Ranovus putting Ottawa tech back on the hardware map

Hamid Arabzadeh
Ranovus founder Hamid Arabzadeh. (Photo by Mark Holleron / Courtesy CMC Microsystems)

While the capital’s new generation of technology companies focuses largely on software, Kanata startup Ranovus is making its mark in a different sector.

The five-year-old company develops technology that makes it cheaper and more energy-efficient for clients to store information in the cloud. The growing firm is proving that hardware can still be a lucrative enterprise even in the post-Nortel era that has seen software makers such as Shopify and Kinaxis dominate the local tech scene.

In late June, the trailblazing company got another boost on its path to scaling up. Ranovus landed $5.5 million in federal funding through Sustainable Development Technology Canada, which works with Canadian companies to bring early-stage clean technologies to market.

“We’re doing something that nobody else is doing anywhere in the world,” says Ranovus chief executive Hamid Arabzadeh, adding his firm sells its technology to three of the world’s five biggest data centre service providers – a group that includes Amazon, Facebook, Google and Microsoft.

It’s the third major injection of capital for Ranovus, which previously raised US$18 million in the fall of 2014 in a round that included OMERS Ventures, the venture arm of the Export Development Corp., BDC Venture Capital, Deutsche Telekom and Azure Capital Partners of California. That investment followed an US$11-million round a year earlier.

An engineering graduate of the University of Waterloo, Mr. Arabzadeh knows his stuff when it comes to hardware. After serving in various roles for Nortel’s optical group during that firm’s heyday as a tech colossus, he left in 2003 to work for CoreOptics, which was bought out by Cisco in 2010.

He helped launch Ranovus in 2012 with $1.5 million in seed capital from his own pocket, various angels, former Nortel colleagues and other investors, including the MaRS Investment Accelerator Fund. Mr. Arabzadeh said he initially didn’t bother to seek additional funding from what he calls very risk-averse Canadian venture capital firms.

“You’ve had a lot of failures, unfortunately, on the hardware side, and core technology is something that investors don’t have an appetite for in Canada in general,” he explained. “Software is much easier. You can add money and people and you usually solve the problem. But with physics, you put money and people and you may get nothing.”

Fortunately for Mr. Arabzadeh, Ranovus quickly proved it was indeed on to something. A year after it launched, California-based Azure led the initial venture capital investment, triggering a wave of interest in his own country.

“Once I had the term sheet from there, I got back here and then everybody wanted to participate,” he said. “The opportunity was validated.”

Ranovus now has about 50 employees, roughly 40 of them at its Kanata headquarters and the rest at offices in Mountain View, Calif., and Nuremberg, Germany. Mr. Arabzadeh won’t disclose the firm’s revenues, but says the company is continuing to grow at a healthy clip.

Although the firm has yet to turn a profit, Mr. Arabzadeh has high hopes that Ranovus will continue to expand its market and prosper.

The data centre industry currently has the same carbon footprint as the airline industry, he said, but is growing at a much faster pace. Finding more efficient ways to power its servers is a major priority for the industry’s main players, he added, and that’s where he believes Ranovus can help.

He said his company’s data-connection hardware uses only a quarter of the power of today’s prevailing technology and runs at 25 per cent of the cost.

The company plans to use the latest infusion of equity to continue developing and refining its technology. Ranovus hopes it can attract new talent intrigued by the challenge of creating world-beating hardware.

“We’re trying to make sure that there’s at least a couple of (hardware) successes here,” Mr. Arabzadeh said. “If we can make it happen and make it visible to people, then I think people will take more chances.”