Gary Brownstone

In August, the Jewish Independent connected with Gary Brownstone about a Winnipeg tech incubator he was working on called Eureka. In the short time since then, the entrepreneur has already moved on to his next adventure.

“Most of my career has been characterized by taking on multiyear projects,” said Brownstone. “In many cases, I’d be involved with or invest in small companies needing help growing to the next level. I’d grow them to the next level and then I would exit. But, generally, the projects I get involved in have a Point A and a Point B, and my mission is to take them from A to B.

“When I went to the Eureka Project, which was an incubator in Winnipeg that a group of individuals together with government and the U of M [University of Manitoba] had tried to launch, for all intents and purposes, [it] had failed. They hadn’t achieved what they’d set out to.”

Brownstone was brought onto the Eureka team to try to save it. They needed answers to three questions. Was there enough world-class talent in Winnipeg to make a venture like this worthwhile? Could the incubator help advance their causes and spin off commercial enterprises? And could Brownstone help make the operation sustainable?

“A big challenge with incubation is that early- stage companies can’t always afford to pay market rates for help, but governments don’t want to pick up the costs forever,” said Brownstone. “When I got to the project, the Manitoba government was covering about 90% of the operating budget.

“The first two [questions] we solved in a relatively short period of time. But, the sustainability issue was longer and … this year, we saw a third of those solved with the signing of a multiyear funding agreement with the province – with them only needing to cover about 30% of our operating budget.”

Seeing that a service like the one he was providing in Manitoba was needed everywhere in Canada, Brownstone move on to create a small practice under the name of LucraTech. He soon had several clients across Canada, the largest one situated in Vancouver, where he now spends about 60% of his time. The other clients are located in Manitoba, Ontario and Nova Scotia.

“I’ve got some associates that I bring into jobs as needed,” said Brownstone. “We are building up our business across Canada and have been for about six months now with some pretty decent success.”

The Vancouver-based company with which Brownstone is working is Canada’s largest technology incubation platform, Istuary Innovation Group. “This is a group of Chinese Canadians who see an opportunity to invest in or acquire Canadian technology for which there could be a market in China,” said Brownstone. “Their expertise is taking Canadian-developed world-class technology into China, where there’s a big market and hunger for this technology … so, these guys are trying to bridge the gap.

“Let’s say that you are an engineer and you have some unique approach to internet security, and they know that, today, in China, on an industrial level, there’s a huge demand for internet security. If they feel that your technology is suitable for that market, they will offer to do a deal with you, and they are very flexible about how they do that. They may offer you employment in one of their innovation labs or, if you had an existing company and were looking for investors, they would invest in you and help you access that market, or they could represent you on an agency basis.”

According to Brownstone, any Canadian technology looking for a home in the Chinese market can likely be aided by Istuary. He believes that Canada is in a unique position and has an advantage over other countries, due to the quality of its schools for engineering, computer programming and related fields, like clean technology and light sciences.

“There is also very strong R&D support in Canada, both federally and provincially,” said Brownstone. “The government will often match every dollar I invest. There is also a very strong tax-credit program, [and] rebates offered will sometimes offset the big costs of R&D.” As well, he added, Canada is an attractive place for developing technology at the moment with the low Canadian dollar compared to that of the United States.

LucraTech aims to take on a series of projects with each client and create a support team to work with that client, beginning by identifying a starting point and an end point.

“Typically, the companies we start working with are small,” said Brownstone. “They have some customers, they have some revenue, but they are trying to grow to the next level. Maybe you have a company that is doing $300,000 a year in revenue and you want to grow that to $3 million in the next couple of years. We create a road map and a plan that will get you from $300,000 to $3 million, and work with you to achieve that.

“By the time you are at $3 million, you’re probably at a size where you can get and manage the support talent in-house and you can now afford more full-time employees, so maybe we aren’t needed anymore at that level of expertise.”

LucraTech offers other services, as well, such as turnaround, wherein they take on medium-sized companies that, for one reason or another, have encountered some trouble and need help. In this scenario, LucraTech goes in and tries to fix the problem and make the company healthy again. Their typical timeline with clients can be anywhere from one to four years.

“If we believe in a company and the entrepreneur and we can add value to the whole equation, we are very flexible on how we work with companies and usually give them two or three choices. We know we will only get paid if the project goes ahead,” said Brownstone.

“Sometimes, we work just for success fees, where we set out to raise money for a company … sort of a finder’s fee. If we are successful, we get paid. If not, we don’t. Sometimes, we will work for a piece of the business or a small number of shares in the business. We’re really flexible. Once we believe in the concept and the entrepreneur, we will find a way to make it work, whether they have a lot or a little money.”

Rebeca Kuropatwa is a Winnipeg freelance writer.

The Eureka Project, a Winnipeg business incubator is as innovative about its own financing and growth as it teaches future entrepreneurs to be. And, with the leadership of businessman Gary Brownstone, some of its partner companies are seeing returns in the tens of millions.

“The Eureka Project mandate is to help what I like to call ‘passionate creators’ of technology or widgets commercialize their inventions,” Brownstone told the Independent. Clients include scientists, engineers and computer programmers who have developed or are developing some kind of new technology. Typically, clients have little or no business experience, which is where Brownstone and his team come in.

Brownstone gets involved in small, fledgling startups and manages them through the initial growth phase. “Our team has expertise with taking this technology to market: finding customers and helping the founder build companies around technology,” he said.

“There are unique challenges in commercializing technology that make it different from other sectors, involving how to finance an idea, how to finance a company with no fixed assets (no buildings, land or equipment), which Canadian investors or bankers are really used to.”

When Brownstone finished his schooling, he realized he had unique experience in working with companies undergoing rapid growth, growth that could be so extreme that it had the capacity to kill the company. Anticipating the potential in companies on the verge of major growth, Brownstone’s approach was to step in to provide the professional management required to shepherd them through that phase. Once a company had managed to get through that period of growth, Brownstone would exit onto the next one. Brownstone has successfully been doing this for more than 20 years now.

“When I was recruited into this position, I saw the opportunity to do that over and over and over again – to help small companies through that first phase of growth, help get them on some solid footing for the future,” said Brownstone.

About five years ago, he started becoming more aware of how Israelis have successfully built a knowledge-based economy.

Someone gave him the book Start-Up Nation by Dan Senor and Saul Singer, and Brownstone, who had spent a year in Israel after high school some 30 years ago, was confused. “I read the book and I thought, ‘Are you sure it’s Israel they are talking about? Now they are a tech powerhouse?’” he said.

Brownstone has, since that time, made an annual trip to Israel and is still amazed by what he sees. On those trips, Brownstone meets with people in Israel who run incubators like his, those in government, policy makers and academics, as well.

“I definitely have a strong respect for what they have accomplished in Israel,” said Brownstone. “We’ve tried to bring a lot of those practices back here. I’ve gone there with senior government people both from Canada and from Manitoba to sort of open up their eyes to what some of the possibilities are if you take a similar approach.”

Since then, Brownstone has used his understanding and connection to Israel to try and bring what he calls “some best practices and good policy advice” back to Canada.

“Ideas are easy and execution is difficult,” he said. “So, a lot of companies, for a variety of reasons, will not succeed in actually commercializing their technology or not commercializing it to a degree that it’s a viable business.”

When someone comes to the Eureka Project with an idea, Brownstone asks three questions to determine whether or not they would make good clients. First, is the technology real? Second, is the individual (or team) capable? (Do they have enough talent? Are they coachable in terms of their own capabilities/capacity? What are their skill sets and backgrounds?) Third, he assess whether or not there is an identifiable market.

“In our line of work, because of the background of the people coming in the door, that’s the question that they most overlook,” said Brownstone about ensuring that there is an actual market for the product or technology. Many companies “look at the world as ‘technology push’ instead of ‘market pull,’” he explained. “We try to turn that conversation around really early on. If you were to come in the door, we’d go through the three questions and satisfy ourselves that the answers are yes, yes and yes.”

In terms of payment, Brownstone has developed a sliding scale wherein, at the beginning, clients can pay as little as a couple hundred dollars a month. “We really want to remain accessible to those that have the best likelihood of becoming [successful],” he said. “In order to do that, we try to keep our fees as low as possible, so that money isn’t really a barrier for them working with us. So, we offset a lot of the costs of delivering services to our clients, because we build a very strong, broad base of support. We get financial help from the province of Manitoba [and] we get some financial help from the U of M. We’ve built a very broad sponsorship program, so that the corporate community supports us and our clients.”

As the companies gain access to some financing and begin to grow, they hire on staff and gradually start paying more of the real cost as their finances allow. “It kind of puts the pressure on us to deliver what we promise we deliver when they come in the door,” explained Brownstone. “If we are able to help them finance and grow their companies, they should be able to pay us a little bit more for what we do.”

He said, “If someone from Vancouver called me and was looking for space, mentorship and local coaching, I might see if they would like an introduction to someone there who does what

we do, so they could have proximity.” He added, “But the short answer is yes,” to taking on Vancouver clients.

“Success begets success, so as people find out about the things that we do … a company we helped launch five years ago will probably do something in the neighborhood of a hundred million dollars in revenue this year,” said Brownstone. “In Canada, that’s a big deal. People from other regions hear about what we are doing and we find more and more we are getting approached from outside Manitoba. We don’t want to turn anyone away, so we had to find ways to help those people.

“We don’t use Manitoba taxpayer dollars to support other companies, but we do have partners and systems in place where we can deliver those services to other province’s companies.”

He added, “In a couple of instances, we’ve had companies who have relocated to Manitoba in order to work with us. There’s a great ecosystem in Manitoba for these young companies in terms of government grants and tax credits, and organizations like ours that can support them.”

The Eureka Project has developed an extensive network of companies and individuals across the United States, China, Singapore, South America, Mexico and as many as 30 other countries.

Rebeca Kuropatwa is a Winnipeg freelance writer.

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