A small Canadian biotechnology company has managed to make one of the toughest leaps for a high-tech firm: It has snagged almost $15-million from venture capital investors to enable it to start mass manufacturing and marketing of an innovative device that allows medical researchers to more easily identify diseased cells.
There was one catch, though. It had to get the money from the United States and Switzerland.
Scott Tanner, chief executive officer of Markham, Ont.-based DVS Sciences Inc., said he spent two years beating the bushes among venture capital firms to try to raise money, but the only bites he got was from investors outside Canada.
On Thursday, DVS is to announce it has arranged $14.6-million in financing from 5AM Ventures, Mohr Davidow Ventures and Pfizer Venture Investments - all based in the United States - along with Switzerland's Roche Finance.
"I really wanted to raise the money in Canada," Mr. Tanner said, "but we couldn't find support for the company." After the U.S. backers were lined up, some Canadian venture capital firms expressed interest, he said. "That was satisfying, but it was too late."
Getting the financial backing was a huge step in commercializing the company's CyTOF analytical instrument, Mr. Tanner said. The money will allow the company to ramp up its production to about 100 units per year of the $600,000 device, and establish a global sales and marketing organization based in an office in California. Currently the company has 27 employees, most of them in the Canadian head office.
The instrument uses mass spectrometry techniques to identify "biomarkers" in cells that may indicate early stages of diseases such as cancer. It provides a better "fingerprint" of disease cells than older techniques.
The equipment can be used for diagnosing diseases in individuals, in developing new drugs to fight diseases, and in helping clinical researchers choose people for test panels. Clients include universities, government bodies and pharmaceutical companies.
Mr. Tanner and he and the key members of his team first conceived the idea for the product while working in the 1990s at MDS Sciex, which at the time was the instrumentation arm of Canadian life sciences firm MDS Inc. In 2005 they left Sciex to develop the technology at the University of Toronto, where they did more research and created prototypes, launching the product on the market in 2009.
But DVS needed more capital to move from making a handful of instruments a year into large-scale manufacturing. They received support from the Ontario Institute for Cancer Research, which advised the company on making pitches for venture capital investment.
It is no surprise that finding willing venture capital support was difficult, Mr. Tanner said, because making biotechnology instruments is viewed as an even riskier activity than developing new drugs. DVS had the advantage of having a product already on the market - even though only a handful had been sold - and it had already proven itself, he said.
Still, he said, "we spent two years making pitches ... and hardly ever getting to first base."
Mr. Tanner's advice to other companies in the same boat is to "make sure you have a really good business mentor" who can help handle the roller-coaster ride of dealing with the venture capital community.