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Links To Universities Improve Startups’ Chances

When Gordon McArthur presented Forerunner Research at the Atlantic Venture Forum in June, he revealed the tremendous sales growth of the company, whose technology detects gases in soils.

Revenue at Forerunner, which grew out of research conducted at St. Francis Xavier University in Antigonish, increased 150 per cent in 2014, and was on pace to rise 80 per cent this year. The company is forecasting almost 70 per cent revenue growth in 2016.

All of which, believe it or not, is fairly typical for a startup that grew out of Atlantic Canadian university research. Entrevestor’s data on Atlantic Canadian startups show that these companies perform a lot better when they have affiliations with universities — like, twice as well.

Of the 286 startups we track in Atlantic Canada, 122 shared their revenue data for last year with us and their sales rose 38.5 per cent in 2014. It’s an impressive number.

But when we assessed the revenue performance of 23 companies that grew out of university research, we found their revenues rose 81.8 per cent in 2014.

Then we examined the data from 41 other companies with relationships with universities — usually that means they have gone through a university entrepreneurship program or used universities for lab facilities or research. Their revenue rose 65.3 per cent.

In total, the startups connected with post-secondary institutions experienced revenue growth of 71.1 per cent in 2014.

“Those researchers that are commercializing aspects of their research are more likely to be working on real problems and have identified solutions leading to breakthrough or high potential products or services,” said Mary Kilfoil, who heads the entrepreneurship program at Dalhousie University in Halifax. “These products have a built-in market-based advantage over, say, another app.”

The number seems astonishing. Is it that the 65 university-linked startups are starting from a low base in revenue? Not compared with other startups in the region. Eleven of the university-related startups that shared their revenue with us had six figures of revenue in 2014, and five others had sales of more than $1 million. Fifteen of the companies reported revenue for the first time, and eight more than doubled revenue last year — factors that contributed to the high growth rates.

Let’s stress something: this is actual data on companies selling their product to clients. It’s not like winning a competition, which depends on the opinion of judges. It’s not making a list of ones-to-watch in a magazine. It says even more about these companies than landing venture capital funding. These are sales that these companies have actually booked.

Of course, the startups affiliated with universities also attracted a great deal of capital to the region. Forty-seven that either grew out of university IP or have some other relationship with universities raised a total of $87.44 million. One was St. John’s, N.L.-based Verafin, which raised $60 million in a landmark private-equity funding. Even if we remove the Verafin funding, these startups attracted investment of $27.44 million.

In total, the startups affiliated with universities employed 453 people as of the end of 2014.