My previous article on start-up funding sources covered Precarn. For the next article in this series, I will cover The Health Technology Exchange (HTX). I recently met with Norman Pyo, director of business development and investment to have a discussion on HTX.

Craig: Thanks for taking the time today to speak with the StartupNorth readership. To start, can you give the ’30 second elevator pitch’ on The Health Technology Exchange?
Norm: HTX is a not-for-profit organization that is funded by the Ontario Ministry of Research and Innovation. Our goal is to support innovation and commercialization in the Medical and Assistive Technology (MAT) sector in Ontario. Companies in this sector are working on things such as medical devices, medical imaging and laboratory devices. In this space we also have companies that are working on software oriented initiatives that the StartupNorth readership may relate to. Examples include healthcare IT systems to manage chronic disease conditions or remote monitoring by connecting personal medical devices to wireless devices such as the Blackberry. We support MAT companies through various programs that provide mentoring, grants, networking opportunities and events.

Craig: So in terms of eligibility, companies need to be Ontario based?
Norm: Yes, companies need to be based in Ontario for us to be able to fund them through our R&D programs; however, we work with organizations across Canada to provide linkages. We also focus exclusively on the MAT sector so we would refer other life sciences companies, such as those in the pharmaceutical or biotechnology industry, to organizations such as MaRS.

Craig: What’s the best way for a company to engage HTX?
Norm: We have three advisors at HTX, each with extensive and complementary backgrounds in the healthcare sector that provide mentoring on issues relevant to start-up medtech companies such as strategic planning, product/clinical development, regulatory strategy and early stage finance. Companies who are not referred to us should make initial contact with the HTX office. From there, they will be connected with an advisor that best fits their needs, in terms of expertise and geographic location. We mainly see early stage companies, so we actively work with the companies to understand what they are trying to achieve and see how we can use HTX resources to support them. This can include providing mentoring advice or making connections to industry partners and teaching hospitals/universities. We also run events on medical technology topics such as regulatory approval and discussion panels with CEO’s of companies in the space who talk about overcoming common hurdles and sector-specific challenges.

Craig: Can you talk about the funding programs you have?
Norm: We currently have three distinct funding programs: the Business Investment Program, the Health Technology Assessment & Implementation Program and the Clinical Validation Program. Each program has a specific focus for use of funds, all of which support advancement and commercialization of MAT initiatives.

Craig: Ok, let’s start with the Business Investment Program; can you talk about how this works and what its purpose is?
Norm: Yes, the Business Investment Program is meant to fund R&D within the MAT space. The program is funded by HTX, OCE and IRAP and provides up to $100K per project. Companies need to apply to the program with a specific project and have a publically funded research institution in Ontario lined up to perform the research. Companies much match the grant amount with 1/3 of their own money as well as 2/3 of in-kind contribution towards the project’s costs. In other words, HTX will fund up to 50% of the project’s cost and these funds will be directed to the research institution to help fund the R&D objectives of the project. Examples of past companies that have received this grant include Quantum Dental Technologies, GestureTek, and Quillsoft. An example of a company that has been awarded a grant under this program is Quantum Dental Technologies. Funding from this program helped to advance Quantum’s Canary System, which provides early detection for tooth decay, without the traditional use of X-rays.

Craig: For 2009, the initial application phase of this program has just closed. What happens next?
Norm: Correct, the call for Expressions of Interest (EOI) for the Business Investment Program closed this July. After the submissions are received, the funding partners (organizations that contribute funds to the program) meet internally to review the submissions to select the most promising projects. Those companies that make it to this next phase will then submit a full proposal. These proposals are reviewed by external reviewers who are familiar with the company’s space and that have a deep understanding of what the project is looking to achieve. Proposals are vetted against the capabilities of the company and research partner, past track record of management and its commercialization potential. Upon validation, the grant is awarded in a tranched fashion based on project milestones. The projects must be completed within a 6 to 18 month period.

Craig: To be clear, the grant is not directly paid to the company?
Norm: Right, typically, the company’s cash contribution is paid to the institution. The company’s costs over and above this are in-kind.

Craig: What is the next program planned?
Norm: We will be requesting Expressions of Interest (EOIs) for the Health Technology Assessment & Implementation Program this August. The purpose of this program is to support the acquisition and assessment of market-ready MAT products by Ontario hospitals. In other words, the program helps fund a hospital’s acquisition of a MAT product, and in return the hospital becomes a reference customer for the company’s product. Similar to the Business Investment Program, applicants can receive up to $100K per project, which must also be matched by the combined contributions of the company and the hospital/healthcare institution. The company provides a deep discount and the institution’s cost for evaluative services are recognized. The HTX contribution helps to defray the purchasing costs. Sentinelle Medical was a past recipient of this grant, and has successfully implemented their imaging technology into the Kingston General Hospital.

Craig: And the third program?
Norm: This would be the Clinical Validation Program. The purpose of this program is to fund clinical testing or validation studies of a MAT product within an Ontario Hospital. The maximum grant per project is $50K and must be matched by the company – with 80% being cash-contribution. Mespere LifeSciences was a past recipient of this grant. Mespere develops a non-invasive hand-held device to measure central venous pressure in real time; replacing the traditional expensive, invasive and infection-prone procedure of catheterization. We have launched this program through partnership with regional innovation organizations such as BioDiscovery Toronto, YORKbiotech, and The Golden Horseshoe Biosciences Network.

Craig: If a company is ultimately selected for one of these programs, how long does it typically take to work through the process and get the cheque?
Norm: This depends a lot on the project being proposed, but it typically takes between 2-4 months.

Craig: How long have these programs been in place?
Norm: We have been running funding programs since 2004 and to date have provided $8 million in funding disbursements and helped fund over 70 projects. Approximately 1/5 of this has been for healthcare IT related projects. Example of healthcare IT initiatives funded include: MedManager Interactive, HInext, and Quillsoft, who all offer innovative solutions to distinct healthcare issues.

Craig: Great, thanks for taking the time to speak today. In closing, do you have any words of advice for entrepreneurs that want to get into the MAT space?
Norm: The MAT space has some unique angles given the public nature of healthcare funding, privacy issues and requirement for clinical research validation. That being said, there are a lot of interesting problems to solve and a lot of opportunities to provide innovation in the space through software or wireless technologies. HTX is here to help support entrepreneurs commercialize their ideas.

craig at mapleleafangels.com

My previous article on start-up funding sources covered the National Angel Capital Organization. For the next article in this series, I will cover Precarn. I recently met with Gary Gudbranson, VP operations at Precarn.

Craig: Thanks for taking the time today to speak with the StartupNorth readership. To start, can you give the ’30 second elevator pitch’ on Precarn
Gary: Precarn is a non-profit organization that supports the intelligent systems industry in Canada through funding of projects that seek to advance research into commercial applications. We fund R&D initiatives for Canadian companies doing research in areas of artificial intelligence, machine vision, sensors, and robotics. We are funded by federal government departments such as Industry Canada and provincial government ministries such as the Ontario Ministry of Research and Innovation.

Craig: What are some of the things that companies in this space are working on?
Gary: The intelligent systems field is quite broad and there are many exciting companies doing interesting work across a variety of industries. Precarn has funded a project by Braintech to further develop its software for industrial robots so they can intelligently pick out the correct part required in a manufacturing process out of a bin of random parts. Another Precarn funded project by Apstat technologies developed data mining software to allow insurance companies to better underwrite insurance risks. iGO Technologies undertook a project funded by Precarn to develop computer assisted surgery solutions. In one of our most well known projects, Precarn supported the research that went into the vision system used on the space shuttle to inspect the space shuttle’s tiles while in space.

Craig: What types of services do you offer to companies and what companies are eligible?
Gary: Our main focus is on funding programs. However, since we know the companies, universities, and researchers in the intelligent systems space, we also help with networking and making connections. We will work with any company in Canada that is in the intelligent systems space that meets the criteria for our funding programs.

Craig: How do your funding programs work?
Gary: Our funding programs are grants that contribute to the costs of a specific project. Precarn will fund a certain percentage of a project and the company must provide matching cash or in-kind funding. Projects must be oriented around advancing research into commercial products. Project proposals must include collaboration with an academic research partner as well as an end user customer. We feel this model best contributes to successful commercialization by having the company to collaborate its research efforts with an academic institution to reduce the technology risk as well as work closely with an end customer to ensure it meets industry needs to reduce the market risk.

Craig: You currently have a program open for applications, can you talk about it?
Gary: The program we currently have active is the Technology Gap Assistance Program (T-GAP) for startup companies. This program is oriented to small companies and funds eligible projects with up to $75,000 or up to 65% of the project’s total costs. Projects need to be in the intelligent systems space and look to further research into technologies that can have commercial applications. Applications are due by Sept 2, 2009 and the program has a total of $1m of available funding.

Craig: How does the application process work?
Gary: Interested companies should reach out to Precarn to start a dialog on what they are looking to accomplish. They can contact Rick Schwartzburg. We can then give feedback if we feel their project is a good fit for what we are looking to fund with the program. Companies should then complete an application form and formally submit prior to the deadline. Once we receive all applications we internally review them to ensure they meet the program criteria. For the applications that meet the criteria, we distribute them to our expert advisory panel to review and rank them. Our expert advisory panel is made up of external industry and academic individuals that are knowledgeable in the intelligent systems space. Based on the ranking, we then award funding starting with the strongest submissions. In order to receive the funding, companies must finalize a contract with Precarn and submit a milestone based plan by which funding will be tranched based on project milestones. As part of the program requirements, Precarn has reporting and audit requirements the company/project must adhere to. From the application cut-off date, a chosen company can typically expect to receive cheques in a period of 3 to 6 months.

Craig: What separates the good applications from the rest of them?
Gary: Our goal is to ensure companies/projects we fund result in successful commercialization and advancement in the intelligent systems field. We look for companies that have a good understanding of their market-space and ability to execute on taking a research initiative to a commercial offering. We like to see initiatives that don’t just do research for the sake of doing research, but do research that will create products that have economic value. We also look for companies that understand the need and have developed good partnerships with academic institutions and industry.

Craig: The T-GAP program was last run last fall. What are some of the companies that received funding?
Gary: Some examples of the 12 funding recipients for the most previous T-Gap round include: Client outlook, Biopeak, Incogna, Nutri-Loc Ingredients, and OneLight.

Craig: In addition to the T-GAP program you also have other larger programs?
Gary: We run larger funding programs that are also open to larger companies to fund projects researching more complex problems. In these programs, the project duration is longer (18-24 months) and funding is larger at up to $500k.

Craig: When do you anticipate opening up new programs?
Gary: Precarn is at the end of its 5 year funding cycle. We are currently sourcing funding for our next cycle so until this is sorted out have not begun to plan out our next programs. We typically will do between 1 to 3 funding programs each year. Each year’s programs can have a different focus to remain relevant with times. We would anticipate that cleantech and energy efficiency would be key areas next year.

Craig: Gary, thanks again for speaking about Precarn with the StartupNorth readership today. It was very interesting to learn more about Precarn and the good work they are doing to support commercialization in Canada.

craig at mapleleafangels.com