Labcal Inc. takes Root with eye on huge growth
Biometrics firm vies for a secure future. Desjardins Venture Capital injects $2.5 million in Quebec City operation
FRANCOIS SHALOM
The Gazette
Tuesday, April 13, 2004
(Photo sidebar. Picture of their portable unit.)
Pierre Root, president and CEO of Labcal Technologies in Quebec City, displays a biometric device that he hopes will be at the vanguard of a growing but niche market of the security industry.
CREDIT: CLEMENT ALLARD, CP
Labcal Technologies Inc. has had its share of twists and turns since its founding in 1995 - both in management and in orientation.
Founder Carl Boudreault has since left and Labcal even placed itself under bankruptcy protection for a while after China postponed a signed $12-million deal that had already gone into production.
But a couple of events two weeks ago appear to have stabilized things for a spell: Desjardins Venture Capital injected $2.5 million in the Quebec City biometrics and security-system firm, on the same day that Pierre Root was elevated from chief operating officer to president and CEO.
The investment can be called a positioning bet: a widely-held assumption exists that biometrics - a growing but still niche industry that decodes fingerprints, voice, human irises and other unique personal traits - is set to skyrocket in 2006.
"The biometrics industry took its first baby steps a few years ago and September 11 moved it to the front page," Root said.
The metaphor may be mixed, but the trend is inescapable.
In the past three years, industry players have scrambled to define their target products and services and invest in technologies, preparing for that planned explosion. If accurate, Desjardins may have bought itself a front-row seat with its 35-per-cent stake in Labcal, which makes biometrics hardware and software in roughly equal proportions.
Root has only been with the firm since June 2003, but his ascension hasn't been haphazard. After 13 years at Bell Canada, he left in 1997 to establish an information-technology consulting firm. "The entrepreneur virus stung me," he said at Labcal's modernistic offices, with primary-colored Bauhaus leather chairs and mahogany desks.
Despite its former troubles and having a lean staff of 26 employees, Labcal is solidly established in a budding industry that "is now practically a must."
Right after September 2001, talk centred on airport security, port access and protecting landmark and government buildings.
"But businesses are increasingly seeing the need for security," said Root.
Simply put, its "minutiae-based" algorithms recognize eight specific points in the intersection of lines in a hand, correctly identifying the individual's handprint 99,999 times out of 100,000.
Labcal makes the access cards with that biometric data, as well as scanners and sensors that decode handprints or access cards.
It's not solely in biometrics. A large part of its business, current and future, is the PKI (public key infrastructure), like the cards you carry to open a door at your office, a much more common system that identifies you, except without any personal physical characteristics imprinted on the card.
Labcal's clients so far include Canada's central bank and the big chartered ones, federal departments, including national defence, as well as provincial and municipal agencies, Hydro-Québec, BCE Emergis and CGI Group.
It has sold its wares in countries that issue national identity cards, including Malaysia, Indonesia and Middle Eastern countries - and soon, Root hopes, the United States.
"What's going to carry this market will really be the large-scale ID projects ... especially in the U.S."
Various programs, including the infamous ID for visitors to the U.S. may be highly controversial, but will be good for business.
"They generate all sorts of connected programs, like the CAC (common access cards) for all American armed forces personnel - several million cards."
There's the even bigger TWIC (transportation workers identity card) program.
That sweeping project would issue a card to all employees of airports, maritime ports and other employees in the transport sector.
"That's another 15 million cards with biometrics right there," said Root.
But in Canada, where jingoistic hysteria has not reached the proportions it has south of the border, progress is slower, and there are still tough questions being asked about the advisability - and feasibility - of further centralizing private and confidential information in government databases.
Labcal will not overreach, focusing on three of the seven main areas of development for biometrics firms.
"We're going to concentrate on civil ID, physical access systems (like office-tower cards) and PC network access (a device attached to computers that identifies a user's fingerprint)," Root said.
The three are expected to generate $4.5 billion U.S. in sales over the next three years. But Labcal, with 2003 sales of $2.5 million, entertains no illusion about fetching 10 per cent of that pie, or even one per cent, for that matter.
"Our number one strategy is the following: we've been the best-kept secret for years. That's not good. We want to not be that anymore."
To stop flying undetected, Labcal will be networking hard at industry trade shows to find U.S. and European distributors.
Root also emphasize the company's hand-held mobile sensor, which allows an inspector to identify authorized personnel on the spot rather than at a point of entry - like checking IDs for baggage handlers or food-truck drivers on a tarmac.
Labcal has plans afoot to "enlarge" its relationship with Identix Inc. of Minnetonka, Minn., its sometimes-rival-sometimes-partner, depending on the contract. Root also disclosed he's had discussions with his main Canadian competitor, Bioscrypt Inc. of Mississauga, "to see whether two Canadian companies could work better together."
Both are much larger, but Root wouldn't expand on future arrangements.
In the meantime, Labcal is preparing a further $10 million financing for after Desjardins, whose investment will fund the next 18 months.
"There's a lot of cash in the U.S. for companies that need that last push to go all out," Root said.
fshalom@thegazette.canwest.com
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