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the challenge

Armen Bakirtzian is chief executive officer and co-founder of Intellijoint Surgical Inc., based in Waterloo, Ont.Glenn Lowson/The Globe and Mail

Each week, we seek expert advice to help a small or medium-sized business overcome a key issue.

It took less than a year for Armen Bakirtzian and his team at Intellijoint Surgical Inc. to take a first-of-its-kind medical technology and put it in the hands of doctors in about 10 hospitals in the United States.

During this time, the Waterloo, Ont., company has grown to employ about 30 people and is on track to bring in $1-million this year. It recently released a second-generation version of its tool, which improves the accuracy of implant selection and positioning during hip replacement surgery.

"We have made a lot of progress," says Mr. Bakirtzian, who notes that Intellijoint had previously tested its product in five Canadian hospitals, which continue to use the technology. "We received FDA clearance for our second-generation device in September, 2015, and went from zero to 10 hospitals in the U.S. in just a few months." The invention was conceived and developed as part of a university engineering class project.

Since its launch six years ago, Intellijoint has raised money mostly from provincial and federal government programs, as well as Canadian angel investors and venture capital firms. But securing funding has become more difficult as the company advances to the next stage of growth, says Mr. Bakirtzian, whose idea for Intellijoint was inspired by the work of his father, an orthopedic surgeon.

"We've been chasing capital in Canada, but I've found the angels and venture-capital gap widening as we've shifted to the right of the commercialization spectrum," he says. "It's a significant challenge because we need capital to continue to develop and commercialize our product."

Mr. Bakirtzian and his team are looking at funding sources beyond the country's borders. There are a lot of U.S. and international investors interested in Intellijoint, he says, but they're all pushing for the company to move to where the money is.

"They request that the business assets be in their home country and that we hire in their home country," says Mr. Bakirtzian. "But we want to keep our operations in Canada – we're a Canadian company, our families are in Canada, and there's a lot of engineering talent where we are in Waterloo.

"We've lived and breathed this question for the last two years," he says. "We want to be in Canada, but should we move to the U.S. or another country to get the capital we need?"

The Challenge: How can Intellijoint gain access to U.S. and international capital while remaining in Canada?


Brian Hunter, president, NorthSpring Capital Partners Inc., Cambridge, Ont.

I think it would be a mistake for Intellijoint to leave Canada. The SRED (Scientific Research and Experimental Development tax incentive) program is very beneficial for early-stage companies, and they would lose that. A lot of companies in this area come out of the University of Waterloo and have access to its talent pool, so it would be a big detriment as well to lose that.

Intellijoint has to keep expanding the business, adding more hospitals and proving it's a success. They should also consider partnerships with a large medical company. If Intellijoint can attract one, they will pay a lot of money to acquire Intellijoint's technology. Intellijoint should also continue to develop their intellectual property and patent new products because there are a number of other areas they can go into.

Hamid Akbari, assistant professor of strategic management, University of Ontario Institute of Technology, Oshawa, Ont.; CEO and founder, BlancLink

It is typical for smart investors, especially those who write cheques of more than $10-million (U.S.), to want to be close to the businesses they invest in, to monitor their operations and performance. Also, they believe that the presence in the U.S. will help with subsequent fundraising efforts as well as faster revenue growth.

Intellijoint should have a legitimate presence in the United States without losing the benefits of being a Canadian corporation. To do so, it can incorporate a company or register a subsidiary in the U.S. and open an office in the right location. The cost and complexity of having an office in the U.S. is manageable and even negligible if done properly. There can be a simple service agreement between the Canadian and American legal entities, or the American entity can be a fully owned subsidiary of the Canadian corporation. The key is to maintain a significant part of the operation in Canada.

My company is also opening a New York office for the same reason – we are raising another round of funding and some of our investors will be able to help us further grow our sales in the U.S. In our case, we agreed to open our office in New York, instead of Silicon Valley, so that we operate in the same time zone as Toronto.

Greg Levey, CEO and co-founder of the software firm Figure 1 Inc., Toronto

We have several prominent American investors today, but in our early seed round we did encounter this issue. One company literally said they could invest only in the New York area – that's their mandate, and there's really nothing you can do about it. With a couple of other investors, the funding would be "softly conditional" on us moving to the San Francisco Bay area.

Every company is different, and for some it does make sense to move somewhere else. I do think there are a lot of reasons for a business to move to the U.S., but not because your investor insists on it. There's so much money out there and Canada is increasingly attractive to U.S. investors. They're getting much more for their buck here and there's good talent here, so it seems crazy to get a company to relocate to the U.S. just on principle. There's other money out there that doesn't care at all if you stay in Canada.


Explore a partnership with a large medical company

This would give Intellijoint access to significant capital and other resources.

Look into incorporating a company or registering a subsidiary in the U.S.

But if Intellijoint goes this route, it needs to maintain a significant part of its operation in Canada.

Work with foreign investors who are okay with a business based in Canada

There are plenty of U.S. and international investors willing to put their money into Canadian companies.

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Interviews have been edited and condensed.

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