AWARD SPOTLIGHT: Novacap Management Winner Of 2019 Private Capital Regional Impact Award For Onstream
Photo: Hans Knapp, Partner, Yaletown Partners and Chair of 2019 CVCA Awards Commitee
Impactful Corporate Sustainability
Few Canadian companies in the oil and gas industry can say that 2015 and 2016 were years of growth and expansion, in the midst of a severe economic recession. The Calgary-based pipeline inspection company Onstream is one of them.
Owner-operators Gerry Wilkinson and Chad Niehaus founded Onstream in May 2005, after identifying an opportunity to improve the technology used on small diameter pipeline inspection tools. They were able to combine two technologies into one tool, thus improving the efficiency and effectiveness of the inspection process. In April 2007, after nearly two years of development and testing, they completed their first live inspection of an operating pipeline.
In 2015, Onstream was looking to partner with the right partner in order to scale. Wilkinson and Niehaus were initially considering more local investors when they discovered Novacap, a private equity firm with offices in Montreal and Toronto. Novacap had previously invested in a company called Creaform, which offered the pipecheck scanner that Onstream was using.
At the time, Novacap was in the process of tremendous growth itself, having twice doubled its Technology, Media and Telecommunications (TMT) funds raised in the past decade from CAD $180M in 2007 to CAD $840M in 2017.
Novacap Partner David Lewin has grown with the business since starting as an intern in 2010 and recalls how interested his team was in a potential deal with Onstream.
“The opportunity had a lot of interesting attributes. Onstream showed resiliency in a down-market, they were growing wallet share under their existing customer base, investing in technology and developing a multitude of new tools and solutions. They were also very profitable.”
While Novacap understood the technology behind Onstream’s business, it would be their first investment in that specific niche vertical. Knowing that the success of Onstream had been spearheaded by Wilkinson and Niehaus, it was paramount that the owner-operators wanted to maintain a meaningful stake.
With the help of Novacap, Onstream opened up its first US-based office in Houston, TX in March of 2016, generating its first USD project in May of that year.
“Novacap helped Onstream transition from the small, western Canada-focused inspection company we were to the North American service provider we are today,” said Wilkinson.
“They let us run the company as we had, successfully, prior to Novacap’s involvement. They assisted us greatly in growth strategy and finance and encouraged us to invest in our technology group. Now we’re breaking new ground in the industry using artificial intelligence.”
The deal was one of two recognized by the CVCA with a 2019 Regional Impact Award. Novacap and Onstream won for Western Canada and the New Brunswick Innovation Foundation (NBIF) and Computational Fluid Dynamics (CFD) technology company Envenio won for Atlantic Canada. This award recognizes member firms whose investment has positioned their portfolio company to make a meaningful mark within the community and the broader business ecosystem. Winners are committed to making impactful investments to help fuel job creation, diversity of talent and community engagement.
From 2014 to 2016, while Alberta was in the middle of one of the most severe recessions it has ever faced, Onstream was expanding so quickly, it was outgrowing its facilities.
“We closed the deal in 2015 with 46 Onstream employees,” said Lewin. “A year later, amid the energy crisis, we were a little over 80. A year after that, while the industry was very slowly picking up, Onstream reached 100 employees, and the headcount was close to 120 by the time we exited. All of this growth was organic.”
Since 2015, Onstream has created 76 jobs in Western Canada. Beyond the benefit of being employed during a recession, many employees also profited from the company’s growth as shareholders. At the time of the deal, the extended management team had the opportunity to invest in equity and collectively they invested just under C $1M. One year after the deal was done, the equity was paid for and they ultimately made a profit of approximately six-times what they had invested.
As Onstream has grown, corporate social responsibility has become engrained in its culture. The team is involved with several community initiatives annually, including the Spina Bifida Association as well as Generations of Hope, an organization that supports families needing Assisted Reproductive Technology.
On a larger scale, Onstream’s work is positively impacting the environment as well. The company’s pipeline inspection service ensures that infrastructure is safe. Proactively identifying and addressing risks protects the community as well as the environment from the potentially dangerous and disastrous consequences of pipeline defects.
“More and more companies want to be good, proactive corporate citizens,” said Lewin. From an environmental perspective, Onstream is making the industry cleaner and safer by helping regulators monitor market participants.”
Involvement with companies that are making a positive impact on the community is important to Novacap. “There are situations where transactions that come across our desk make a lot of economic sense, but we’d rather pass because they’re not aligned with our guiding principles,” Lewin said. “The Onstream team has a great set of values and is contributing to make the world a cleaner place. They’re very deserving of this award.”