Biotech Dreams

Ever since reading Linda McQuaig on Connaught Labs — the “public” lab that McQuaig argues, convincingly, could have helped Canada fight the COVID-19 pandemic had it not been privatized by the Mulroney government in the ’80s — I’ve been thinking about the value of publicly owned businesses and looking at government investment in private enterprises with a colder eye.

Connaught Labs is one chapter in McQuaig’s book, The Sport and Prey of Capitalists: How the Rich Are Stealing Canada’s Public Wealth, the thesis of which is that Canada had a long history of successful, government-owned enterprises but:

…in recent decades, we have allowed our inspiring public enterprises to be privatized and our vital public programs downsized, leaving us increasingly dominated by the forces of private greed that rule the marketplace.

Poliomyelitis Vaccine, Formalin-Inactivated, otherwise known as Salk Inactivated Poliovirus Vaccine, or IPV, Connaught Medical Research Laboratories, University of Toronto, 1959.

Poliomyelitis Vaccine, Formalin-Inactivated, otherwise known as Salk Inactivated Poliovirus Vaccine, or IPV, Connaught Medical Research Laboratories, University of Toronto, 1959. (Source: Sanofi Pasteur Canada Archives)

In every case — from Connaught Labs to postal banks to the CNR — the force working against government ownership was private business, which finally got the upper hand in the late 1980s, when the Brian Mulroney government began privatizing government assets in earnest.

Once Mulroney (and his partners in privatization, Margaret Thatcher and Ronald Reagan) were through, Canadians, Brits and Americans had been quite thoroughly convinced that government was incapable of running any enterprise successfully — that you’d as well light cash on fire as allow government to spend it running a public enterprise. Although giving public money to private companies? That’s totally cool.

You may think I’ve wandered very far away from the topic alluded to in the headline to this story — the April 8 announcement that the Atlantic Canada Opportunities Agency is giving $2,214,302 to The Verschuren Centre and four private sector biotech companies — but there’s actually a direct link between federal privatization in the ’80s and Cape Breton biotech investment in 2021 and it’s Annette Verschuren herself. According to her bio, Verschuren, who gave her name (and a personal donation of $500,000) to the center founded in 2009 as the Verschuren Centre for Sustainability in Energy and the Environment:

…began her career as a development officer with the Cape Breton Development Corporation, a coal mining operation, in Sydney, Nova Scotia. She then worked with Canada Development Investment Corporation as executive vice-president, privatizing crown corporations…

Last fall, as you may recall, the Verschuren Centre consciously uncoupled from Cape Breton University and registered as a federal, not-for-profit, research and technology hub. The Verschuren Centre’s story, according to the CBC, is that it has been “supported by the university in terms of services, but its activities have always been fully self-funded.”

But…that’s leaving a few points out.


Public purse

The Verschuren Centre has been the recipient of its fair share of government money over the years — up to and including the non-refundable $695,721 contribution it received from ACOA on April 8. That money will be used to “obtain specialized research and development equipment,” much like the $478,870 non-repayable contribution CBU received in 2014 to “acquire laboratory equipment for the Verschuren Centre.”

This past February, the provincial government announced The Verschuren Centre (or VC Inc) would receive funding from the $50 million Forestry Transition Trust, established in 2020 after the closure of Northern Pulp to “bring innovation to the forestry and biological resources sector.” VC Inc’s share would be:

...$672,500 over the next six months to support the development of a Bio-technology Acceleration Centre to help advance key forestry and biomass sector innovative technology companies towards commercialization.

That “acceleration centre” — AscendBio — will see The Verschuren Centre and Innovacorp (along with ACOA, which is is listed as a “supporter”) trying to lure “industrial biotech and agtech start-ups from around the world.” The main attraction is the facilities at The Verschuren Centre, facilities — as noted above — the public has helped pay for. (You can view a list of federal grants and contributions to the center on the ACOA website).

Verschuren Centre, CBU (Photo by By MPen92 (Own work) CC BY-SA 4.0, via Wikimedia Commons)

Rather than taking an ownership stake in any of these biotech and agtech startups, AscendBio makes of virtue of not doing so, dangling the possibility of “Non-dilutive capital from provincial and federal government” before would-be entrepreneurs.

Brett Bundale, in a glowing profile of the Centre for the Canadian Press in which she raved about CBRM’s future as a “non-urban” tech hub (describing us as a “remote East Coast community”) noted that “branch[ing] off” from CBU had:

…freed the centre from some of the constraints and bureaucracy of being tied to an academic institution and allows startups to keep their own intellectual property.

“The fact that we can find all that equipment under one roof and not have to hand over all of this intellectual property was probably the biggest selling feature for us,” said Mark Masotti, president and CEO of Alter Biota.

Which seems to suggest most places that have “all that equipment under one roof” would insist on a piece of the action — but not AscendBio:

“Our goal is to de-risk them for investment by accelerating them through what we call the valley of death,” [Verschuren Centre CEO Beth] Mason said, referring to a common business term that refers to startups that have begun operations but are not yet generating revenues.

Apparently, the hope is that having benefited from all this public assistance (government funding, access to labs equipped with government funding) the successful entrepreneurs will eventually “build out [their own] facilities” here in Cape Breton.

That could work, I guess.

But I am going to go on record with my personal doubts right here.


Meet the Board

Before I consider the four companies that received funding, I’d like to introduce The Verschuren Centre board, which consists of Calgary-based Keith MacLeod (president), Toronto-based Verschuren, CBU president Dave Dingwall, Marion Bridge-based Frank van Schaayk and Toronto-based Victoria Sharpe.

MacLeod has a strange background for the president of a cleantech research hub: he’s the former CEO and chair of the Calgary-based energy consultancy Sproule, he currently serves on the board of the oil and gas company Paramount Resources; he once served as chair of the Canada Nova Scotia Offshore Petroleum Board; and he’s also served on the boards of Manitok Energy, Trilogy Energy and Prairie Storm Energy.

Van Schaayk also began his career in the oil and gas sector before moving into food, serving first as president and COO of Ben’s Limited and then as regional president, the Americas, of McCain Foods. Van Schaayk, like most of these characters, has served on more boards than you can shake a stick at and in addition to The Verschuren Centre, he was chair of the board of the Nova Scotia Health Authority until earlier this month.

Which brings us to Sharpe, a “long-term champion of integrating the environment and the economy” (who is going to tell her the two have never not been “integrated?”), Sharpe was “the first employee and founding President and CEO” of Sustainable Development Technology Canada from 2001 to 2014. She continues to serve as a strategic advisor to the foundation’s board.

SDTC is “an independent federal foundation” funded by the federal government to the tune of $750 million. According to SDTC communications coordinator Anusheh Fawad, it “provides non-repayable contributions to eligible Canadian cleantech companies and does not take any equity in a company.” So, another source of string-free money.

To be eligible for SDTC funding, a company must be recommended by an “SDTC-approved accelerator partner” and Nova Scotia boasts two such partners — Innovacorp and The Verschuren Centre.

But there’s an even tighter link between the SDTC and the Verschuren Centre because the current chair of the SDTC board, as I discovered while perusing the foundation’s 2019-2020 Annual report, is Annette Verschuren:

Annette Verschuren

Source: SDTC Annual Report 2019-2020


Got that? To get funding from the federal foundation, of which Verschuren is board chair, you need a recommendation from an “approved” accelerator like The Verschuren Centre, of which Verschuren is a director, as is Sharpe, who also serves as a strategic adviser to the SDTC.

And to make everything just that much cozier, Verschuren was recently named to Premier Iain Rankin’s new Economic Growth Council where she will, presumably, advise the premier to put more money into biotech startups. (Just a guess.)

Okay, I’m starting to feel claustrophobic.  It’s time to look at the four businesses that received ACOA money and plan to take up residence at The Verschuren Centre.



Reazent LogoReazent was registered in Nova Scotia as a limited company on 5 March 2019 with Sumit Verma listed as president and secretary. Verma arrived in Nova Scotia from Mumbai, India, in November 2019 through Innovacorp’s Start-up Visa Program (Innovacorp is a designated Canadian business incubator that can recommend entrepreneurs receive a start-up visa from Immigration, Refugees and Citizenship Canada under the business incubation stream).

Reazent, which Verma co-founded in 2018 with Friedrich Srienc and Steve Moon, aims to produce:

…efficient, high-efficacy organic replacements for agrochemicals. These products help in crop disease control, yield growth, and abiotic stress resistance in the agricultural industry.

In June 2020, Reazent (supported by The Verschuren Centre) received $100,000 in seed funding from SDTC.

Also in June 2020, Reazent was announced as one of the IndieBio San Francisco Class 10. IndieBio, with facilities in both San Francisco and New York, is one of four accelerators (the others are HAX, Chinaccelerator and MOX) operated by the venture capital firm SOSV. Each team accepted into the IndieBio accelerator gets:

…a $250,000 package for an equity position of 10%–12% post-Seed. $200,000 is in cash and $50,00 is in-kind.

IndieBio doesn’t mess around — if it’s helping you “derisk your company in science, business and customer value” (even if it does so for only four months) then it’s going to take 10% to 12% of your company in return (assuming you land seed money). During the four-month program, founders “engage with customers and partners, pitch to investors, and turn science into a real product people pay for.” At the end of four months, teams are kicked out of IndieBio’s labs although they “continue to be part of the IndieBio family” which will “help teams find lab space after the program through our network and introductions.”

On April 8, ACOA announced that Reazent (which it misspelled) would receive:

…a $403,050 repayable contribution to further develop and commercialize its patented organic fertilizers and pesticides to improve crop health and yields. This project will create up to five jobs.


Kraken Sense

Kraken SenseKraken Sense logo is not what the wise men brought Jesus (although he probably could have used it, Biblical food safety being what it was).

Kraken Sense is:

…bringing real-time testing, with results in two minutes, to automated food and water systems, everywhere from the farms to kitchens. They are making an in-line autonomous device with refillable, single-use cartridges that employ carbon nanotubes magnetized with strain-specific antibodies to measure the concentration of pathogens, not just their presence.

(I’m not sure how you can have “refillable, single-use cartridges” but I’ll let it pass.)

In October 2020, Kraken Sense received $40,000 as part of Innovacorpo’s GreenShoots competition for “Nova Scotia Start-Ups,” although Kraken Sense is not registered as a company in Nova Scotia and the Cape Breton Post story about the ACOA funding says the company is based in Mississauga, Ontario.

In November 2020, Kraken Sense received $100,000 in seed funding from SDTC (again, supported by The Verschuren Centre).

Kraken Sense was also part of the IndieBio San Francisco Class 10, so would presumably have received the same $250,000 contribution in return for a 10% to 12% post-Seed stake.

On April 8, ACOA awarded Kraken Sense:

…a $315,000 repayable contribution to commercialize its innovative device that can detect bacteria in food and beverage products in real-time. This project will create up to eight jobs.

While the company’s co-founder, Nisha Sarveswaran, seemed excited about the funding and getting to use the The Verschuren Centre’s lab facilities, she didn’t say anything about plans to set up shop in Nova Scotia when product testing is completed.


Alter Biota Inc

Alter BiotaAlter Biota Inc was registered as an extra-provincial federal corporation in Nova Scotia on 3 September 2020. Its “home jurisdiction” is Toronto. Mark Edward Masotti is the president, CEO and secretary. Masotti, according to his LinkedIn bio, is a “Process engineer with extensive experience in various fields from power generation, transmission and storage to biogas, water/wastewater, and civil infrastructure.”

Alter Biota “manufactures low-cost, high-performance biographene additives for the concrete industry.” These additives “increase the strength of concrete and reduce its environmental footprint.”

In October 2020, Alter Biota received $40,000 as part of Innovacorpo’s GreenShoots competition for “Nova Scotia Start-Ups.”

The company received $100,000 in seed funding from SDTC in November 2020 (supported by The Verschuren Centre).

On April 8, ACOA announced it was giving Alter Biota “a $400,531 repayable contribution to commercialize its low-cost, high-performance, concrete strengthener. This project will create up to six jobs.”


Phycus Biotechnologies Inc

Phycus Biotechnologies IncPhycus Biotechnologies Inc was registered as an extra-provincial federal corporation in Nova Scotia on 5 November 2019. Its home jurisdiction is Richmond Hill, Ontario. Aditya Pandit is listed simply as a director, although the company’s website lists Pandit as co-founder, along with Christian Euler.

Phycus produces “a plant-based commercial-scale ingredient for skin care products, providing an alternative to crude oil-based ingredients,” technology that was developed “at the University of Toronto in Prof. Krishna Mahadevan’s lab.”

Phycus was accepted into Innovacorp’s Fall 2019 Sprint Accelerator Program, receiving “$50,000 and six months of business guidance to address key technical and business milestones, along with access to incubation space at Innovacorp’s facilities.”

In June 2020, Phycus received $100,000 in seed funding from SDTC (again, supported by The Verschuren Centre).

On April 8, ACOA announced it would give Phycus “a $400,000 repayable contribution to produce a plant-based commercial-scale ingredient for skin care products, providing an alternative to crude oil-based ingredients. This project will create up to six jobs.”


Public Good

Adding up the ACOA money announced on April 8 plus the provincial monies that have been invested in these startups and the provincial contribution to The Verschuren Centre, I get $3.4 million.

Adding up the jobs, I get “up to” 25 but I never trust the job numbers in government press releases. And anyway, what sort of jobs? Short-term, presumably — the funding won’t last forever. And will locals be employed or will companies bring in people who’ve worked for them previously? The ACOA “Backgrounder” on the investment is low on such details.

Innovacorp “invests” in companies, so presumably benefits monetarily when (or if) they succeed. But in terms of economic development, none of these startups sounds particularly attached to Nova Scotia. You get the sense they simply follow the money and lab facilities (and that it must be an awful slog at times). In the event one of them actually has a breakthrough and is able to scale production and commercialize their technologies, are they really likely to establish production facilities here? Is Cape Breton actually growing an “ecosystem of innovative, environmentally sustainable companies,” as the ACOA press release would have it?

Take a company like Reazent: if it succeeds in producing environmentally friendly fertilizer will the founders set up a factory in Nova Scotia or sell the technology to Monsanto (under the beaming faces of the venture capitalists at the IndieBio accelerator) and move on to their next challenge? And if they sell the tech (surely the much more likely possibility) what will be the net benefit to us? Some short-term jobs and the chance to buy the finished product from Monsanto?

I think my problem with all of this is that we have a private sector that specializes in venture capital and startup accelerators and seed funding. Do we really need our government dabbling in all this as well?

Wouldn’t a better way for government to support cleantech development be to fund university research? With rights to use or lease the resulting technologies? To make sure there is some public benefit from the investment? (The obvious example here is the COVID vaccine. Much of the research behind it was publicly funded and yet, it is the large pharmaceutical companies that are reaping the — insane — profits).

I put that in the form of a question because I’m really not sure what the answer is, and I will have to do some more research of my own before I can say anything more definitive, so I’m off to the Spectator laboratory to run a few experiments…