Good management practices, in both human resources and finances, offer founders the best chance of successfully navigating an innovation landscape that continues to be marked by conflicting economic signals, a panel of startup experts said last week.

Speaking at Entrevestor Live, PEI BioAlliance executive director Jason Cleaversmith, Ocean Supercluster chief growth and investment officer Jennifer LaPlante and serial entrepreneur and startup coach Jon McGinley weighed in on the trends shaping the ecosystem with the help of moderator Kathryn Lockhart, CEO of startup accelerator Propel.

Cleaversmith’s organization is an industry group that represents life sciences companies, many of which are startups. The Ocean Supercluster is a federal entity that funds research and development work via cost-sharing arrangements with the private sector. And McGinley has spent more than 20 years in various innovation economy roles, most recently as a growth coach and advisor. He was previously the Senior Partner with CloudKettle, a specialized information technology consultancy and Salesforce Summit Partner.

Fundraising: Mixed Landscape, AI a Darling
Whether founders have reported difficulty raising capital amid a national and international marketplace that has only recently begun to emerge from its year in the wilderness depends heavily on the investment proposition they are offering.

LaPlante said the founders she works with at the Supercluster have experienced less trouble fundraising if they are pitching businesses in the artificial intelligence or cleantech spaces, suggesting investors are particularly focused on a couple of key areas.

“I think sometimes it depends on who (founders) are talking to, and it depends on the language they’re using,” said LaPlante. “Ones that have seen really good traction so far tend to be focused on the buzzwords of today, which are ‘artificial intelligence,’ and they tend to be ones that are focused on climate, with very tangible outcomes.”

In the third quarter, Atlantic Canadian startups raised $117 million, led by cleantech star CarbonCure’s record-breaking US$80 million round, according to data from the Canadian Venture Capital and Private Equity Association. That figure marks a significant recovery from the second quarter’s anemic $16 million total.

“I think 2023 has been a really difficult year, not only for those that have their own funds and are trying to raise money to put into those funds, but also for entrepreneurs who are seeking investments,” said the BioAlliance's Cleaversmith.

“There’s not been a lot of IPOs in the (life sciences) sector, there’s not a lot of liquidity around, and that tends to be what generates the capital that’s available for bioscience.”

He added that the long, capital-intensive research and development process associated with biotech plays, particularly anytime regulatory approval is required, means investors with the patience for the space tend to be specialists — a sentiment LaPlante mirrored for some types of bluetech.

“Be really flexible,” Propel CEO Lockhart advised entrepreneurs. “Can I search for non-dilutive? Can I get family and friends? Can I search for family offices, or micro funds? Having capital at the early stage is important, and it’s requiring traction.

“That needs to go well beyond, ‘Do I have an idea?’ to (the question of) do you have an idea with tangible evidence you can actually sell product into the market?” 

Labour Market: Community Mobilization Needed
A systemic effort to retain skilled immigrants and improve market efficiency is needed to address the sweeping labour shortage still hobbling many corners of the knowledge economy, said the panelists.

The economic downturn of the past year has seen significant layoffs in the East Coast technology sector, mirroring a trend set by the American tech giants. In the first quarter of this year, Halifax venture capital shop Concrete Ventures even recorded the first decline in total employment since it started keeping records based on LinkedIn data.

But companies that need to hire specialized workers, particularly for STEM roles, can still struggle to fill positions, the panelists agreed.

McGinley, the startup coach and CloudKettle veteran, said the ecosystem as a whole needs to do a better job of developing talent locally, including by hiring from within the region or promoting internally, so as to offer more career development opportunities for local professionals.

“For me, I take a long view on this,” said McGinley. “Because really, when I look at CloudKettle in the context of a lot of the organizations I’ve worked with in Atlantic Canada the last 10 or 15 years, we have a bit of imposter syndrome or an inferiority complex.

“‘It’s better in New York! It’s different in San Francisco!’ Truth is, we’re every bit as talented here as they are there. I’ve seen it. I’ve lived it.”

Entrevestor’s 2022 Startup Data Report found that immigrant-led companies make up more than a quarter of the community, and a large percentage of the STEM students enrolled at East Coast universities are international students. For example, they make up about 24 percent of Dalhousie University’s more than 2,100-person faculty of computer science.

Retaining more of those students in Atlantic Canada after they graduate offers a possible path to alleviating some pressure in the labour market, Lockhart said, but that requires the ecosystem make a concerted, collective effort to welcome those new immigrants.

“These individuals … who have chosen to live in Atlantic Canada, many have come in through using the front door of the universities,” said Lockhart. “The immigration in Atlantic Canada that comes from them is causing all kinds of new growth prospects.

“I totally get it — housing, healthcare, it’s not without difficult challenges. But putting this talent to work productively, that’s our job. That’s what we need to do.”

Regulators: Resumption of Normalcy Risks Capital Flight
The arrival of COVID-19 in Canada catalyzed regulators to help get products like vaccines and face masks to consumers faster and with less red tape. But with the acute stage of the pandemic over, a resumption of business as usual risks driving drug developers and others to focus their efforts on international markets.

Life sciences companies on the East Coast raised almost $110 million in 2022 and saw solid 40 percent revenue growth. Of the 807 startups in Entrevestor’s databank, 179 are life sciences businesses, representing an important slice of the overall ecosystem. But many of those companies tell Entrevestor they are conducting some or all of their trials in the United States or overseas due to cost worries — often reluctantly.

“We’ve seen what can be done, but we are back into that time where the regulatory pathways are several years, there’s not so much flexibility,” said Cleaversmith. “If we look at a medical device in Atlantic Canada, it's a great place to actually develop it, but you’ve got a choice to make and I think everybody in the room will know (their answer).

“You can try to battle with 10 different provinces in Canada, or you can go south of the border and have a market that’s 10 times the size of Canada.”

LaPlante of the Ocean Supercluster said some parts of the blue economy face similar concerns, particularly since many oceans startups are also life sciences companies. Halifax-based Clean Valley CIC, for example, is commercializing a system to use wastewater from land-based oyster pens to grow algae, which can then be used as fish feed, making it both a life sciences and oceantech company.

“It depends how you define these sectors, but we’ve got to make sure the regulatory environment is conducive to those companies,” said LaPlante. “Money is coming in, and we do want to keep this talent here as much as possible, or we’re going to lose it to the U.S.”