Karl Martin calls in a break from the entrepreneur’s grind. He has been in the business of technology for the past three years but his success has been accelerated since he joined forces with a creative community.
“These are not hobby start-ups. People come here to help turn your company into a billion dollar company,” says Karl, who co-founded wearable technology company Bionym in 2011.
He was talking about the Creative Destruction Lab, a venture lab based at Rotman School of Management in Canada. Scores of start-ups, mostly tech-based, have been accelerated this year. The lab is designed to increase the probability of venture success by providing a free working space and access to fellows whom are established, successful entrepreneurs.
“That mentality is unique and I can tell you that it’s been hugely instrumental to the kind of success and growth we have achieved,” says Karl, who is an alumnus of the University of Toronto, Rotman’s base.
His company, which specializes in biometrics and authentication technology for consumer electronics, was set-up three years ago when Karl met his co-founder while the pair were earning PhD’s.
Since entering the lab, Bionym has swelled to 27 employees and raised a seed-round of C$1.4 million in funding. The company's flag-ship product, Nymi, is a wearable authentication device that uses users' electrocardiogram to validate identity.
Before launching the start-up, Karl ran a consultancy for nearly two years. His co-founder’s research was focused on biometric recognition and their backgrounds were a perfect fit.
“I had experience of taking research and turning that into something commercially viable, so we joined forces,” says Karl, who launched KMKP Engineering, his first business, in 2009.
Bionym’s main revenue stream comes from the selling of wearable tech, but they consider the company a service provider. Their focus is on identity management and the co-founders hope to sell products and services to retailers and hospitality providers.
For now, however, Karl is cashing in on the expertise of the lab’s fellows – “the G7”. The core of the program is made of entrepreneurs and investors, who act as mentors. They meet with the lab's ventures every couple of months and map-out the businesses' milestones.
It is seemingly competitive; at each meeting, a start-up gets cut from the program, based on performance.
“The problem with incubators is that you have advisors without any significant successes behind them,” says Karl. “The lab pulls together people with significant successes; exits in the region of hundreds of millions of dollars. There is no better teacher than somebody that can lead by example.”
The lab takes no equity and charges no fees. It is founded by philanthropy and the G7 fellows have invested personally, says Jesse Rodgers, the Creative Destruction Lab's director. “Their donations help make it a reality,” says Jesse, who helped set-up the lab to help early-stage start-up founders.
In its first year, the Creative Destruction Lab produced eight successful ventures and generated over $65M in equity value. One of last years’ ventures recently presented their products at the Consumer Electronics Show in Las Vegas.
This year, 15 new ventures have been accepted into the lab from a range of industries – and several of them are alumni from Rotman’s MBA program.
“This year was excellent and we have a much higher calibre of companies than we ever expected,” says Jesse, who co-founded TribeHR, a HR software company, in 2009, which was later acquired by NetSuite.
“We devised the program by focusing on finding people that have the potential to build massively scaled companies. The whole process is about figuring out who they are, building a structure, and making them feel that they’re making a difference.”
Outside entrepreneurs are not the only ones who benefit. Rotman MBAs can work with ventures through the Venture Lab Course, which gives final-year students the opportunity to identify and solve business problems faced by the start-ups. They receive feedback from professors, the CDL team and the venture founders.
There are currently 26 MBAs involved, says Jesse, and one student improved the online revenues of a venture by more than 300 per cent. They have since been invited to stay on with the venture as an equity partner.
“There’s an opportunity for MBA students to be engaged with them, and add a lot of value and learn a lot at same time,” explains Jesse. “They get to sit in on our G7 meetings and learn from the interaction. Their assignments also help companies move forward; they are all deeply involved in helping them achieve their milestones and make that growth.”
Karl has no formal business education, and while he doesn’t feel that was necessary to launch the business, he says the financial experience one gains on MBA programs has grown in demand as the start-up has swelled.
“The lab was hugely helpful with providing that support,” says Karl, who hired an MBA graduate to fill a business development position.
The lab has allowed Bionym to pivot and completely change their company from a licensing business to a product-based business. “It gave us both the mentality of saying: ‘this is actually something we should go for’, as well as the actual practical example from people willing to give their advice,” Karl says.
“That group of core advisors, the G7, you don’t get that everywhere. Five of the original fellows invested $1 million in our seed-round.”
The majority of the lab’s ventures are tech-orientated, but Jesse has plans to develop a second stream of healthcare start-ups. Last year was an experiment and, because companies are cut based on performance, they had to focus on start-ups that would benefit the most.
Jesse is also exploring quantum-technology as a third steam option. “We see a huge opportunity to really drive the creativity and interest,” he says.
But he says the key part of the lab’s development is using ventures as a tool for MBA students – that aren’t just classroom lessons. “It’s such a unique opportunity for MBAs to be able to see early-stage companies and learn as they're doing it,” says Jesse.
“That type of mixture is what we see as the highest value of the lab.”