Editorial - 21-11

The recent success of Tissue Regeneration Therapeutics Inc (TRT) is being hailed as an example of the strength of the Toronto region's stem cell research. While such a claim certainly has validity and should be celebrated, the strategy behind the Univ of Toronto spin-off's initial growth and long-term objectives are equally important (see page 6).

Just three years old, TRT has benefited to date from public seed funding and early-stage investment by a small group of investors. That support has allowed the company to begin implementing a development strategy that is largely based on financing growth through revenues.

A US$20-million licensing agreement with an Ohio-based firm gives TRT the freedom to grow without the equity dilution that inevitably accompanies venture capital financing. The company hasn't ruled out VC backing in the future. But development through sales of its core technology for extracting stem cells from umbilical cord tissue means greater value-add and market capitalization.

Early revenue streams also ensure that a company's technology is more closely aligned with the needs of its customer base. While not unprecedented, too few firms take such an approach, instead opting to finance growth through external investment.

VC and other forms of equity financing have a place, but the longer a firm can wait before going that route, the more value that's created for the benefit of its owners and for Canada. Innovation strategies often ignore this aspect of company growth and in the process they miss a fundamental dynamic of wealth creation.