Purposeful destruction

Purposeful destruction

< Back to Articles | Topics: Skilled workforce | Contributors: Jon Tattrie | Published: July 1, 2018

Growing Atlantic Canadian science-based technology startups into booming companies

Writing in the 1940s, the German economist Joseph Schumpeter argued capitalism can never be stationary and that the fundamental impulse driving the capitalistic engine comes from entrepreneurs creating new consumer goods, new methods of production or transportation and new markets.

“Capitalism requires the perennial gale of creative destruction,” he concluded.

Those winds are blowing through the Creative Destruction Lab (CDL) – Atlantic, which in June graduated its first cohort of nearly a dozen new companies looking to clear ground to grow their own businesses on. Executive Director Jeff Larsen says the course runs for nine months and uses objective-based mentoring.

“We take the best startups in Atlantic Canada and we help accelerate their growth by putting them through a program with some of the most successful entrepreneurs and business people across Canada,” he says.

CDL is a seed-stage program for massively scalable, science-based companies. It started at the University of Toronto five years ago and arrived at Dalhousie University’s Rowe School of Business in 2017. In 2019, New York University will start the first American CDL program. It has locations at the Sauder School of Business at the University of British Columbia, the Haskayne School of Business at the University of Calgary and HEC Montreal.

Atlantic Canada’s first class includes Harbr, which raised $1.75 million for its startup to use artificial intelligence in project management, real estate development and construction projects. Bereda Training got $150,000 through three angel investors it met at CDL-Atlantic to develop its online training platform for endurance athletes.

“The thesis of the program is that there are no better ideas or efforts elsewhere in the world, but you see more of these companies growing in Silicon Valley and Boston and a few other places. But in Canada, we’ve had less of them,” Larsen says.

He thinks the Silicon Valleys of the world take advantage of a long tradition of growing companies and a better mentoring system. Larsen says the insights east coast startups can learn from CDL mentors like Clearwater’s John Risley, IMP’s Ken Rowe and Microsoft Canada’s Ozge Yeloglu, can help young entrepreneurs make wise decisions from the start.

And Atlantic Canada, with a stagnant economy and aging population, is rife for creative destruction. “GDP per capita is essentially equal to productivity times demographics,” Larsen says. “If we know our demographic is declining, our only option is increasing productivity.”

Atlantic Canada doesn’t have a growing labour force, nor floods of venture capital, so CDL focuses on greenblue innovation (ocean-tech, clean-tech and agri-tech). Larsen says job growth will come from startups, not big companies expanding.

Gillian McCrae is a Venture Manager with CDL-Atlantic. She works directly with the companies over the nine-month program, connecting them to mentors, scheduling regular one-on one calls to check in on them and guiding them through the process.

They work in two-month “sprints,” setting three critical objectives that will “move the needle” for the businesses in that eight-week period. McCrae says it could be increasing sales, getting new partnerships, working with contract manufacturers or making critical hires. “A lot of the cases, it’s uncovering the unit economics, or the economic benefits, within how they sell to their customers. It does require a deep dive and analysis on market assessments, customer engagement and success planning around the customer side.”

Even when they don’t meet the objectives, they do find a new understanding of what they should be focused on. “They don’t get cut from the program if they don’t achieve the programs. The way they make it through is the commitment of the fellows and associates who want to continue working with them,” she says.

McCrae, who has run her own businesses including GetGifted, says mentors helped her immensely. Putting your hopes and dreams before experienced business people can leap-frog you ahead, she says. “These are the people who have been there and done that. They have the experience, the history and the challenges that new entrepreneurs have to go through and overcome too.”

She won’t name it, but says one Toronto-based company built so many relationships in Atlantic Canada through CDL that it’s looking at relocating here.

The CDL cohort gets even more support from MBA students like Ryan Bunker, who help them meet those sprint goals. “It can be general market intelligence. If a company is looking to enter a new market space, we would help them with determining the overall market size, dynamic, who are the big players, how do they compete, what are the growth prospects of that market,” Bunker says. “It could be helping a company who has a product in a market, but isn’t sure on the actual value and how it should be captured through pricing.”

Bunker was paired with a CDL startup as part of his studies at Dalhousie. He can’t name it for confi dentiality reasons, but he helped it figure out how its products differed from existing ones and learned about the pricing strategies of rivals. Other MBA students look at cash flow performance and projections to help with investor packages, or improve pitching and presentation skills to win investors.

Bunker says the students get to test classroom concepts in the real world. “If we’re not doing something like this, it’s a lot of theory without a lot of hands-on experience,” Bunker says. “I said to everyone in the Creative Destruction Lab that the first day session was the best day of my professional career. It was just so exciting. I got to meet a lot of great people and build a network that is very valuable.”

Zach Green says the CDL program worked well for Mysa, the pioneering smart thermostat company he co-founded to control electric baseboards. “We make it really simple for homeowners to set energy-saving schedules from their phone or tablet and they can see in real time the energy consumption of all the heaters — and all the stuff in their house,” he says. “We make really easy for people to save energy and money.”

One of their investors suggested they apply for a CDL-Atlantic spot to gain mentors and secure investment. “It’s been extremely positive,” he says. “There were so many things at CDL that we didn’t think of that has put our business on the right course.”

For a startup company looking to get into the power business, they got a heck of a mentor: Chris Huskilson, CEO of Emera, the company that owns Nova Scotia Power and other utilities in Canada, the U.S. and the Caribbean. “We know our solution from the end-consumer angle, but to hear how our solution impacts the utility angle and how we scale up to provide to thousands and hundreds of thousands of customers — Chris is masterful at that,” Green says.

Huskilson has agreed to work with Mysa after the CDL program ends. “It’s awesome.” Mentor Matthew MacLellan, President of Eastlink Wireless, gave them valuable insight on debt planning, raising debt and how to use it to sustain the business. “It was extremely helpful advice.”

Another mentor suggested they do another round of manufacturing before they started to sell units. “We did — and we found a few problems with our manufacturing line that we were able to fix before the units went to customers.”

Green says the CDL experience was a little chaotic at first, with 20 startups and 20 mentors meeting all at once. But by the second meeting, things had smoothed out. They got a number of angel investors on board for the next round of funding and are now exploring a different thermostat for the condo market and a software subscription for commercial users.

“It was the very first initiative I have seen that does a good job of including all four Atlantic provinces,” he says. “I never felt like one was stronger than the other. Just because we are from Newfoundland doesn’t mean we were a ‘nobody’ startup. CDL did a really good job of making it pan-Atlantic.”

The Creative Destruction Lab takes applications on a rolling basis and has set an Aug. 12 deadline for the next cohort. It selects ventures based on their potential to scale, the defensibility of their product or service and the commitment of the co-founding team. Ventures can apply at www.CreativeDestructionLab.com or email questions to info@creativedestructionlab.com. CDL-Atlantic’s Gillian McCrae says the graduating ventures are already blowing the winds of change through eastern Canada. “They’re representing some of the best companies in Atlantic Canada in front of a national audience and to be part of that has been a pleasure,” she says. Joseph Shumpeter would have called it “unternehmergeist,” or the entrepreneurial spirit.

“Only a few people have these qualities of leadership,” he wrote. “However, if one or a few have advanced with success, many of the difficulties disappear. Others can then follow these pioneers.”

< Back to Articles | Topics: Skilled workforce

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