Tech sector seen getting boost

By Quentin Casey – Telegraph Journal | link to original article

The sale of one of New Brunswick's most celebrated companies is complete. And though Fredericton-based Radian6 is now in American hands, many believe the company's sale will actually invigorate, not diminish, the province's tech sector.

Gerry Pond, who chaired Radian6's board of directors up until the company's multimillion-dollar sale on Monday, says the transaction will release “multiple millions” of dollars into New Brunswick – money he predicts will be reinvested into other emerging startups.

“The buyout releases a considerable amount of capital in New Brunswick. That's money that is staying in New Brunswick,” Pond said in an interview.

Pond, one of Radian6's first financial backers, says the company's angel investors will “recycle” some of their profit into other New Brunswick companies. Similarly, the Canadian venture capital firms that invested in Radian6 will look to invest in other local startups after hitting a “home run” with Radian6.

“That is already starting,” Pond said.

The sale of Radian6 was announced on March 30 and the deal was finalized on Monday. Salesforce.com (NYSE:CRM) – a San Francisco-based tech company – bought Radian6 for $276 million in cash and $50 million in stock. In addition, approximately $10 million in stock and $4 million in cash will be issued to the company founders.

But as Pond notes, the deal will impact more than just angel investors, venture capitalists and the Radian6 founders. For instance, both the federal and provincial governments will receive a piece of the buyout pie through the collection of capital gains tax.

Plus, New Brunswick taxpayers have a $325,000 investment in Radian6 through the New Brunswick Innovation Foundation (NBIF), a provincially funded corporation that invests in research and startup companies.

In the fall of 2006, the NBIF put up $50,000 to help Radian6 in its early days. In 2008, the NBIF pumped $276,000 into the company's expansion.

The sale of Radian6 now means the NBIF will get some return on its investment, though the exact figure has not yet been released. The NBIF has already said the payout will be used to help launch more companies like Radian6.

Trevor Macausland, the executive director of Propel ICT Inc., says the sale of Radian6 is piquing the interest of investors now eager to discover the province's next technology darling. Macausland says he has received numerous emails and phone calls from investors seeking information about the companies within Propel, an incubator of local tech startups.

“The investor community has really started reaching out and asking around in search of the next big thing,” he said in an interview.

“There's a groundswell of people who are really, really excited about the prospects for IT startups in New Brunswick and Atlantic Canada. They're looking to cash in on the Radian6 momentum.”

Macausland, who previously worked at Whitehill Technologies in Moncton, says it was inconceivable – even 10 years ago – to think that a five-year-old Fredericton company could be sold for roughly $400 million. “It's a pretty exciting time to be in the IT industry in New Brunswick.”

For Thomas Hayes, the president and CEO of GrowthWorks Atlantic Ltd., there's only one negative aspect to the Radian6 deal: his investment fund wasn't part of it.

Joking aside, Hayes says the deal is sure to boost investment in local startups.

“It's wonderful when you can point to a Radian6 and say, 'Here's an example where the investors got huge returns,' ” he said. “We need a cadre of people who are prepared to write cheques and help these young companies succeed.”

Last month, the GrowthWorks Atlantic Venture Fund, which comprises Atlantic Canadian shareholders, invested in its fifth New Brunswick company.

The GrowthWorks fund announced $1.35 million for Lymbix Inc., a Moncton-based technology company that is hoping to follow Radian6 along the path to a major exit.

Lymbix was founded in 2009. Its main product is ToneCheck, software that can gauge the emotional tone and sentiment of emails and other text.

“We're always on the lookout for companies we think have leading-edge technology, little competition … a strong management team, reasonable valuation and great prospects to shoot the lights out,” Hayes said after announcing the venture fund's financial support for Lymbix.

Hayes said the Radian6 deal should also help governments realize the technology sector's economic potential.

“We have to do something to change the story here in the region,” he said. “It's not just natural resources that are going to keep us going and growing here.”

Radian6 saw its revenues triple in 2010 as more than 1,000 companies adopted its technology, which allows businesses to track what is being said about them online. Radian6's long client list includes more than half of the Fortune 100, including Dell, Microsoft and PepsiCo.

Radian6 may now be American-owned, but Pond says being a division of Salesforce – an “emerging giant” – will actually help maintain the Fredericton startup's stellar growth.

“Salesforce has a stake in New Brunswick. When you can attract a global startup – with the capital and knowledge they bring – you've got an emerging growth engine in your backyard,” Pond said, noting Radian6 and its employees are expected to remain entrenched in the Maritimes.

“The outcome is that everyone stays here … and it's still managed from New Brunswick.”

And most important, Pond argues the success of Radian6 proves that dynamic, quick-growing companies can sprout from New Brunswick soil. As he notes, Radian6 developed its technology with local talent, was initially supported with New Brunswick capital and had a New Brunswick management team.

“Not only did it come from here, it grew extremely quickly,” he said.

“We can do it from here. Let's get it out of our minds that we can't.”