This is the second of two stories about Canada’s efforts to compete in the fast-growing global market for ocean robotics and sensor technologies. This story focuses on one Canadian marine technology company taking on multinational giants and finding success. The first story, published on Dec. 8, looked at the impact of investments by Canada’s Ocean Supercluster in this area.
A marine technology company in Newfoundland that started with six employees is now competing against multinationals and winning multi-million-dollar contracts.
The growth of Kraken Robotics, based in St. John’s, has been possible only with the financial investment and support of many federal and provincial government agencies, says Bill Donovan, senior program manager at Kraken.
“Kraken wouldn’t be where we are today without their support,” he said in an interview.
Kraken Robotics has grown to 215 employees in six countries, and is competing in the fast-growing global market for underwater robotic vehicles and sonar-sensor technologies. “We’re competing against much larger international conglomerates that make us look very small with regards to the number of employees or the level of revenues,” Donovan says.
The National Research Council’s Industrial Research Assistance Program, and the Government of Newfoundland and Labrador through multiple programs, have been big supporters since Kraken’s inception in 2012, he says. “They’ve been there to help support in the acquisition of materials, equipment, technical resources," he says.
Kraken has received more than $15 million in funding from government agencies and project funding partners, according to the company’s Q3 report for this year.
One reason for that investment is that the federal government has identified and is supporting 16 Key Industrial Capabilities (KICs), including remotely piloted systems and autonomous technologies, and sonar and acoustic systems. The KICs represent areas of emerging technology with the potential for rapid growth and significant opportunities, established capabilities where Canada is globally competitive, and areas where domestic capacity is essential to national security.
Made-in-Canada technology bested multinational competitors
Kraken Robotics was the first company to receive funding from Canada’s Ocean Supercluster, which invested up to $6.3 million in the Kraken-led $20-million OceanVision project to develop new marine technologies and products for underwater robotics data acquisition and analytics.
Federal and provincial support for OceanVision allowed Kraken to hire more than 40 highly qualified personnel within two years, according to Donovan.
That led directly to Kraken designing, building and testing its patented “KATFISH” technology and “Autonomous Launch and Recovery System.” KATFISH is a high-speed, towed underwater vehicle equipped with the company’s high-resolution sonar. “We’ve put our synthetic aperture sonar up against leading competitors and we’ve won,” Donovan says.
In the fall of 2020, Kraken was awarded a $36-million contract with the Royal Danish Navy to supply its KATFISH system to upgrade the navy’s mine-hunting capabilities. The Canadian firm bested three multinational giants in the competitive bid process: Northrup Grumman, Thales DMS France and Klein Marine Systems.
Based on the performance of its KATFISH system, Kraken then landed a sole-source contract with the Polish Navy to supply mine-hunting systems.
All told, government investments in the OceanVision project led directly to Kraken securing nearly $50 million in international commercial contracts, Donovan says.
Kraken also has worked with and been supported by Defence Research and Development Canada, Innovation, Science and Economic Development, Public Works and Government Services Canada, Global Affairs Canada and Export Development Canada.
Company faces challenges with U.S. market, supply chain
Kraken faces challenges that are both unique to the ocean technology sector and typical of mid-sized Canadian companies competing globally during the COVID-19 pandemic.
For example, the U.S. Navy — one of the largest and biggest-spending navies in the world — is a potential customer for Kraken’s products. “But as a Canadian company, there are a number of challenges in trying to sell to the U.S. Navy,” including the Biden administration’s “Buy American” policy, Donovan says.
Competing on an international scale is a challenge in itself for a mid-sized company with no large cash revenues, given the costs of growing a business, he says.
The pandemic has “killed the supply chain,” which is hitting Canadian SMEs very hard, Donovan says. Integrated circuit boards, which Kraken could obtain within 60 days pre-COVID, are now almost impossible to get without a six- to nine-month lead time, he adds.
Kraken does much of its manufacturing and production of tech platforms in-house, so it needs to build inventory of electronic components and other parts.
The pandemic has also prevented Kraken from attending international trade shows and doing in-person demonstrations of robotic platforms, a key part of the company’s sales process.
Kraken is traded on the Toronto Venture Stock Exchange, which ranked the company in its “Top 50” list in 2020 and 2019 (when Kraken placed No. 1 in the technology category).
Donovan says the company and its board of directors are surprised but puzzled that Kraken’s share price hasn’t increased over the last year, despite winning sizeable contracts. “I can’t fully explain why that has been happening,” he says.
While the company has yet to turn a profit, its revenues are forecasted to grow to $28 million to 30 million in 2021, up from $12 million last year.
This July, Kraken acquired PanGeo Subsea, a private Canadian services company specializing in high-resolution 3E acoustic imaging of the sub-seabed. The acquisition will give Kraken recurring revenues from providing imaging services to the offshore oil and gas, offshore wind energy, marine science and other sectors, Donovan says.
Kraken also plans to introduce two new autonomous underwater vehicles (AUV) in 2022 and is in the design and development stage for a third. “By the time we get into early 2023, we’ll have a full suite of underwater robotics that will be capable of collecting seabed and sub-sea images at depths of 10 metres to 6,000 metres,” Donovan says.
As for Kraken's share price, the company views it as a short-term situation that will correct itself as investors realize the value of its intellectual property in Canada, Donovan says.
"We're confident it will not only rebound, it will exceed expectations in the very near future."