Daniel Huynh wants to learn the nuts and bolts of starting a business. He and his two partners, Wen Ma and Jacky Mak, are electrical engineers who would rather be entrepreneurs. They have what they think is a good idea. But is there a market for it? Could they turn a profit? Are there legal issues that could tangle them up?
It’s Day One of Techno, U of T’s entrepreneurial boot camp for science and engineering students. Huynh, Ma and Mak –and I, and others – have spent this sweltering June day inside the air-conditioned confines of the Best Institute on College Street learning about the program. Only one month long, Techno provides intensive, hands-on guidance in product development, patent law, finance, marketing and people management, among other things – and it’s free.
More than 50 individuals and groups applied, but only 18 were accepted. “They have to be serious about building a company,” says founder Cynthia Goh, a chemistry professor, who devised the Techno concept a few years ago. Goh, who is also director of the Institute for Optical Sciences, tells me she helped pick the chosen few based on in-depth applications and interviews. “Their science has to be solid,” she says.
Members of team Huynh-Ma-Mak have come up with the idea of creating affordable add-ons to a particular kind of optical system used in labs. These instruments examine materials by looking at changes in the way light is scattered – a technique that shows potential for distinguishing normal cells from cancerous ones. The team members know they can build the add-ons because Mak has already designed, built and tested one that they hope will be their first product.
The problem with optics, Huynh explains to me, is that the equipment is designed and priced for commercial research labs, not universities. A complete system can cost upwards of $300,000. And if you want to do a different type of analysis than the instruments were intended for – examining a liquid, for instance, instead of a solid – you have to kit yourself out with a whole new system. There are few options to buy individual components, he says.
The prohibitive cost and the limited capability of the systems are what drove Mak to design his own add-on. But it took him two years to do it. Lots of optical engineers are forced to do this to save money. What if Mak and his partners could sell basic, reasonably priced components to university researchers, as adjuncts to the systems they already have? One stumbling block may be intellectual property, says Huynh. “Someone holds a patent that may be similar,” he notes. The first thing they plan to do is look into that.
Across the room, I meet Chris Pettigrew, one of only two undergraduates in the program, the other being his twin brother and business partner, Michael. Chris is confident about their proposed company, which aims to produce lab instruments that will be able to determine cellular lifespan – measured by the number of times a cell divides before it dies. This work is often done manually, mostly by students, by looking through a microscope, separating the dividing cells with a tool called a micromanipulator, and counting.
Chris believes their idea is such a good one that he is uncomfortable telling me much about it. He’s certain, both from working in the field and from reading the literature, that there will be demand. Cancer, aging, genetics labs – lots of life sciences facilities – do this. “It’s the lifeblood of all these labs,” he says. And he and his brother have cracked how to automate it.
Another person I talk to is Xingxing Xing, a physicist interested in quantum information and computing. While working on his PhD, he developed a new high-precision way to measure how long it takes a pair of photons to get from one point to another. This can be helpful information if you want to determine the characteristics of something in their way – a tumour, for example. You can already buy equipment that does this, he says, but it costs tens of thousands of dollars. He thinks his device could sell for a few thousand. He imagines selling it to other physicists or to biophysics labs. He’s not sure yet, but that’s one of the details he hopes to figure out over the next month.
Along with this year’s participants, there are former Techno grads here, as concrete evidence that the program can lead to business success. I speak with Michael Montgomery, who has developed a novel way to dampen the sway of super-tall buildings, which occurs even in regular winds. Two Toronto highrises are currently testing designs that incorporate his “viscoelastic coupling damper.” I shake hands with Mallika Das, whose eco-safe wood protection company I wrote about for U of T Magazine last year.
It’s been a long day and the Techno folks unwind with some sausage rolls and falafel. It’s not lost on anyone that we’re inside a building named after Charles Best, co-discoverer of insulin, and that the discovery of insulin has provided U of T with more than $3 million in research money every year, through the Connaught Fund.
There is a certain frisson in the air.
One of the perks of Techno is free advice from pros, such as financial gurus and patent experts. Xing is interested in how planning and budgeting works. He tells me he’s been advised not to use overly optimistic projections in his business plan because investors will look at the plan and later judge his performance based on the targets he’s set for himself. You can privately strive to be aggressive, he says, but you should think twice about setting public targets you might not be able to meet.
Meanwhile, both the Pettigrews and Huynh and his team ask for help with patent issues. Chris and Michael have already spent their own funds filing a provisional patent application, which program advisers confirm was a smart move: it will save the brothers money while also acting as a placeholder as they work out some bugs.
The news is less rosy for Huynh, Ma and Mak. They ask for help understanding the technical language of the patent they fear they might infringe. Their hunch is right; the
patent holder, though not in their field, has staked a broad claim, and if they follow their current plan, they risk treading on his territory. The three huddle together in a little glassed-in boardroom, debating what they should do. Do they approach the patent holder to collaborate? Risk ignoring the claim? After a few days of intense discussion, they decide to ditch their idea and come up with something new.
“There’s something I really picked up here from Professor Goh,” says Ma. Goh’s philosophy is that the most important thing about the company is not the idea, but the people. “The biggest asset is you, your knowledge,” says Ma. “We have to make our expertise generate revenue for us.”
Today, results are out from the Global Innovation Index – a ranking of countries jointly published by INSEAD, a leading business school, and the World Intellectual Property Organization. Canada has dropped from number 8 last year to 12 this year. There’s lots of noise in the media these days about how Canada is not entrepreneurial enough. The Organisation for Economic Co-operation and Development reported in June that the Canadian business sector devotes only one per cent of the country’s GDP to research and development, compared to two per cent in the U.S. – and 2.5 per cent in Japan and Korea. An expert panel convened by the federal government to report on Canadian innovation said last year that we’re not going to be able to maintain our standard of living if we don’t do something to turn this around.
“Innovation is the ultimate source of the long-term competitiveness of businesses and the quality of life of Canadians,” the report, Innovation Canada: A Call to Action, states.
Goh told me that one of her reasons for starting the Techno program is that she doesn’t want to lose any more Canadian scientists to California. This is the program’s third year and so far more than 76 people have completed it, resulting in the launch of 35 new companies. She’s proud of the program’s job-creation record. “Techno enables students to create their own high-value jobs and control their future,” she says. Commercialization also has important societal benefits, and Goh’s epiphany was that graduate students are an underutilized resource. “They are really the ideal candidates to serve as conduits to move technology outside of the university and to create value to society in as short a time as possible,” she says.
This is not Goh’s first fling with commercialization. She was also the instigator behind what has now become “Entrepreneurship 101,” a course run by the Medical and Related Sciences discovery district (MaRS) – the Toronto nonprofit devoted to helping researchers turn theory into commercially viable products. But whereas the MaRS offering takes a more academic approach, Goh keeps Techno very much hands-on. “We are cultivating early stage innovation,” says Derek Newton, executive director of U of T’s Innovations and Partnerships Office, about Techno. “We take a university startup, give it enough support to grow up and survive and thrive in the real world.”
With this year’s Techno now past the halfway mark, Chris and Michael Pettigrew have just received the results of an intelligence report that MaRS commissioned for them. It confirms the brothers’ hunch that there is a strong market for their product. (Techno participants have access to all the services that MaRS offers its members.) The Pettigrews have already spoken to a design firm about creating a prototype, which they want to be able to show to future investors.
I ask Chris if he’s learned anything surprising from Techno. One thing, he says, is an appreciation of the importance of a good sales pitch. He credits a talk by Angel Morales, one of the program’s mentors and a real estate agent, for showing him and his brother that sales means far more than “moving product” in a used-car salesman sort of way; it means putting together the most compelling case for their company. The first sale will be to investors.
I find Xing still mulling over a talk given early in the program by Darren Anderson, the founder of Vive Crop Protection, a U of T spin-out company that predates the current Techno. Anderson told the group about how Vive started in 2006 as a company that made fluorescent nano tags used in the biomedical industry. But that market was limited, they found. So they explored other options for their technology: an anti-reflective glass coating, a water treatment catalyst and sales of the nanoparticles directly to academic and industrial researchers. About three years ago, he told them, the company began focusing on crop protection. They developed a system that can deliver existing pesticides more efficiently. And they haven’t looked back: the company had to hire 10 new people in the last year to keep up with demand.
Xing is intrigued by the company’s reincarnation. The decision to venture into crop protection was “not obvious,” he says. He’s thinking about his own technology and whether he’s on the right track with it. One of the most important things he’s learning is that you have to be prepared to adapt your business idea to unforeseen circumstances. “Ninety-three per cent of all new businesses change their initial idea,” he tells me. He heard that here at Techno, and it’s stuck with him.
Huynh, Ma and Mak are a case in point. “The initial company that we were thinking of starting has completely changed,” says Mak, as the four of us convene in the same boardroom where they made some tough decisions just days earlier. Instead of designing and building add-ons for existing optical systems, they’ve decided to design simple, sturdy, fair-priced stand-alone equipment designed specifically for post-secondary teaching labs. They have examined what their competitors offer: too many bells and whistles that students never use, but which the university nonetheless has to pay for.
Their first order of business now is to talk to potential buyers at U of T – lab managers in the electrical engineering, computer engineering and physics departments – to find out more about their needs. “We’ll see what kind of tweaks they need,” says Ma. “The biggest difference is we’re now starting with the problem and looking for a solution.”
It’s the final day of Techno, what they call “pitch day,” when company ideas are formally presented to the group plus a smattering of invited guests. The main room has been converted into a makeshift auditorium, with rows of chairs facing a podium and a large projection screen. Some participants have traded in shorts and T-shirts for business casual.
“LabInvasion” is the new company moniker chosen by Huynh, Ma and Mak. Ma is giving the presentation, and she plays to the crowd. She likens the optical equipment market to a world where luxury vehicles are the only way to get around. “We want to build the Corollas of the optics world,” she says, and we all laugh.
Their first product will be an optical power meter. A survey conducted by the team showed that customers want robust, stable, low-cost equipment and need only a small wavelength range, a small power range and low precision. “We can match needs, maintain quality and make it affordable,” she says.
She lays out the plan. In the first year, they will leverage their direct connections. Later, they hope to benefit from recommendations from their customers and online scientific equipment sites. They project one or two products and 20 customers in year one, and revenue of $200,000 by year three.
Toward the end of the afternoon, it’s Chris Pettigrew’s turn, with “Cytospan Technologies.” He warms up the audience with some slides illustrating how the lifespan of a cell is currently measured: here’s a pencil, and here’s a smudgy chart where the data are recorded. These slides are all we need to be convinced that the process needs updating. Optics may be speeding around in a Ferrari, but biology is still using the horse and cart. Cytospan is going to change all this, Chris states confidently. He predicts the company will have $10 million in revenues by 2015. It already has six investors.
Xing’s “Sonola Imaging” pitches last. He’s decided to use his photon-measuring technology to make brain imaging possible with ultrasound. He had mentioned this idea earlier as an offhand possibility, but I’m surprised to hear now that it’s the main focus. Later, he tells me that an Ontario Brain Institute fellowship he received in the second week of Techno helped tip him in that direction.
He points out that many communities have no access to expensive brain imaging technology, such as MRIs or PET scans. Ultrasound doesn’t work well in the brain, because it uses sound waves to create images, and skull bones distort the waveforms. He is hopeful that his photon arrival-time technology, and what he’s learned about optics and wave propagation, can solve this problem by providing a way to adjust for the bones.
Rather than compete with ultrasound companies, he’s hoping to collaborate with them. And the market is big: more than 2,000 universities, 170,000 small clinics and countless ambulances in North America alone have ultrasound devices, and every one of those facilities could in theory extend the use of their ultrasound with Xing’s technology. And there’s no indication in the literature, he says, that industry leaders are developing anything along these lines.
Xing expects to have the hardware and software worked out in 2013 and a proof-of-principle device sometime thereafter. He’s less sure of the timing of a real prototype or commercial product, but, he says, “I’m not aware of any reason why this should not work.”
And if it doesn’t? Not a problem, he says. “You think your idea is the best in the world. But your strength is your knowledge and background, not this one idea. I will find another problem to work on.”
Alison Motluk (BA 1989 TRIN) is a journalist in Toronto.