Accelerating international cleantech expansion

Paul Austin  0:00  
In the past, we would not have looked at this pre commercial space and we are and I quote what climbing down the ladder. To now look at these types of investments.

Jeanette Jackson  0:11  
Welcome to clean tech forward, a Fourside Podcast where we explore clean tech customers capital and Canada's path to net zero. Tune in to learn more about Canada's most exciting clean tech startups, industry success stories, investor insights and academic initiatives as we accelerate the growth and impact of clean tech together

Welcome to clean tech forward. I'm Jeanette Jackson, CEO of foresight Canada. Today we're talking with Roch Ripley, a partner at Gowling WLG and the head of Vancouver intellectual property department. We're also joined by Paul Austin, a partner at the Canadian independent investment banking firm Fort Capital. The three of us discuss Canada's status as a global competitor in cleantech and what Canadian companies need to do to prepare for international expansion.

This clean tech board podcast is supported by Gowling WLG, a global leader in intellectual property law, Gowling WLG works alongside Canadian cleantech companies to develop IP strategies that maximize business opportunities, and increase market share while protecting valuable innovation. From ideas to investment to international expansion Gowling WLG understand the potential of your intellectual property at every stage of growth, visit Gowlingwlg.com/cleantech, learn how they can support your business today.

I'm going to start with you Roch. Tell me a little bit about what you're seeing in terms of trends for Canadian cleantech? 

Roch Ripley  1:47  
Well, I do think in Canadian clean tech, we are in a scale up phase. It's not an industry that just started yesterday, in this province, or in this country. I think we've been working on it for a very long time. And I think we're starting to see the fruits of that long term investment. And I think part of that scale up is in international growth and expansion and investment, which I'm sure Paul can talk a little bit more about, and which a lot of my clients ask about in respect of intellectual property, because that is one of the many tools that companies have to protect the fruits of their R&D When they grow and scale internationally. 

Jeanette Jackson  2:34  
Paul, over to you, what are you seeing in terms of the incredible trends and growth of Canada's clean tech space? 

Paul Austin  2:41  
Thanks, Jeannette, the world of clean tech or climate tech in the last couple of years, globally has really changed. It's a significant and fundamental change that we're seeing, especially among investors and investor interest. And for years, you know, we, as you know, Jeanette, we were in a very kind of struggling place in clean tech, it was hard to get traction and hard to get investment dollars. And that all changed about two and a half years ago, when the world really took the climate crisis. And much more seriously, and we saw sort of a general public awareness off of the, you know, we saw it and with our own eyes, whether it was floods and fires, etc, and, and a real momentum around putting new investment dollars to work in new technologies. And so we've seen an incredible influx of foreign capital and domestic capital here into the ventures that are part of this energy transition. And that's been the big change that we've seen here in the last couple years. 

Jeanette Jackson  3:58  
Absolutely, I had the privilege of attending cop 26, in the face of COVID. And it was incredible to see the 10s of 1000s of people that were there, really ensuring that climate change was front and center in all recovery. And quite frankly, economic developments as we navigate some of the losses that we've all faced as a result of the pandemic. You know, over to you. What gets you excited about the work your organization is doing specifically in this space Roch? 

Roch Ripley  4:31  
Well, I think, I think a couple things. Well, I mean, one, I'm a techie. I really find the technology interesting. I'm a lawyer, I'm a Patent Agent, but before I did that, I got a degree in electronics engineering. So when I learned about all the new stuff we're working on. I mean, just from a techie perspective, I think it's really cool. And frankly, it makes me pretty proud to be Canadian and British Columbian and to be making these contributions. Two, I see a lot of what we do, I think in a broader geopolitical context, I certainly think the last couple of years have been a time where a lot of us have been doing a lot of reflection. And I think COVID And a lot of the other crises that we've been through have accelerated trends. So I think Paul's absolutely correct two and a half years ago, we've started to see a lot more capital, that was definitely in part related to the pandemic. But I don't think that is an artificial construct that when the pandemic ends, the investment will end, I think it's brought forward a trend and accelerated a trend towards sustainable investment, and, and development of these resources. But I don't think it's a flash in the pan. So it'd be part of something like that on an accelerated timescale, I think is pretty exciting. And it's just really neat to be part of big deals and do interesting work in to support the local economy. You know, we see a whole bunch of different work in our business, we've done international deals. And that's great. But, you know, working on the local deals, and helping local entrepreneurs succeed, I think it's particularly rewarding when you walk down the street, and you see your community being vibrant and thriving, that's because of the local works. I think it's fantastic to be part of that, and to help local entrepreneurs succeed.

Jeanette Jackson  6:30  
Now, Paul, I am on Fort's mailing list, and I almost feels like every week, there's an announcement of being support that Fort's providing for some of these scaling, clean tech companies, perhaps sort of, from your perspective, share with us about what gets Fort, and you and the incredible team, they're excited about the work that you're doing in the clean tech space. 

Paul Austin  6:52  
I like to, you know, relay A story that we experienced here. So our clients are often pre commercial clients, and that they are developing their technology, and they have yet to really become mainstream in the sense that they have customers and, and, and, you know, a track record of revenue streams, these are new technologies trying to get a foothold into the market. And they're, they're quite capital intensive, a lot of them in that sense that it takes a lot of capital to build the plants to deliver the benefits that these technologies promise. And so it's quite challenging for investors to look at those types of investments because there's no track record. And so they're really betting on what the entrepreneurs are projecting into the future. And what we found was in talking to investors around the world, we came across this class of investors that we would an asset class that are what we call private equity. They're their funds with billions and billions of dollars, or their sovereign wealth funds. These are country wealth, funds that are managed by countries, or even the pension plans. And, you know, typically, those pools of capital, we're not interested in pre commercial early stage Tech with high risk. And what we saw in the last couple of years, were these investors talking to us and saying, you know, the world has changed, we are no longer investing in oil and gas. And what you have for capital, what your clients are, are doing is very interesting. It's a transition to low emissions. And in the past, we would never have looked at this. But there's so much pressure now for environmental and social and governance type investments, that and there's not that many ESG qualified deals out there. And so, in the past, we would not have looked at this pre commercial space. And we are and I quote, climbing down the ladder, to now look at these types of investments. So having that kind of sentiment and ambition from these, these, these climate tech funds or these new pools of capital to invest into this space is really quite remarkable. And it's exciting to be part of it. And you know, we've been very fortunate here in British Columbia to have world leaders in these types of technologies. And in the sectors I'm talking about air are in green hydrogen production, hydrogen infrastructure, and carbon capture utilization and storage companies. So there's a variety of different companies in those sectors that are now raising capital successfully and raising capital

from private equity, sovereign wealth funds, pension plans from all over the world, in addition to the more traditional investors that used to and still do invest, which are venture capital, or impact family office venture capital.

Jeanette Jackson  10:16  
Yeah, I agree. I've seen some incredible transitions in the way investors are making decisions. There are more folks interested in that early space. There, I'd say looking at investing more capital upfront so that the ventures have a real going concern, instead of spending the next 18 to 24 months, trying to raise more money, they're actually having the space to get some of the work done. Because as we all know, commercializing technology, depending on how complicated it is, can take a little bit of time, and it needs a lot of focus and attention to be done. Right. You know, rock going back to you when we think about sort of the strategies that companies need to look at when they're targeting both domestic and international investors, when they're looking to grow internationally. What role does IP play in that story? And what do ventures need to think about when they're navigating their intellectual property and other trade secrets? You know, going on that international cleantech stage?

Roch Ripley  11:18  
I think IP plays an important role. I don't think it's the be all end all I think, to run a good business, you have to be well managed, particularly in the current talent, climate, you have to treat your employees really well. There are a lot of things you have to execute well on to be successful. And I think to be as successful as you can be executing well, and IP is, is one of the things you got to do. I mean, just to, to elaborate, or to talk a little bit about something Paul talked about the international perspective, and how that contrast to what he had previously seen in Canada. You know, one of the things that I think Canadians can do better, and I think we're starting to do better is commercialize and grow and use the IP system to commercialize and grow, you look at some of the companies in other countries. I mean, the United States leverages international IP systems, American companies leverage international IP systems incredibly well, to their advantage. But even countries where I mean, frankly, we've had a generational head start on by some metrics have leapfrogged us in terms of using that international system to the benefit of their companies, I'm thinking in particular of China and Korea, the amount of IP activity generated in those countries, you know, by some metrics, by many, frankly, exceeds what we have here, which I think is unfortunate. So, I think that, especially for the kinds of companies we have in this country, which tend to be a little on the smaller side, relative to our American neighbors, like Paul mentioned, pre commercial, which I think at least from my personal experience, we get involved in all the time, because of the nature of the business. Having an IP strategy upfront about how to protect the fruits of your R&D is really important, if only so that when you're going to secure investment, you have a compelling and persuasive and accurate narrative to tell people, hey, when they're going to invest in your company, the stuff you're generating with that money is going to be well protected. If an employee goes across the street, and tries to take some IP with them, there are things you've done to mitigate that competitive disadvantage that results from, you know, people leaving or the marketplace catching up. And some of the choices you make up front. Probably the most common one is patent versus trade secret. If you've got some kind of technology you've invested a lot of money in, do you spend, frankly, you know, 10 $20,000, to secure patent protection? Or do you just try to keep it a secret with the risk that it could leak and employ you could leave somebody could reverse engineer the product. And in a highly capital intensive space, like clean tech where your competitors can be really large companies, and they can throw a lot of resources at reverse engineering. What's the best way to protect that IP and I think getting in there early, pre commercial to develop a strategy can be really helpful. And you know, I think to the credit of the Canadian government, in particular, NRC IRAP, they've realized that getting strategic advice early can be really helpful and laying a solid foundation. So you know, companies that have ITAs  from IRAP technology advisors, I think get pretty good advice in that regard, particularly with the focus that they've they've developed recently in that space. 

Jeanette Jackson  14:59  
So Paul, building on IP, you know, obviously, we also want to look at export opportunities, Canadian companies, there's certainly an increase in domestic adoption through various government initiatives. Right now, industry is getting more familiar and comfortable with some of the cultural differences working with technology companies, as well as potential risks. Let's throw that out there. When you are looking at engaging different investment firms from around the world, are you hearing from them that they want to see the companies also expanding into international markets? Is that what investors are also looking for?

Paul Austin  15:38  
Yes, you know, investors, they look at a number of sort of categories to determine whether they want to invest. The first one is the market, how big is the market in Canada, as we know, is a pretty small market. Even though it's a very sophisticated market, it's quite small, compared to the United States, you know, and that kind of factors about 10 times the US market about 10 times the Canadian market. And so, you know, they're looking to see investors are looking to see the opportunity for their companies to grow. And especially in these new categories, these new these new areas of carbon capture, for example, or the hydrogen space. And so, you know, what we what we often see is that they want investors want to see that the technology works initially. And so Canada has a very good program or programs, as we've talked about here from the National Research Council, and the technology advisors and our CI rap

program, where they fund early stage companies to help them get going. And then there's a whole succession of programs like Sustainable Development technology, Canada, that takes that maybe early stage NRC project, and applies more capital to scale it up again, in a demonstration that often happens here, initially in Canada, and then it's it could go to other domestic applications, but it's often we talk about these companies being born international exporters, almost from the get go, because the markets are so much bigger. And so it's very important to understand how to approach those markets and being successful. And it's, you know, it's very different, you have to have, you know, consider the business model, are you going to fly in fly out to a market? Are you going to establish a sales representative or an agent? Are you going to put your own people in the country and start working out or eventually establish a subsidiary? So all of those, those that intent of the company to capture that big market to explain that there is a huge market? And then what is addressable? Okay, you can't do everything, obviously, at once, what is the strategy to go after that? Rocks mentioned the IP strategy, really, really critical. And, you know, investors want to make sure that that entity is got, you know, high barriers or moats around the technology, so people can't steal it. And

and then the government has global affairs, Canada is a great resource. And I would encourage anybody considering going to any foreign market to go to the Global Affairs Canada website, and there's a number of programs that will help small businesses, you know, get a toehold into those markets or understand those markets. And they range from $50,000 for an individual company up to you know, a quarter million dollars in association, you know, applies on behalf of its members. So, you know, the market and then the capital to grow. It's all you know, tied in internationally, it's not just domestic it, you really have to think globally in this new climate change and climate technology opportunity.

Jeanette Jackson  19:15  
So building on some of that, thinking about Canada's competitive edge, we've talked a little bit about some government funding opportunities, you know, where do we have a competitive edge? Not necessarily in sectors but you know, from an innovation SME scale-up perspective, and then perhaps where do we need to do better? What can we do better as an ecosystem to support the ideation commercialization and scale up of these incredible opportunities? Roch? Do you want to chime in with that? 

Roch Ripley  19:45  
Sure. Yeah, I've got a couple of ideas. I think one thing is really capitalizing on the synergy between our resource extraction industries and clean tech. I think too often in the popular media they're put at odds with each other, which kind of drives me crazy, actually, because, I mean, I've got lots of clean tech clients where strategic investments have been made by mining companies or oil and gas companies. Because, you know, one thing that differentiates Canada from a lot of other jurisdictions is that we actually care about things like sustainability for oil and gas extraction or for mining. I think, as I'm sure we'll be hearing in the years to come in respect of natural gas and oil in view of current geopolitical events, that if you're looking to invest or get resources, where the oil and gas company or the mining companies actually caring about the environment, Canada can be a great place for that. And you can have a lot of investment across industry sectors, which I think really can differentiate us.

I think the other knock on Canada internationally, which I think we're better at now, which I still think is true, is I still I still think we do fall down to commercialization stage. We've got a whole bunch of talented engineers and business persons and a whole bunch, for example of government programs to get people going. But when it comes to actually commercializing and making those initial sales and generating revenue, I don't think we do as well as some of our competitors. I think we can make that a little easier, you know, the government is trying to do its part by actually acting as a customer as opposed to just a funder. Although the things I hear from, you know, some clients and other people I talked to you is that, you know, we could still do better in that regard.

But I think, I think working on the commercialization aspect is something that we've been doing, we should continue to do. And I think also nursing that cross sector synergy we have between, you know, oil and gas, and mining and clean tech is something we're really well positioned to do, and which could, you know, geopolitically serve us very well in the future.

Jeanette Jackson  22:08  
And, Paul, I mean, you're looking at, you know, Canadian ventures, comparing them to what's happening, you know, based on what the international investment community is looking at globally, what are you seeing?

Paul Austin  22:19  
Yeah, I think Roch, you've really touched on some really good points, which are the competencies that we have in, in large, capital intensive industries. And we can apply those same engineering skills to the climate tech space. And there's great opportunity to do that. The criticism we often hear from investors is that the Canadian companies do not have the same skills on the commercialization and globalization of the go to market sales and marketing aspect. I think that's, that's changing, I think we do have very sophisticated managers that can take technology internationally.

We don't have the same track record, maybe, but we were quickly catching up, there has been sort of a, a bias towards funding and supporting the pre commercial space. And there's it sort of skewed that way, because we can't get off side on with World Trade Organization for funding or subsidizing our businesses, commercially. And so we tend to fund and focus on that early stage innovation, and there's a lot of programs that help our companies there. And it's almost bias towards keeping pre commercial because there is the all this support for the technology development. And you know, one of the things that I like to see, you know, we were starting to see the, the universities fund these innovation programs, where you really bring in the different disciplines. So it's not just the engineering aspect and the technical aspect, but you bring in business school, and other disciplines to bring some kind of business focus, market focus, as well as the technical engineering aspect. So but it's all, it's all very positive, we have a great reputation in the world for great technology. And we just have to, you know, follow through in that and, you know, support our companies as best we can, bringing them the capital to go do that is, you know, critical. And so a lot of the use of proceeds of this investment is to is to commercialize and to go to market with a proven product that's been demonstrated here, and now has application in another countries.

Jeanette Jackson  24:55  
Paul, this is a perfect segue to the end of our session. Before we end could we get a few quick tidbits from both of you, Paul, what are one or two tips you would give an entrepreneur who's looking to scale a clean tech company here in Canada? 

Paul Austin  25:13  
You know, the power of partnerships are very important. Understanding your guitar target market, you're going into and looking for partners, whether they're a supply chain partners, or they could be government partners. They could be the Global Affairs Canada, you know, if you're going into a market, especially outside of North America, you know, the, there's a lot of information and support available through the Trade Commissioner Service, and I would make your first call to the local trade commissioner in whichever city you are in Canada and find out, you know, what research they have on the market that you're going into it, I'm sure there will be lots of information, lots of contacts, and when you go in country, you know, you should make the embassy stop an early stop. And the provinces also have a similar network of people that can help. And so partnerships are key can't do it alone. That would be that would be my main tip. 

Jeanette Jackson  26:17  
I like it and rock over to you. One or two Max tips.

Roch Ripley  26:23  
I think Paul's Correct. I'll expand on that a little bit, which is, you know, leverage, leverage what the government has made available to you, right, so you have the Provincial and Federal Trade Commissioners, I've worked with them a lot. I think they're great, I think they're very well connected 

Leverage these programs, we've talked about IRAP, Export Development, Canada, etc, also has one where you're expanding into a new market, they'll actually help pay for your IP protection. So, you know, my overarching tip there is to take advantage of all these things that the government is willing to do to help Canadian entrepreneurs get started. But don't let it hold you back. Right? Don't let that change your mindset, to one where you want to stay in that pre commercial phase. You want to scale and commercialize and use the advantage that you've got without, without it sort of morphing into something that holds you back. The second thing would be and this is a very practical tip that I don't know, it's happened a few times now. You're starting a company don't incorporate it in the US. I got a lot of clients, where for I think because of the popular media, they ended up incorporating a Delaware company. I mean, that's what you would do if you're American, you automatically disqualify yourself from many, many sources of Canadian funding and to rectify that is a big pain. So if you're really just starting out very early stage, stay Canadian and take advantage of all the things Canada has to offer. 

Jeanette Jackson  27:56  
Thank you to both of you currently from darling WSG Paul Austin from Fort capital. Thank you so much for coming on today and talking about how Canada can become a global leader in clean tech and sustainability. Thank you for your time and look forward to chatting soon.

Thanks for listening. Join us next time when we're back with Gareth Brown of clear renewables. Don't forget to rate and review clean tech forward on iTunes and subscribe to the podcast wherever you listen.

Unknown Speaker  28:28  
To learn more about Foresights programs, events and more, visit us at foresight cac.com or follow us on social at Forsyth CAC.