Okanagan and Vancouver Island attract computer-based businesses
By Gillian Shaw, Vancouver Sun
Published: Wednesday, December 26, 2007
VANCOUVER - If you were in a cab in Kelowna this summer, you might have had an early tip off to the $350-million sale of Club Penguin to Walt Disney Co.
Brent Holliday, a partner at Greenstone Venture Partners, was busy trying to track down rumours of the impending sale but it was only later he learned he should have checked with the cab drivers.
"A friend of a friend said he was in a taxi in Kelowna and because he was in a suit the driver asked if he was going to Club Penguin," said Holliday. "There were rumours out there that Sony was talking to them and all these guys in suits were going to Club Penguin.
"When you're in a small regional town like that, talk to the cab drivers - they know what's going on."
In that deal Disney paid $350 million upfront with the potential to top that up with another $350 million, depending on revenues at the children's virtual world website. Cab drivers in Kelowna could have a lot more news if the Okanagan Science & Technology Council (OSTEC) is successful in promoting its new mission statement: "To lead the development of thriving technology-driven sectors in the Okanagan."
Another Kelowna company, the startup Flight Motion Simulator is heading to Las Vegas early in the New Year where it has been named a 2008 innovation award winner at the Consumer Electronics Show for its Dreamflyer personal flight motion simulator.
They are just a couple of companies in a growing trend that is seeing British Columbia's technology sector spread from the Lower Mainland to the Interior and throughout Vancouver Island.
"If you go to Vancouver Island as well, not just the Okanagan, both mid- and north Island as well as Victoria, there are numerous companies that are starting up and that are already established in the tech space," said Hector MacKay-Dunn, a senior partner with the law firm Farris, Vaughan, Wills & Murphy LLP, chairman of the B.C. Innovation Council and a director and adviser for a number of public and private companies in the tech and biotechnology sectors. "There is a lot of desire to live on the Island, much like the Okanagan.
"A lot of people have created their wealth and now want to live on the Island for lifestyle reasons; the Island is becoming a hotbed of new technology companies."
MacKay-Dunn said when he was speaking at a technology awards dinner in Parksville on Vancouver Island, it was reminiscent of earlier tech awards dinners in Vancouver.
"There were 300 people there, there was lots of buzz," he said. "This is very, very promising for the community; it is not just Vancouver anymore."
While biotech companies, with their longer life cycles, huge appetite for funding and often a research attachment to universities face more location limitations, tech companies can launch with fewer resources and generally they face a shorter timeline to maturity.
"Particularly for technology is it easier, the cycle is tighter, you don't need a lot of people to pursue an idea and you don't need 100 million bucks to get to proof of principle for an idea," said MacKay-Dunn. "The island is fertile ground and a number of companies have taken root there."
Companies that are thriving outside the Lower Mainland cover the gamut from software to environmental technologies that are gaining traction as clean tech attracts growing interest from entrepreneurs and investors.
Back in Vancouver, digital entertainment is scoring big with independent studios taking their place on the global stage.
"You have all these independent studios that are really doing well," said Holliday. "Studios like Next Level Games that are fending off acquisitions left and right because they want to grow big, they want to continue developing their own titles."
Vancouver's Next Level recently celebrated five years as the city's largest independent full-service video game developer and it has reached that while also winning accolades for being among the best companies to work for in B.C. and being recognized among Canada's top 100 employers.
Smoking Gun Interactive is another independent studio, co-founded by ex-Relic Entertainment employees John Johnson, Angie Radwan-Pytlewski and Drew Dunlop.
"I see a lot of things going on there," Holliday said of the independent studios. "Whether they turn into big exit events next year I'm not sure, but they are going to continue to grow."
While Club Penguin trumped a lot of deals with its $350-million-plus price tag, other B.C. tech companies also changed hands in 2007.
Blast Radius, the successful Vancouver interactive marketing firm was sold in November to international conglomerate the WPP Group, the world's second largest advertising company. While terms of the deal weren't disclosed, the size of Blast Radius and its $41.8-million in sales last year suggest it was also among one of B.C's larger deals.
The sale came a decade after the company was launched by seven Vancouver Film School graduates with about $5,000 in capital. Blast Radius will retain its name, its full management team led by president and CEO Gurval Caer and all of its 350 employees, 180 of whom are located in Vancouver.
Burnaby's TIR Systems was snapped up by Royal Philips Electronics, the world's biggest maker of light bulbs, in a $75-million deal that gives the Amsterdam-based Philips TIR's leading-edge technology in LED-based white lighting.
Vancouver-based BrightSide Technology, a company that specializes in high-dynamic-range (HDR) image technology was acquired by Dolby Laboratories Inc. for $28 million in cash last spring.
Vancouver's Absolute Software wrapped up a banner year with a two-for-one stock split and optimistic projections from analysts. They like the company's efforts push to have its security, data protection and theft recovery software and service become as essential to laptop computers as anti-virus software. The company has deals with the major computer manufacturers and most recently it announced that Best Buy Canada will distribute Absolute's Computrace LoJack product through its Geek Squad computer support services. Once activated by a subscription, LoJack calls home the first time it's connected to the Internet if a computer is reported stolen.
While a recent report by Deloitte on trends in venture capital suggests Canada's unfavourable tax environment is discouraging American investment, some early stage companies are finding angel investors with deep pockets. Notably the year saw Strangeloop Networks announce one of the largest Series A round financings in Canadian history - $11.5 million raised from individual angel investors.
Clean tech has taken a prominent role in tech investments and B.C. is growing its own share of companies in this space. Ballard Power Systems stepped back from the automotive fuel cell business in a deal that will see 113 of the company's 560 employees working for a new private company owned 50.1 per cent by Daimler AG, 30 per cent by Ford Motor Co. and 19.9 per cent by Ballard. Ballard expects to cut costs by $15 million US a year with the move that allows it to focus on building its current commercial base in fuel cell forklifts, backup power and power cogeneration.
"Vancouver and British Columbia were way ahead of the curve on clean tech, almost to a fault in that some of the early big success stories were built here, particularly in the fuel cell area so there was a lot of success but a lot of failure now, " said David Berkowitz who leads Ventures West's Cleantech practice.
"Right now clean tech is very hot across North America and Europe as well.
"As a sector it has gone from being a little niche a few of us were investing in to being the fastest-growing sector in venture capital in North America."
Simon Fraser University spinoff SWITCH Materials is another company to watch that's addressing environmental concerns with its energy efficient window technology. With Neil Branda, a scientist who was named one of Canada's top 40 under 40 in 2006 and the holder of a Canada Research Chair in materials science, leading the research team as the company's chief technology officer, SWITCH closed its first round of financing last spring.
Solar technology promises to be high on the agenda in the coming year. "Solar is going to continue to be very, very hot - pardon the pun," said Berkowitz. "The economics are there, the growth is there and there is significant room for technology improvement so it is a very healthy environment for venture investment."
Companies like SWITCH are in the growing energy-efficiency sector. "I believe building efficiency is going to attract increasing percentages of money," said Berkowitz. "It is the low-hanging fruit. It is easy to save 20 to 30 per cent of the energy load, from solutions like LED lighting to smart windows which is what SWITCH is doing."
"There are many opportunities there."
gshaw@png.canwest.com
© Vancouver Sun