Canadian IIoT startups reborn in wake of oil crash

The fast-growing Canadian Internet of Things (IoT) market is poised to exceed USD$4.9 billion by 2018. However, if Canadian industrial IoT (IIoT) is to aspire to such lofty heights, the industry must navigate several challenges  – like a low dollar environment that can be both a blessing and a curse.

In a 2015 report, International Data Corp. (IDC) estimated that by 2018 the Canadian IoT addressable market will be worth over USD$4.9 billion, up from $2.8 billion in 2013.

IIoT in Canada has been forced to innovate to conquer the country’s key geographic weakness – a small population and remote resources spread out over vast distances. The remote locations of Canada’s many energy and mining projects sparked innovative startups such as Calgary, Alberta-based companies GEOTrac, which provides fleet management technology, and Pure Technologies, a maker of pipeline inspection robots.

The recent downturn in energy prices and oil demand presented a challenge for IIoT innovation driven by natural resources investment, particularly investment from Alberta’s private equity markets. With natural resources comprising around 15% of its national GDP, Canada was especially hard hit by the oil price decline.

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Increased interest in Canadian IIoT

However, CEO of the Canadian Venture Capital Association (CVCA) Mike Woollatt said Canadian venture capital funds are seeing increased investment opportunities in Canada’s shift away from natural resources towards other avenues of innovation. He cited the record $2.3 billion in venture investment generated in Canada in 2015 – a 24% increase from the previous year despite the massive hit taken by the Canadian energy industry. Much of this activity is being driven by the relatively low valuations for Canadian startups compared to Silicon Valley, especially with the Canadian dollar trading at a 30% discount to the greenback.

“Everyone’s pretty interested in Canada, the dollar’s at 70 cents, there’s tons of opportunities, a lot of companies growing like crazy, but there’s less competition for financing than in the Valley,” said Woollatt, who said the CVCA will be dedicating a breakout wing of its upcoming conference this spring to wearables and IoT.

With the IPO market almost non-existent in Canada, strategic exits are now dominating activity among fast-growing IIoT companies. Last fall, Atlanta-based Acuity Brands bought Distech Controls for USD$242 million. Quebec-based Distech is a leader in smart building automation and energy management solutions.

This follows the USD$138 million acquisition of Ottawa-based SkyWave Mobile Communications, the biggest machine-to-machine communications provider on the Inmarsat satellite network. SkyWave was bought by Orbcomm, a global equipment tracking company headquartered in New Jersey.

The low Canadian dollar makes exports of wearables and IIoT products to the U.S. much more competitive, especially considering the comparatively huge size of the American market. However, the low Canadian dollar presents significant challenges for startups looking for top talent.

“One of the big hindrances to growth and scale in Canada is talent recruitment and retention, and that includes designers, sales and engineers,” said Woollatt who explained the difficulty Canadian IoT startups face competing for talent when Silicon Valley pays larger salaries in U.S. dollars. “Canada is one of the cheapest places in the world to launch a startup, but we don’t have the ability to scale because we don’t have huge check-writers, we don’t have huge swaths of talent, and the talent is very expensive.”

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Canadian IIoT continues expanding

Nonetheless, the Canadian IIoT ecosystem continues to steadily expand and attract investment from both U.S and homegrown venture players, like Toronto-based VC firm McRock Capital which specializes in IIoT. McRock recently led a USD$2.3 million Series A investment in Moncton-based RtTech Software that makes real-time efficiency improvement tools for the manufacturing industry.

Also generating recent investor interest is Toronto-based MMB Networks, which closed USD$4.5 million in series B financing led by Roadmap Capital. MMB’s drop-in embedded software platform features interoperability across multiple popular IoT platforms and protocols, and cuts time-to-market for connected device vendors.

Other notable startups emerging from the Canadian IIoT scene include: Invixium (biometric security); SensorSuite (smart building monitoring and energy efficiency); Awesense (electrical grid monitoring); Miovision (traffic data collection and signal operations); mnubo (big data analytics for IoT); and Blue Rover (IoT connectivity and asset monitoring).

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