‘Creative Destruction’ could build a better Canada

‘Creative Destruction’ could build a better Canada

Rick Spence | 13/08/24 | Last Updated: 13/08/23 2:40 PM ET
Sometimes the road to business success isn’t easy to see.

A year ago, Karl Martin and Foteini Agrafioti had a new company, awesome technology, and no clear path. Both were engineering PhDs from the University of Toronto, he was a specialist in biometric identity systems and privacy; she developed the first technology to identify users based on their unique cardiac rhythm, and would be named U of T’s 2012 “inventor of the year.” But great technology alone does not a business make. Puzzled why big companies never came to the table with licensing deals, Agrafioti and Martin wondered what to do next. A year ago, a solution appeared. The university’s Rotman School of Business was opening a “Creative Destruction Lab” to provide mentoring and monitoring from seven of Canada’s most successful entrepreneurs — all of whom had steered tech companies to lucrative exits. Who could say no? One year later, the pair’s company, Bionym, has $1.4-million in funding and a new cause: changing the way identification works. By early next year, it will be selling Nymi, a Bluetooth-powered wristband that authenticates your identity to smartphones, tablets, computers, and eventually your car, your home, and the weight machines at your gym. Bionym is one of just eight companies that survived the first year of the Creative Destruction Lab (CDL), coming out stronger, more certain, and capitalized for success. Bionym’s success shows what can happen when you connect new entrepreneurs and promising technology with veteran mentors who understand business and know how to get things done.With so many successful entrepreneurs looking for new challenges, and so many startups looking for guidance, Canada needs to get this connection right. And despite its ruinous-sounding name — based on the work of Joseph Schumpeter, who theorized the economy could best be understood as a continuing series of disruptive innovations — the Creative Destruction Lab is showing how to build a better economy by fast-forwarding young companies that could be the next Research in Motion.

The Creative Destruction Lab is looking for 18 new businesses to mentor from November to next June. The application deadline is  Sept. 17; details are atcreativedestructionlab.com.

Warning: This lab is hard to get into, and easy to get out of. Last year, 76 companies applied, and 18 were accepted. All got the mentoring of the the G7 Fellows — seven millionaire mentors. But those that fail to meet their milestones face constant threat of being sent packing.

“We’re looking for massively scalable IT firms,” explains program founder Ajay Agrawal, a Rotman professor of entrepreneurship. That means entrepreneurs who face high initial product-development and marketing costs, but could reap “very high profit margins once they reach scale.” Agrawal clearly expects that “massively scalable implies they will likely massively disrupt one or more traditional industries.”

What makes the CDL different from the many other accelerator and mentorship programs, besides its broad access to Rotman professors and its use of MBA candidates to write financing plans, is its ability to provide mentors who are also willing to invest. The G7 Fellows this year included Dennis Bennie (best known for Delrina Technology), Nick Koudas (Sysomos), Nigel Stokes (DataMirror), Lee Lau (ATI Technologies) and Dan Shimmerman (Varicent). The Fellows invested seed money in three of the Lab’s companies; some have already made a profit. In June, the Lab’s most prominent graduate, gesture-control device maker Thalmic Labs of Waterloo, Ont., raised $14.5-million in a Series A round that valued it at about $50-million.

Five of the Fellows will return for a second year. Agrawal says the Lab is looking for two new Fellows, and millionaires are lining up to be selected. It’s not hard to find volunteers when they’ll get first crack at financing some of Canada’s most exciting technologies.

Before joining the CDL, the Bionym founders “didn’t really know where we were going,” Martin admits. After two years of hoping big companies would build products using their technology, they were advised by their G7 mentors that they should make their own product. That led to the development of Nymi, “the wristband that knows who you are.”

People have too many passwords, and sophisticated access systems are easily foiled by intruders carrying other people’s identity cards, Martin says. Agrafioti’s work has proven that electrocardiogram rhythms are as distinctive as fingerprints, but impossible to steal.

This fall, Bionym will reach out to software developers to encourage them to build applications for the Nymi; Martin contends it will have more uses than he and Agrafioti could ever imagine. (With a bit of code, the Nymi could easily mimic a Nike FuelBand.) This month, the company closed a $1.4-million seed round with five of the seven Fellows, along with Toronto venture capitalists Relay Ventures. It will start taking orders for the Nymi in September (for 2014 delivery), and hopes to close a $10-million to $15-million funding round by year end.

Martin sounds creatively un-Canadian as he surveys his company’s prospects: “We don’t see ourselves in a position where we have to raise money [this fall]; we could survive on presales. But we’re looking for big growth, not just survival.”