Many investors want to see a strategy from Canadian companies on how the business plans to expand into international markets.
Roch Ripley, partner and head of Vancouver's Intellectual Property Department, joined Paul Austin, partner at Fort Capital, and Jeanette Jackson, CEO of Foresight Canada, to talk about how cleantech companies can successfully take their business from the national level to international stage. The discussion includes:
- Canada's global competitiveness in cleantech:
- Important details that entrepreneurs need to know before expanding into global markets; and
- The various resources and support available to Canadian innovators.
Transcript
Paul Austin 0:00
In the past, we would not have looked at this pre commercial space
and we are and I quote what climbing down the ladder. To now look
at these types of investments.
Jeanette Jackson 0:11
Welcome to clean tech forward, a Fourside Podcast where we explore
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together
Welcome to clean tech forward. I'm Jeanette Jackson, CEO of foresight Canada. Today we're talking with Roch Ripley, a partner at Gowling WLG and the head of Vancouver intellectual property department. We're also joined by Paul Austin, a partner at the Canadian independent investment banking firm Fort Capital. The three of us discuss Canada's status as a global competitor in cleantech and what Canadian companies need to do to prepare for international expansion.
This clean tech board podcast is supported by Gowling WLG, a global leader in intellectual property law, Gowling WLG works alongside Canadian cleantech companies to develop IP strategies that maximize business opportunities, and increase market share while protecting valuable innovation. From ideas to investment to international expansion Gowling WLG understand the potential of your intellectual property at every stage of growth, visit Gowlingwlg.com/cleantech, learn how they can support your business today.
I'm going to start with you Roch. Tell me a little bit about what you're seeing in terms of trends for Canadian cleantech?
Roch Ripley 1:47
Well, I do think in Canadian clean tech, we are in a scale up
phase. It's not an industry that just started yesterday, in
this province, or in this country. I think we've been working
on it for a very long time. And I think we're starting to see
the fruits of that long term investment. And I think part of that
scale up is in international growth and expansion and investment,
which I'm sure Paul can talk a little bit more about, and which
a lot of my clients ask about in respect of intellectual property,
because that is one of the many tools that companies have to
protect the fruits of their r&d When they grow and scale
internationally.
Jeanette Jackson 2:34
Paul, over to you, what are you seeing in terms of the incredible
trends and growth of Canada's clean tech space?
Paul Austin 2:41
Thanks, Jeannette, the world of clean tech or climate tech in the
last couple of years, globally has really changed. It's a
significant and fundamental change that we're seeing,
especially among investors and investor interest. And for years,
you know, we, as you know, Jeanette, we were in a very kind of
struggling place in clean tech, it was hard to get traction and
hard to get investment dollars. And that all changed about two and
a half years ago, when the world really took the climate crisis.
And much more seriously, and we saw sort of a general public
awareness of of the, you know, we saw it and with our own eyes,
whether it was floods and fires, etc, and, and a real momentum
around putting new investment dollars to work in new technologies.
And so we've seen an incredible influx of foreign capital and
domestic capital here into the ventures that are part of this
energy transition. And that's been the big change that
we've seen here in the last couple years.
Jeanette Jackson 3:58
Absolutely, I had the privilege of attending cop 26, in the face of
COVID. And it was incredible to see the 10s of 1000s of people that
were there, really ensuring that climate change was front and
center in all recovery. And quite frankly, economic developments as
we navigate some of the losses that we've all faced as a result
of the pandemic. You know, over to you. What gets you excited about
the work your organization is doing specifically in this space
Roch?
Roch Ripley 4:31
Well, I think, I think a couple things. Well, I mean, one, I'm
a techie. I really find the technology interesting. I'm a
lawyer, I'm a Patent Agent, but before I did that, I got a
degree in electronics engineering. So when I learned about all the
new stuff we're working on. I mean, just from a techie
perspective, I think it's really cool. And frankly, it makes me
pretty proud to be Canadian and British Columbian and to be making
these contributions. Two, I see a a lot of what we do, I think in a
broader geopolitical context, I certainly think the last couple of
years have been a time where a lot of us have been doing a lot of
reflection. And I think COVID And a lot of the other crises that
we've been through have accelerated trends. So I think
Paul's absolutely correct two and a half years ago, we've
started to see a lot more capital, that was definitely in part
related to the pandemic. But I don't think that is an
artificial construct that when the pandemic ends, the investment
will end, I think it's brought forward a trend and accelerated
a trend towards sustainable investment, and, and development of
these resources. But I don't think it's a flash in the pan.
So it'd be part of something like that on an accelerated
timescale, I think is pretty exciting. And it's just really
neat to be part of big deals and do interesting work in to support
the local economy. You know, we see a whole bunch of different work
in our business, we've done international deals. And that's
great. But, you know, working on the local deals, and helping local
entrepreneurs succeed, I think it's particularly rewarding when
you walk down the street, and you see your community being vibrant
and thriving, that's because of the local works. I think
it's fantastic to be part of that, and to help local
entrepreneurs succeed.
Jeanette Jackson 6:30
Now, Paul, I am on Fort's mailing list, and I almost feels like
every week, there's an announcement of being support that
Fort's providing for some of these scaling, clean tech
companies, perhaps sort of, from your perspective, share with us
about what gets Fort, and you and the incredible team, they're
excited about the work that you're doing in the clean tech
space.
Paul Austin 6:52
I like to, you know, relay A story that we experienced here. So our
clients are often pre commercial clients, and that they are
developing their technology, and they have yet to really become
mainstream in the sense that they have customers and, and, and, you
know, a track record of revenue streams, these are new technologies
trying to get a foothold into the market. And they're,
they're quite capital intensive, a lot of them in that sense
that it takes a lot of capital to build the plants to deliver the
benefits that these technologies promise. And so it's quite
challenging for investors to look at those types of investments
because there's no track record. And so they're really
betting on what the entrepreneurs are projecting into the future.
And what we found was in talking to investors around the world, we
came across this class of investors that we would an asset class
that are what we call private equity. They're their funds with
billions and billions of dollars, or their sovereign wealth funds.
These are country wealth, funds that are managed by countries, or
even the pension plans. And, you know, typically, those pools of
capital, we're not interested in pre commercial early stage
Tech with high risk. And what we saw in the last couple of years,
were these investors talking to us and saying, you know, the world
has changed, we are no longer investing in oil and gas. And what
you have for capital, what your clients are, are doing is very
interesting. It's a transition to low emissions. And in the
past, we would never have looked at this. But there's so much
pressure now for environmental and social and governance type
investments, that and there's not that many ESG qualified deals
out there. And so, in the past, we would not have looked at this
pre commercial space. And we are and I quote, climbing down the
ladder, to now look at these types of investments. So having that
kind of sentiment and ambition from these, these, these climate
tech funds or these new pools of capital to invest into this space
is really quite remarkable. And it's exciting to be part of it.
And you know, we've been very fortunate here in British
Columbia to have world leaders in in these types of technologies.
And in the sectors I'm talking about air are in green hydrogen
production, hydrogen infrastructure, and carbon capture utilization
and storage companies. So there's a variety of different
companies in those sectors that are now raising capital
successfully and raising capital
from private equity, sovereign wealth funds, pension plans from all over the world, in addition to the more traditional investors that used to and still do invest, which are venture capital, or impact family office venture capital.
Jeanette Jackson 10:16
Yeah, I agree. I've seen some incredible transitions in the way
investors are making decisions. There are more folks interested in
that early space. There, I'd say looking at investing more
capital upfront so that the ventures have a real going concern,
instead of spending the next 18 to 24 months, trying to raise more
money, they're actually having the space to get some of the
work done. Because as we all know, commercializing technology,
depending on how complicated it is, can take a little bit of time,
and it needs a lot of focus and attention to be done. Right. You
know, rock going back to you when we think about sort of the
strategies that companies need to look at when they're
targeting both domestic and international investors, when
they're looking to grow internationally. What role does IP play
in that story? And what do ventures need to think about when
they're navigating their intellectual property and other trade
secrets? You know, going on that international cleantech stage?
Roch Ripley 11:18
I think IP plays an important role. I don't think it's the
be all end all I think, to run a good business, you have to be well
managed, particularly in the current talent, climate, you have to
treat your employees really well. There are a lot of things you
have to execute well on to be successful. And I think to be as
successful as you can be executing well, and IP is, is one of the
things you got to do. I mean, just to, to elaborate, or to talk a
little bit about something Paul talked about the international
perspective, and how that contrast to what he had previously seen
in Canada. You know, one of the things that I think Canadians can
do better, and I think we're starting to do better is
commercialize and grow and use the IP system to commercialize and
grow, you look at some of the companies in other countries. I mean,
the United States leverages international IP systems, American
companies leverage international IP systems incredibly well, to
their advantage. But even countries where I mean, frankly,
we've had a generational head start on by some metrics have
leapfrogged us in terms of using that international system to the
benefit of their companies, I'm thinking in particular of China
and Korea, the amount of IP activity generated in those countries,
you know, by some metrics, by many, frankly, exceeds what we have
here, which I think is unfortunate. So, I think that, especially
for the kinds of companies we have in this country, which tend to
be a little on the smaller side, relative to our American
neighbors, like Paul mentioned, pre commercial, which I think at
least from my personal experience, we get involved in all the time,
because of the nature of the business. Having an IP strategy
upfront about how to protect the fruits of your r&d is really
important, if only so that when you're going to secure
investment, you have a compelling and persuasive and accurate
narrative to tell people, hey, when they're going to invest in
your company, the stuff you're generating with that money is
going to be well protected. If an employee goes across the street,
and tries to take some IP with them, there are things you've
done to mitigate that competitive disadvantage that results from,
you know, people leaving or the marketplace catching up. And some
of the choices you make up front. Probably the most common one is
patent versus trade secret. If you've got some kind of
technology you've invested a lot of money in, do you spend,
frankly, you know, 10 $20,000, to secure patent protection? Or do
you just try to keep it a secret with the risk that it could leak
and employ you could leave somebody could reverse engineer the
product. And in a highly capital intensive space, like clean tech
where your competitors can be really large companies, and they can
throw a lot of resources at reverse engineering. What's the
best way to protect that IP and I think getting in there early, pre
commercial to develop a strategy can be really helpful. And you
know, I think to the credit of the Canadian government, in
particular, NRC IRAP, they've realized that getting strategic
advice early can be really helpful and laying a solid foundation.
So you know, companies that have ITAs from IRAP technology
advisors, I think get pretty good advice in that regard,
particularly with the focus that they've they've developed
recently in that space.
Jeanette Jackson 14:59
So Paul, building on IP, you know, obviously, we also want to look
at export opportunities, Canadian companies, there's certainly
an increase in domestic adoption through various government
initiatives. Right now, industry is getting more familiar and
comfortable with some of the cultural differences working with
technology companies, as well as potential risks. Let's throw
that out there. When you are looking at engaging different
investment firms from around the world, are you hearing from them
that they want to see the companies also expanding into
international markets? Is that what investors are also looking
for?
Paul Austin 15:38
Yes, you know, investors, they look at a number of sort of
categories to to determine whether they want to invest. The first
one is the market, how big is the market in Canada, as we know, is
a pretty small market. Even though it's a very sophisticated
market, it's quite small, compared to the United States, you
know, and that kind of factors about 10 times the US market about
10 times the Canadian market. And so, you know, they're looking
to see investors are looking to see the opportunity for their
companies to grow. And especially in these new categories, these
new these new areas of carbon capture, for example, or the hydrogen
space. And so, you know, what we what we often see is that they
want investors want to see that the technology works initially. And
so Canada has a very good program or programs, as we've talked
about here from the National Research Council, and the technology
advisors and our CI rap
program, where they fund early stage companies to help them get going. And then there's a whole succession of programs like Sustainable Development technology, Canada, that takes that maybe early stage NRC project, and applies more capital to scale it up again, in a demonstration that often happens here, initially in Canada, and then it's it could go to other domestic applications, but it's often we talk about these companies being born international exporters, almost from the get go, because the markets are so much bigger. And so it's very important to understand how to approach those markets and being successful. And it's, you know, it's very different, you have to have, you know, consider the business model, are you going to fly in fly out to a market? Are you going to establish a sales representative or an agent? Are you going to put your own people in the country and start working out or eventually establish a subsidiary? So all of those, those that intent of the company to capture that big market to explain that there is a huge market? And then what is addressable? Okay, you can't do everything, obviously, at once, what is the strategy to go after that? Rocks mentioned the IP strategy, really, really critical. And, you know, investors want to make sure that that entity is got, you know, high barriers or moats around the technology, so people can't steal it. And
and then the government has global affairs, Canada is a great resource. And I would encourage anybody considering going to any foreign market to go to the Global Affairs Canada website, and there's a number of programs that will help small businesses, you know, get a toehold into those markets or understand those markets. And they range from $50,000 for an individual company up to you know, a quarter million dollars in association, you know, applies on behalf of its members. So, you know, the the market and then the capital to grow. It's all you know, tied in internationally, it's not just domestic it, you really have to think globally in this new climate change and climate technology opportunity.
Jeanette Jackson 19:15
So building on some of that, thinking about Canada's
competitive edge, we've talked a little bit about some
government funding opportunities, you know, where do we have a
competitive edge? Not necessarily in sectors but you know, from an
innovation SME scale-up perspective, and then perhaps where do we
need to do better? What can we do better as an ecosystem to support
the ideation commercialization and scale up of these incredible
opportunities? Roch? Do you want to chime in with that?
Roch Ripley 19:45
Sure. Yeah, I've got a couple of ideas. I think one thing is
really capitalizing on the synergy between our resource extraction
industries and clean tech. I think too often in the popular media
they're put at odds with each other, which kind of drives me
crazy, actually, because, I mean, I've got lots of clean tech
clients where strategic investments have been made by mining
companies or oil and gas companies. Because, you know, one thing
that differentiates Canada from a lot of other jurisdictions is
that we actually care about things like sustainability for oil and
gas extraction or for mining. I think, as I'm sure we'll be
hearing in the years to come in respect of natural gas and oil in
view of current geopolitical events, that if you're looking to
invest or get resources, where the oil and gas company or the
mining companies actually caring about the environment, Canada can
be a great place for that. And you can have a lot of investment
across industry sectors, which I think really can differentiate
us.
I think the other knock on Canada internationally, which I think we're better at now, which I still think is true, is I still I still think we do fall down to commercialization stage. We've got a whole bunch of talented engineers and business persons and a whole bunch, for example of government programs to get people going. But when it comes to actually commercializing and making those initial sales and generating revenue, I don't think we do as well as some of our competitors. I think we can make that a little easier, you know, the government is trying to do its part by actually acting as a customer as opposed to just a funder. Although the things I hear from, you know, some clients and other people I talked to you is that, you know, we could still do better in that regard.
But I think, I think working on the commercialization aspect is something that we've been doing, we should continue to do. And I think also nursing that cross sector synergy we have between, you know, oil and gas, and mining and clean tech is something we're really well positioned to do, and which could, you know, geopolitically serve us very well in the future.
Jeanette Jackson 22:08
And, Paul, I mean, you're looking at, you know, Canadian
ventures, comparing them to what's happening, you know, based
on what the international investment community is looking at
globally, what are you seeing?
Paul Austin 22:19
Yeah, I think Roch, you've really touched on some really good
points, which are the competencies that we have in, in large,
capital intensive industries. And we can apply those same
engineering skills to the climate tech space. And there's great
opportunity to do that. The criticism we often hear from investors
is that the Canadian companies do not have the same skills on the
commercialization and globalization of the go to market sales and
marketing aspect. I think that's, that's changing, I think
we we do have very sophisticated managers that can take technology
internationally.
We don't have the same track record, maybe, but we were quickly catching up, there has been sort of a, a bias towards funding and supporting the pre commercial space. And there's it sort of skewed that way, because we can't get off side on with World Trade Organization for funding or subsidizing our businesses, commercially. And so we tend to fund and focus on that early stage innovation, and there's a lot of programs that help our companies there. And it's almost bias towards keeping pre commercial because there is the all this support for the technology development. And you know, one of the things that I like to see, you know, we were starting to see the, the universities fund these innovation programs, where you really bring in the different disciplines. So it's not just the engineering aspect and the technical aspect, but you bring in business school, and other disciplines to bring some kind of business focus, market focus, as well as the technical engineering aspect. So but it's all, it's all very positive, we have a great reputation in the world for great technology. And we just have to, you know, follow through in that and, you know, support our companies as best we can, bringing them the capital to go do that is, you know, critical. And so a lot of the use of proceeds of this investment is to is to commercialize and to go to market with a proven product that's been demonstrated here, and now has application in another countries.
Jeanette Jackson 24:55
Paul, this is a perfect segue to the end of our session. Fefore Are
we and a few quick tidbits from both of you, Paul, what are one or
two tips you would give an entrepreneur who's looking to scale
a clean tech company here in Canada?
Paul Austin 25:13
You know, the power of partnerships are very important.
Understanding your guitar target market, you're going into and
looking for partners, whether they're a supply chain partners,
or they could be government partners. They could be the Global
Affairs Canada, you know, if you're going into a market,
especially outside of North America, you know, the, there's a
lot of information and support available through the Trade
Commissioner Service, and I would make your first call to the local
trade commissioner in whichever city you are in Canada and find
out, you know, what research they have on on the market that
you're going into it, I'm sure there will be lots of
information, lots of contacts, and when you go in country, you
know, you should make the embassy stop an early stop. And the
provinces also have a similar network of people that can help. And
so partnerships are key can't do it alone. That would be that
would be my main tip.
Jeanette Jackson 26:17
I like it and rock over to you. One or two Max tips.
Roch Ripley 26:23
I think Paul's Correct. I'll expand on that a little bit,
which is, you know, leverage, leverage what the government has made
available to you, right, so you have the Provincial and Federal
Trade Commissioners, I've worked with them a lot. I think
they're great, I think they're very well
connected
Leverage these programs, we've talked about IRAP, Export Development, Canada, etc, also has one where you're expanding into a new market, they'll actually help pay for your IP protection. So, you know, my overarching tip there is to take advantage of all these things that the government is willing to do to help Canadian entrepreneurs get started. But don't let it hold you back. Right? Don't let that change your mindset, to one where you want to stay in that pre commercial phase. You want to scale and commercialize and use the advantage that you've got without, without it sort of morphing into something that that holds you back. The second thing would be and this is a very practical tip that I don't know, it's happened a few times now. You're starting a company don't incorporate it in the US. I got a lot of clients, where for I think because of the popular media, they ended up incorporating a Delaware company. I mean, that's what you would do if you're American, you automatically disqualify yourself from many, many sources of Canadian funding and to rectify that is a big pain. So if you're really just starting out very early stage, stay Canadian and take advantage of all all the things Canada has to offer.
Jeanette Jackson 27:56
Thank you to both of you currently from darling WSG Paul Austin
from Fort capital. Thank you so much for coming on today and
talking about how Canada can become a global leader in clean tech
and sustainability. Thank you for your time and look forward to
chatting soon.
Thanks for listening. Join us next time when we're back with Gareth Brown of clear renewables. Don't forget to rate and review clean tech forward on iTunes and subscribe to the podcast wherever you listen.
Unknown Speaker 28:28
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