Waterloo has no shortage of creative engineers and inspired inventors. The trick, of course, is to turn this intellectual bubbling into startup talent, which in turn will build self-sustaining businesses that can support the local community. This multi-stage, multi-stakeholder agenda accounts for the range of government, research and business representatives who descended on the University of Waterloo’s Innovation Summit this April. As the university’s president and vice chancellor Feridun Hamdullahpur noted in his opening remarks at the event, a key focus since last year’s inaugural summit has been the commercialization of ideas, a task that Waterloo is well equipped for since the university fosters a rare combination of innovation and entrepreneurship: “we’re primed for success because we’re extremely good at many things,” he observed. But building an innovation ecosystem is a undertaking that requires input from a number of quarters, not the least of which is VC systems, which in Canada have proved less ready to support innovators than their U.S. cousins, and hence less able to sustain their continued growth within the country. Canadian VC activity increased significantly in 2013 — up 31% over total dollar investments for 2012 — however, this increase served only to reduce the competitive gap between Canadian and U.S. financing which saw Canadian companies garner 54% of the dollars that went to U.S. counterparts and median investment size by domestic VCs continue to fall short by more than two thirds of that provided by international investors. So in the spirit of generating more domestic success stories, the Innovation Summit mounted a dual agenda — the showcase of Waterloo talent and inspiration of creative solutions to the funding conundrum.
The University of Waterloo has long been recognized as a centre for engineering innovation. An extensive co-op program, initiatives like VeloCity which is aimed at fostering entrepreneurship, strong engagement with industry, and policies which allow researchers to own their IP have helped to position the institution as a critical player in the development of a regional innovation ecosystem. According to a 2013 PWC report, the university has a total annual economic impact of $2.614 billion on the region, contributing substantially to an ecosystem which was granted “631 patents per million — three times the national average.” Over the course of the two-day Summit, attendees were introduced to some of this innovation in the work of Waterloo alumni and faculty who have had their own impacts on key industries: Kunal Gupta, founder and CEO of the Polar Mobile app platform, Eric Migicovsky, creator of the Pebble smartwatch, Steven Lake, co-founder of Thalmic Labs, a research firm dedicated to “designing the future of human-computer interaction” and Ehsan Toyserkani, former student and now associate professor in the Department of Mechanical and Mechatronics Engineering and director of the Multi-scale Additive Manufacturing Laboratory at the University of Waterloo.
Toyserkani has two patents to his credit: one that relates to the use of additive or 3D manufacture for the creation of complex shapes with varying densities and a second patent for technology that enables the embed of sensors within metallic structures. A technology of the future that is gaining currency today, 3D applications are now available for “printing” a range of highly customized objects, including advanced engineering tools and components, prosthetic limbs, human organs, fine antique instruments — even chocolate — but Toyserkani’s inventions feature strong commercial applicability. Biomedical parts used in regenerative medicine, for example, made of biodegradable materials that would dissolve when no longer needed, or light, porous materials built to better adhere to different human tissues in the case of the first patent, and 3D layering technology that would support the sensor ubiquity that is prerequisite for our connected future in the case of the second. In the biomedical field, Toyserkani has worked for six years with Mt. Sinai and McMaster hospitals and with researchers at the Universities of Toronto and Guelph, and has received strong support from his home institution for development of the manufacturing process. Pending approval from the FDA which involves lengthy testing, he expects to move to the commercial phase in 2020, but Toyserkani pointed to other novel applications for his work, such as remanufacturing which involves the use of additive printing and robotics for onsite repair of components and tools in industrial or aerospace settings, which is likely to move to commercial production much more quickly. Despite the huge potential that 3D manufacturing offers and immanent VC support for commercialization of his own technologies, Toyserkani has found “limited Canadian funding for R&D” — prior to 2011, his was the sole research initiative in this space in Canada, and while other researchers have since come on board, Toyserkani concluded that “we are losing the race” from the perspective of global competition. He contrasted this Canadian experience with evidence from a Wohler study which reported U.S. investment of over $500 million dollars in additive manufacturing over the last three years (and into the next four) to bring additive technology to the mainstream.
But if adequate funding remains an issue, Summit organizers went to greats lengths to mobilize spokespersons from the investment industry who are adopting novel approaches to this challenge. Whitney Rockley, for example, who is co-founder of McRock Capital, a venture capital firm focused on growth opportunity in the “Industrial Internet of Things,” outlined work by large global companies in Smart Cities, advanced manufacturing, the ‘digital oilfield’ and automation of power grids as precursors to the “next revolution” and the foundation for adjacent innovation. When assessing a startup’s potential, she explained, McRock Capital considers a number of factors, including the technology’s ability to plug into larger, established platforms. As example, Rockley pointed to a product’s interoperability with GE’s Predix software platform for industrial analytics and connectivity as a predictor of success in IIoT markets — along with a founder’s drive to make the business happen.
With a similar message, president and CEO of Chrysalix Energy Venture Capital Wal Van Lierop stressed his organization’s singular focus on the energy business, but also specific opportunity therein. Citing Chrysalix successes with GlassPoint, a company that built solar powered steam generators to extract heavy oil in the Middle East, and Minesense, provider of a ruggedized sensoring and analytics platform that improves efficiencies around ore extraction, Van Lierop urged the audience to think of Canada as a leader in clean tech management of the resource sector. “We are really complacent in our resource industry,” he added, and “if we don’t exploit our leadership in our resource sector and clean tech, others like China will.” But how to manage this, given the large capital investments that are needed for projects in the energy space? Van Lierop’s answer is to “use other’s money,” to create an ecosystem that can take advantage of new opportunities in the resource sector, specifically government funds that could help “change the game for Canada” and investment from the “green elephants of the future,” large companies that can afford risk in pursuit of radical innovation. In Van Lierop’s schema, the smaller company or startup, which “understands the value chain” also has a role to play — funded by the larger organization which invests through brokerage services provided by VC companies like Chrysalix.
But in the 21st century, as Helge Seetzen, CEO of Tandemlaunch, a VC focused on the commercialization of early stage businesses, argued, more is needed than investment funds if VC is going to work. Since technology has transformed our (Marxist) views on the utility of labour and the means of production, he explained, there’s no more need for the capital intensive factory: “we now have crowd funding, additive manufacturing and software is eating the world.” In Seetzen’s view, collaboration around ideas is the new currency, and “innovation has become the one way that companies can differentiate from one another.” Unfortunately, this is a message that has not yet penetrated the business landscape. According to Sweetzen, Canadian universities have invested $54 billion dollars in applied research, but only 600 startups have grown out of this — a “technology transfer gap” that he attributes in large part to the VC community, which “as an asset class, have failed miserably from 1995.” Sweetzen’s advice for this group is to take a lesson from the small handful of funds that are actually making money for their investors that actually understand their domains and the players in the field. VC is about more than providing capital, he argued — it’s about providing the expertise and value add that enables technology transfer, and about investing in “high technology risk,” a proposition that is different from “market risk” as well informed investors understand their markets and where opportunity lies. On a practical level, Sweetzen advised adoption of the “Synergy Investment Model,” which Tandemlaunch has implemented through its 25+ investors, 10+ industry partner and 600+ university partner network which have combined to build synthetic companies around innovation.
A key thread that runs through each of these examples and through other presentations at the Summit is the importance of collaboration between VC and inventor institution, razor like focus on identifying specific and long term commercial opportunity, and strong support from government (outlined by the Honourable Gary Goodyear, Minister of State (Federal Economic Development Agency for Southern Ontario) at the event and in the video discussion with InsightaaS below) in the construction of sustainable innovation ecosystems that can support the local community. But as every rule has its exception, the Summit also highlighted an alternative path, crowdfunded investment to the tune of $10 million through Kickstarter for creation of the Pebble smartwatch — an initiative that founder Eric Migicovsky claimed required “no business plan as that would be a waste of time,” involved sourcing of appropriate manufacturing facilities in Asia as first step, and has proved a multi-million dollar success for the Waterloo trained Migicovsky and his team.
 According to the Canadian Venture Capital & Private Equity Association, “The median investment size from Canadian investors was half a million dollars, far short of the $1.7 million median investment from non-Canadian firms.” Thompson Reuters, on behalf of the CVCA, Canada’s Venture Capital Market in 2013. https://www.cvca.ca/files/Downloads/VC_Data_Deck_2013_English.pdf
 PriceWaterhouseCoopers. University of Waterloo Economic Impact Study 2013.