B.C. Technology Companies Tap Challenging but Lucrative U.K. Market

Tuesday, November 22, 2005

Reports of B.C. companies expanding into the United Kingdom once seemed vaguely exotic. Today, significant B.C.-to-U.K. business connections abound, and it's great news for our balance of trade.

According to Britain's U.K. Trade & Investment Agency, Canadian businesses choose the U.K. as their preferred EU investment location.

Canadian companies see the U.K. as an entry point to the European Union market. But it's not simply a question of common language and legal system.

When the British North America Act officially made Canada a country in 1867, it also entrenched the English legal system and many financial practices that persist. The U.K. enjoys an open and diverse society, with a skilled, flexible workforce that's receptive to innovation and technology. Much of this could also be said about British Columbians.

Given London's financial importance, high-growth companies consider admission to trading on the Alternative Investment Market (AIM) of the London Stock Exchange for financing.

The following B.C. companies count on significant U.K. revenues, and each has established operations there.

Since 1998, Victoria-based Carmanah Technologies has supplied thousands of solar-powered lighting and illumination products to U.K. customers for marine, roadway and transit applications.

Burnaby-based Extreme CCTV, a fast-growing maker of night vision surveillance equipment, reportedly does half of its business there.

Vincent Schiralli, president of Vancouver's Intrinsyc Software, says that about a quarter of the company's revenues flow from U.K. sales of its mobile interconnect software.

In 2004, Burnaby's Azure Dynamics introduced its hybrid electric powertrain for London taxis, with test cabs now accumulating miles to validate significant sales volume to London Taxi International. Azure subsequently closed a £5 million private placement in London.

Richmond's MDA Corp. has successfully built a sizable U.K. business unit that helps banks, mortgage lenders and lawyers address the real estate market's background processes. With 60 million U.K. people conducting 1.4 million buy/sell transactions annually, this translates into huge asset flow and market potential.

According to John Geddes, MDA's vice-president of business development, "The British market is open, like our own. The 'old boys network' that may operate in other sectors just doesn't apply in the technology industry."

Geddes confirms that foreigners - even English-speaking - enjoy a bit of an advantage, because they're unburdened with social history or expectations based on language patterns.

"We benefit from the 'exotic' factor. There's no question we gain access at times when a British person wouldn't. We come from afar, so they take our meeting. We're accorded greater courtesies and forgiven for tiny lapses of local protocol. Of course, you must still be well prepared."

For Phil Dubois, CEO of Vancouver-based CityXpress, the U.K. offered an opportunity to broaden the company's reach. Its online programs allow newspapers to combine online and traditional print advertising, resulting in new business models and revenue. After identifying dominant players, the company launched a relationship with one. Then came well-supported trials of one auction product, which led to a later rollout of all CityXpress products with over 20 daily newspapers.

These B.C. companies developed product and launched market momentum here, then built sales and marketing presence in the U.K.

While it can be lucrative to penetrate the U.K. market, it's also stunningly expensive. Startups especially suffer, paying expenses in foreign currency while earning little revenue. Because smart CEOs worry about foreign exchange markets and the stability of political and legal systems, revenues in pounds or euros hold great appeal.

In an uncertain world, the comfort of common language and culture cements collaboration.

Judy Bishop (judy@judybishop.ca) is a long-time corporate and market strategy adviser to technology companies. Her column appears monthly.