Helping businesses expand
In August, the Jewish Independent connected with Gary Brownstone about a Winnipeg tech incubator he was working on called Eureka. In the short time since then, the entrepreneur has already moved on to his next adventure.
“Most of my career has been characterized by taking on multiyear projects,” said Brownstone. “In many cases, I’d be involved with or invest in small companies needing help growing to the next level. I’d grow them to the next level and then I would exit. But, generally, the projects I get involved in have a Point A and a Point B, and my mission is to take them from A to B.
“When I went to the Eureka Project, which was an incubator in Winnipeg that a group of individuals together with government and the U of M [University of Manitoba] had tried to launch, for all intents and purposes, [it] had failed. They hadn’t achieved what they’d set out to.”
Brownstone was brought onto the Eureka team to try to save it. They needed answers to three questions. Was there enough world-class talent in Winnipeg to make a venture like this worthwhile? Could the incubator help advance their causes and spin off commercial enterprises? And could Brownstone help make the operation sustainable?
“A big challenge with incubation is that early- stage companies can’t always afford to pay market rates for help, but governments don’t want to pick up the costs forever,” said Brownstone. “When I got to the project, the Manitoba government was covering about 90% of the operating budget.
“The first two [questions] we solved in a relatively short period of time. But, the sustainability issue was longer and … this year, we saw a third of those solved with the signing of a multiyear funding agreement with the province – with them only needing to cover about 30% of our operating budget.”
Seeing that a service like the one he was providing in Manitoba was needed everywhere in Canada, Brownstone move on to create a small practice under the name of LucraTech. He soon had several clients across Canada, the largest one situated in Vancouver, where he now spends about 60% of his time. The other clients are located in Manitoba, Ontario and Nova Scotia.
“I’ve got some associates that I bring into jobs as needed,” said Brownstone. “We are building up our business across Canada and have been for about six months now with some pretty decent success.”
The Vancouver-based company with which Brownstone is working is Canada’s largest technology incubation platform, Istuary Innovation Group. “This is a group of Chinese Canadians who see an opportunity to invest in or acquire Canadian technology for which there could be a market in China,” said Brownstone. “Their expertise is taking Canadian-developed world-class technology into China, where there’s a big market and hunger for this technology … so, these guys are trying to bridge the gap.
“Let’s say that you are an engineer and you have some unique approach to internet security, and they know that, today, in China, on an industrial level, there’s a huge demand for internet security. If they feel that your technology is suitable for that market, they will offer to do a deal with you, and they are very flexible about how they do that. They may offer you employment in one of their innovation labs or, if you had an existing company and were looking for investors, they would invest in you and help you access that market, or they could represent you on an agency basis.”
According to Brownstone, any Canadian technology looking for a home in the Chinese market can likely be aided by Istuary. He believes that Canada is in a unique position and has an advantage over other countries, due to the quality of its schools for engineering, computer programming and related fields, like clean technology and light sciences.
“There is also very strong R&D support in Canada, both federally and provincially,” said Brownstone. “The government will often match every dollar I invest. There is also a very strong tax-credit program, [and] rebates offered will sometimes offset the big costs of R&D.” As well, he added, Canada is an attractive place for developing technology at the moment with the low Canadian dollar compared to that of the United States.
LucraTech aims to take on a series of projects with each client and create a support team to work with that client, beginning by identifying a starting point and an end point.
“Typically, the companies we start working with are small,” said Brownstone. “They have some customers, they have some revenue, but they are trying to grow to the next level. Maybe you have a company that is doing $300,000 a year in revenue and you want to grow that to $3 million in the next couple of years. We create a road map and a plan that will get you from $300,000 to $3 million, and work with you to achieve that.
“By the time you are at $3 million, you’re probably at a size where you can get and manage the support talent in-house and you can now afford more full-time employees, so maybe we aren’t needed anymore at that level of expertise.”
LucraTech offers other services, as well, such as turnaround, wherein they take on medium-sized companies that, for one reason or another, have encountered some trouble and need help. In this scenario, LucraTech goes in and tries to fix the problem and make the company healthy again. Their typical timeline with clients can be anywhere from one to four years.
“If we believe in a company and the entrepreneur and we can add value to the whole equation, we are very flexible on how we work with companies and usually give them two or three choices. We know we will only get paid if the project goes ahead,” said Brownstone.
“Sometimes, we work just for success fees, where we set out to raise money for a company … sort of a finder’s fee. If we are successful, we get paid. If not, we don’t. Sometimes, we will work for a piece of the business or a small number of shares in the business. We’re really flexible. Once we believe in the concept and the entrepreneur, we will find a way to make it work, whether they have a lot or a little money.”
Rebeca Kuropatwa is a Winnipeg freelance writer.