"Money is the fuel." Tom Hayes, CEO of GrowthWorks Atlantic

Diagnostic Chemicals is P.E.I.'s most successful bioscience company. Founded in 1970, it brings in $40 million in revenue annually.

Diagnostic Chemicals was founded at a time when growth from internal revenues and government assistance was the norm. It meant relatively slow growth, but when everyone else was on that same curve, that didn't matter so much.

There is a lot of work that needs to be done to take a product from the lab bench to the market.

Since the 1990s, venture capital has had a profound impact on the way technology companies grow, pushing growth rates with millions of investment dollars in an effort to provide an edge on the competition.

Venture capital can be simply described as a large pool of money looking for companies to invest in. It's usually private money, sometimes from a few investors, sometimes from many shareholders. Occasionally, as with the Business Development Bank of Canada, it is public money.

Money gives companies huge advantages. It allows them to immediately invest in research, develop engineering processes and launch marketing campaigns, rather than wait for surpluses to build or debt burdens to fall to finance those crucial aspects of growth.

"Quite often if you have succeeded in developing a new technology, a new product, you have a short window in order to take advantage of that competitive advantage," says Tom Hayes, CEO of GrowthWorks Atlantic, a Halifax-based venture capital firm.

"In order to get the product to the market quickly, and in a broad fashion, adequate capital is necessary to support the sales and marketing effort."

Kevin Yarr explores some of the difficulties P.E.I. will face in building a bioscience industry.
(runs 10:17)

Venture capital can also bring other advantages. Fund managers usually take a seat on the board of the companies they invest in, and are experienced in taking companies through the rapid growth phases of product development and launch.

"What's a challenge here is we don't have a lot of experienced teams that have been through the process of building a technology company in a rapidly changing environment," says Hayes.

Venture capitalists can help not only with advice, but also with making connections to the kinds of people emerging companies need to hire in order to compete on a world market. If you're competing on the world market, you need to be able to take advantage of opportunities quickly, before someone in California, or Dublin or Osaka beats you to it.

Unfortunately, access to venture capital is not a strong point for Atlantic Canada, and access in P.E.I. is worse than it is in other parts of the region. Statistics gathered by the Canadian Venture Capital Association show Atlantic Canada typically gathers about two per cent of the venture capital invested in Canada. With eight per cent of the population, that is a long way from its share.

Prince Edward Island has the further disadvantage that few venture capital firms are active here, but the provincial government believes if the bioscience sector is built, the venture capitalists will come.

"They're in P.E.I. now, and they're all across Canada and the globe, and those people want to invest in initiatives like this," says Development Minister Mike Currie.

"They're out there now and you can find them easily."

Mike Currie believes access to venture capital on P.E.I. is adequate.

Working against the government's hopes is a tendency for venture capitalists to invest close to home, where they can easily keep an eye on how their investments are doing. The closest venture capital companies to P.E.I. are in Halifax, and there are two major ones that could be doing business on the Island: Growthworks Atlantic and the Business Development Bank of Canada.

BDC is actively looking for investments on the Island, but Growthworks is not. It is a labour-sponsored fund, one of a type that is structured nationally to have tax credits provided for investors by legislation enabled by the province. P.E.I. and Alberta are the only two provinces not to provide tax credits for investors in labour-sponsored investment funds.

Growthworks has lobbied for those tax credits without success, and until they are implemented, the fund will focus on the other three Atlantic provinces.

It is possible for a venture capitalist from outside the region to invest in P.E.I., but in most instances in Atlantic Canada where that has happened, a local venture capitalist has taken the lead and brought in others as co-investors.

"I was looking at some numbers ... in New Brunswick," says Hayes, "and it showed that for every dollar that we invested in that province over the last three years, we probably brought another two dollars in outside investment."

Taking a company all the way down the road of success can easily mean $10 million to $20 million invested, so those extra dollars are important.

For Prince Edward Island to be successful in building a vibrant bioscience sector, it will have to break new ground in the area of attracting venture capital.