University-Related Startups Outperform
December 19th, 2016
The winning company in the Growth Stage category at the Atlantic Venture forum last summer was 4Deep Inwater Imaging, a company that grew out of research conducted at Dalhousie University.
Around the same time, the No. 3 finisher at the Cisco Innovation Grand Challenge in Dubai was Fredericton-based Eigen Innovations, which is based on industrial Internet of Things technology developed at University of New Brunswick.
A few months earlier, the 2015 BDC Young Entrepreneur of the Year award was presented to Chris Cowper-Smith, the CEO of Spring Loaded Technologies, a company which came together in the Starting Lean program at Dal.
These are just a few examples that show that some of the most celebrated startups in Atlantic Canada are born in university research or work with universities as they developed. In fact, research by Entrevestor shows that in the last two years, startups affiliated with universities grew revenue at a far greater rate than the other startups in the community.
Each year, we collect data on startups from around the region, including their revenue, employment and other such metrics. We also examine the metrics for companies affiliated with post-secondary institutions – either those that grew out of intellectual property developed at these schools, or those using the schools’ facilities and expertise as they grow.
Performance of Startups Affiliated with Universities and Colleges
|Number of Startups||111|
|Employees of these Startups||394.5|
|2015 Funding Raised by these startups||$27.3M|
|Number of Companies Funded||43|
|Dataset: 111 startups affiliated with universities|
Source Enrrevestor Databank
In our 2014 analysis of the startup community, we found that such companies’ revenues were increasing 71 percent, when the startup community overall was producing 37 percent revenue growth.
In 2015, the overall startup community saw a huge jump in sales, mainly because of the strong performance of the growth-stage companies. Overall, 120 companies provided us with revenue data, and they showed an increase of 66 percent over the previous year.
Of those respondents reporting revenue data, 57 companies had connections to universities or colleges. And those with revenue reported a total sales growth of 110 percent. That’s right. These companies more than doubled their revenue in one year, and outperformed the broader community by about two-thirds.
What’s notable about our findings is that we have found a superior performance by these university-related companies for the second year in a row.
There are likely two reasons for this strong showing: First, IP developed in universities tends to comprise deeper technology than something put together by freelance innovators and is therefore more advanced and harder to replicate. And second, companies that continue to work with post-secondary labs, to use their labs and tap their experts, show the sort of discipline and outreach that should be found in a healthy startup.
There’s a general acceptance among people in the broader community that the universities are a golden resource for Atlantic Canada, accounting for most of the research and development carried out in the region.
“They are a huge source of intellectual property and talent,” said Greg Phipps, Managing Director of Investment at Innovacorp. “Certainly, a majority of the deals that we’ve done in the life sciences sector were born in the universities.” He added that Innovacorp-backed companies in other sectors, such as advanced manufacturer Atlantic Motor Labs and digital intelligent design company QRA Corp., also got their start at universities.
What’s more, at least six Atlantic Canadian institutions are now offering some form of curriculum to teach entrepreneurship, most of which have courses that include credits for degrees.
The University of New Brunswick is worth watching because of the concentration of young companies now emerging through its MTE program.
Another development that has been gaining momentum is the work at Dalhousie University to host Canada’s Business Model Competition, which is affiliated with the International Business Model Competition.
These initiatives are increasing the entrepreneurial skillset of young people emerging from universities, which should help to drive further growth in the future.