Ottawa startups remain bullish on fundraising despite headwinds in VC market

Welbi founder
Welbi co-founder Elizabeth Audette-Bourdeau is hoping to raise more money for her firm in 2023. File photo

While venture capital investment in Canadian firms plummeted in 2022 as tech valuations took a widespread hit and economic headwinds mounted, some Ottawa tech companies say that won’t deter them from pushing ahead with plans to secure more growth funding.

Biotech startup Genomadix is one of several local firms that said in a recent Techopia survey it plans to raise more money in the capital markets in the next 12 months.

Chief executive Steve Edgett said the company is polishing up its pitch deck as it prepares to pursue a “proper series-A” round aimed at raising between $25 million and $30 million in the first half of 2023.

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“It’s an attractive market,” Edgett says of the current fundraising climate for biotech firms like Genomadix, which makes a rapid COVID-testing device. “There’s quite a bit of money on the sidelines available to finance companies into a growth stage.”

Genomadix was launched in September 2021 after one of its main shareholders acquired the assets and intellectual property of now-defunct Spartan Bioscience out of creditor protection.

The company’s flagship product, dubbed the Genomadix Cube, is a coffee cup-sized rapid-testing device. In addition to detecting the virus that causes COVID, the technology has also been adapted for other applications, including testing for bacteria that cause legionnaire’s disease and detecting genetic mutations that may cause cardiac patients to reject a commonly prescribed blood-thinner.

Earlier this year, Genomadix signed a multi-year deal with the Mayo Clinic that will see the non-profit Minnesota-based organization gain an ownership stake in the local firm. 

Under the agreement, Genomadix engineers will work with infectious disease and point-of-care specialists at the Mayo Clinic to brainstorm new testing technologies and map out a plan to best commercialize the Ottawa company’s products.

But Edgett says his 53-person firm needs a bigger financial warchest to really capitalize on the potential of the Genomadix Cube.

“With the funding and the revenue projections that we have, we could add one or two new tests a year,” he says. “But to be a real player in this space, we need to have 10 or 15 different tests in various verticals all operating on the cube in order to show it’s a platform, not just a one-off test. That requires a lot of additional capital.”

Genomadix is currently awaiting approval from regulators in Canada and the U.S. to resume production of its device and market it for other applications, including tests on cardiac and stroke patients.

Edgett says he expects to get the green light from Health Canada and the U.S. Food and Drug Administration within the next 60 days, adding the approval will open the floodgates for sales to a “bunch of customers” south of the border, including the Mayo Clinic.

“As soon as we have that FDA approval, the company’s going to be worth a lot more money,” he says. “That’s when we’ll do the series-A.”

Another rising Ottawa tech company in the healthcare field, Welbi, also says it’s looking to raise as much as $10 million before 2023 is out after landing $6 million in seed capital this past summer.

Based out of Invest Ottawa’s accelerator at Bayview Yards, Welbi makes a software platform that helps retirement and long-term care homes design recreation programs and other activities for seniors while monitoring residents’ levels of engagement.

Co-founder and CEO Elizabeth Audette-Bourdeau told Techopia the firm’s fundraising efforts attracted so much interest that the company eventually decided to limit contributors to its seed round to those investors it felt “could really move the dial to the next level” as it ramps up its expansion drive.

Welbi’s footprint in the U.S. has grown to five states over the past three months. While the company had virtually no U.S. revenue a year ago, it now earns about three per cent of its sales south of the border. 

Audette-Bourdeau says she expects that share to rise to more than 25 per cent by the end of 2023. She expects Welbi, which now has 25 employees, to double its headcount over that span.

“I believe there are a lot of opportunities for us to grow into (the U.S.),” she says. “We’ll be trying to just pour fuel on the fire.”

Canada is known among investors as “more of a slow-moving market” when it comes to healthtech, Audette-Bourdeau says. But Welbi’s success during the pandemic has convinced U.S. venture capitalists that the company is for real, she says.

“Because we’ve been able to penetrate (the Canadian market) so fast over the last 18 months, it is attractive to U.S. investors,” Audette-Bourdeau explains. “They know that once we get into the U.S., things are going to go even faster.”

Edgett and Audette-Bourdeau remain bullish on their fundraising prospects despite a recent study that showed venture capital funding for Canadian companies nosedived in the third quarter compared with a year earlier.

The Canadian Venture Capital and Private Equity Association said last month that companies raised $896 million across 144 deals in the third quarter, a 50 per cent drop from the previous quarter and the lowest total since the first quarter of 2020.

The CVCA said total investments across Canada were down 78 per cent year-over-year from July to September, part of a year-long decline as soaring inflation, rising interest rates and other economic challenges batter the tech sector. 

Edgett says there’s no question investors are more reluctant to dole out cash than they were a year ago, when the funding frenzy was at its peak.

“Raising money in Canada is really difficult right now,” he says.

But he says there are still plenty of venture-capital firms willing to grab a stake in high-potential companies if they fit the right criteria.

“You want to be either looking for a little bit of money to get started or you want to be looking for a big chunk of money to scale up,” Edgett says. “It’s the piece in the middle that I think is really hard.”

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