In some investors’ minds, you’ll never make money when you’re trying to sell to the poor.”
Dou and his fellow co-founders also lacked business acumen though they are incredibly savvy when it comes to technical and scientific knowledge. “Investors thought we were not ready from their perspective,” he says. “But we felt we were speaking two different languages... It was really difficult to move things forward.”
Funding is a challenge for every startup, but particularly for a company with a “social focus,” Dou says. On top of that, Chipcare needed a hefty amount of cash in order to go through the multi-stage process of creating, building and testing a medical tool. “It’s got hardware, software, mechanical, chemical and a lot of other stuff all integrated into one platform or unit,” Dou says. “There is a lot more work and validation that needs to be done before you can talk to investors, or you can actually say this thing would work.”
After coming up empty-handed, Chipcare decided to switch gears in more ways than one by focusing on grants and using its relationship with the University of Toronto. The idea for Chipcare initially started as a research project through the university before it began to take shape as a commercial venture in 2006 and 2007. One of the company’s five co-founders, Stewart Aitchison, is a U of T professor — a connection that allowed them to access special government funding not available to all startups. All of Chipcare’s early funding was through research grants, which Dou says totalled roughly $600,000.
Chipcare in 2012 then connected with Grand Challenges Canada, an organization funded by the federal government that supports entrepreneurs in science, technology and social and business innovation. Lu Chen, another Chipcare co-founder, was recognized by the organization as one of its Stars in Global Health that year. In turn, Chipcare received $100,000 in funding as part of the first phase of the program. “That gave us data, gave us a prototype to demonstrate the technology and apply for a patent; we got some market analysis done at the same time,” Dou says. “And all of this was able to support a strong pitch with investors,” who they approached once again in October 2012.
In early 2013, Chipcare also turned to ventureLab, a non-profit innovation centre in Ontario’s York Region that provides assistance in the form of mentoring, workshops and training courses. They also tapped similar resources at MaRS Innovation, a nonprofit created to help inventors through its 16 member institutions.
All the hard work paid off by April 2013: Chipcare announced it had secured more than $2 million in funding, one of the largest-ever angel investments in Canada’s health-care sector. The cash infusion came from phase two of Grand Challenges Canada’s program, which agrees to match funding that a startup gets from the private sector. Chipcare raised more than $700,000 from the Maple Leaf Angels network, an angel investment group based in Toronto, as well as additional funding from Uof Tand MaRS Innovation, for a total of $2.17 million after matching in this financing round.
“This financing will allow us to really set up and build a company, and have our prototype of the product, and then start the necessary clinical and field trials,” Dou says. “And then get ready for the regulatory clearance, or approval.”
Chipcare’s aim is to have an alpha prototype about a year from now, which it will test and then develop a beta prototype, before progressing to clinical trials. The recent money raised will likely be enough to reach the beta prototype stage, Dou says, while the vote of investor confidence will help in the next round of fundraising. “It’s definitely made it a lot easier, because new additional investors all need to see if other investors have invested in you,” he says.