Ottawa firm building unique business model to help emerging biotechnology companies

It’s been called the commercialization gap and the valley of death, and it threatens to derail hundreds of Canadian biotechnology firms that are moving products and technologies towards the marketplace. An Ottawa firm is betting that its commercialization model can successfully overcome the financing vacuum for biotechnology start-ups languishing between seed funding and the first round of venture capital.

Onefield is establishing a network of financial, legal, patenting and contract partners and combining them with in-house expertise to assist firms in the so-called bio-diamond region of Montreal, Ottawa, Kingston and Toronto. It intends to cover all the bases starting with disclosure and including company formation, development and commercialization to eventual exit. Firms accessing expert services through Onefield will receive bulk discount rates negotiated with partner firms. If the model proves successful, the company plans to expand throughout Canada over the next three years.

President and CEO Colin Goodfellow admits it’s an aggressive target, but he sees considerable potential in an area where existing commercialization vehicles are absent or faltering. He also contends that the success of the innovation agenda is dependent upon far more commercialization than has been achieved to date.

“The innovation agenda is at risk in the inability to go from seed to round one. The gap is enormous,” says Goodfellow, a major player in the transition of the Medical Research Council to the Canadian Institutes of Health Research. “We’re playing very close to the ground and in the Ottawa area alone we have a potential pipeline of 24, high-volume IP producers.”

Key to the Onefield model is the creation of the First Seed Fund, a Community Small Business Investment Fund (CSBIF) that could provide up to $15 million in financing to early-stage plays. The provincial CSBIF program was the focus of proposed enhancements in the recent Ontario Budget, doubling the investment incentive for individuals and corporations to 30% and extending the deadline for the formation of new CSBIFs (R$, April 16/03). Onefield hopes to assemble the $2 million in commitments required to launch a CSBIF in the Ottawa area by September and then extend the concept to communities across the province.

“This will be our competitive advantage. When you have money, all of a sudden you’re on the other side of the ledger,” says Goodfellow. “I think the federal government should consider adopting something like this nationally. CSBIFs are tax advantaged, market based and they recognize the valley of death. If they are complemented with flow through shares, you would have a receptive, small-capital vehicle for seed investments.”

The Onefield commercialization model arrives at a time when several other larger proposals have apparently failed to secure buy-in from the federal government. By using a tax leveraged mechanism like CSBIFs, it can focus on generating revenue on business development services and sourcing capital. With the CSBIF program providing a revenue stream for early-stage firms, Onefield can afford to be patient and anticipates relationships with firms for between seven and 10 years.

“We offer stability as the IP evolves,” says Goodfellow. “Our allegiance is to the IP owners whereas the VC’s allegiance is to the fund investor and the university’s allegiance is to the university.”

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