Dartmouth scanners suit investor
The Chronicle Herald
By CHRIS LAMBIE Business Editor
Body scanners that aim to ensure the perfect fit have attracted a $30-million investment for a Dartmouth outfit.
Northwater Capital Management Inc.’s Intellectual Property Fund is putting the money into Unique Solutions Design Ltd. The cash infusion will allow Unique Solutions to open more than 300 of its scanning kiosks across North America by the end of 2013.
"What they’ve come up with is really breakthrough technology," David Patterson, Northwater Capital’s chief executive officer, said Wednesday in a telephone interview from Toronto.
"This is significantly going to alter the way that shopping happens in the American market and we’re very excited about being part of it."
He would only say the investment gives Northwater "a significant stake" in Unique Solutions.
"This is a real surprise to us to find this kind of breakthrough technology coming out of Nova Scotia," Patterson said. "That’s a major coup for (Unique Solution founder and president Tanya Shaw) and the others that have gotten it this far. . . . Halifax is not Silicon Valley. And yet here we have a major firm where major mall owners in the U.S. are lining up to have technology that’s being sold from Halifax."
Northwater doesn’t have any other investments in this province.
"If there are other great deals coming out of Nova Scotia, we’ll be looking at them," Patterson said.
Shaw also declined to say what stake in Unique Solutions the $30 million will give Northwater.
"It’s not a controlling interest but it’s certainly a significant interest," she said.
Unique Solutions, which started working on its scanning technology in 1998, isn’t turning a profit now. But Shaw said it has in the past and she predicted it will again in the "very near" future.
"The market is now ready for what we’ve been building," she said.
Her new backer agrees.
"Certainly within a couple of years we should be making money on this," Patterson said. "This is one that will move very quickly and we’re really delighted to be a major part of it."
The deal with Northwater closed at the end of June, Shaw said. The first tranche of the $30-million investment came in June. The rest is expected within a year.
The Toronto investment firm, which also has offices in New York and Chicago, heard about Unique Solutions through a California resident who was once affiliated with Northwater and had connections to Nova Scotia, Shaw said.
The first talks with Northwater took place in late February.
"They had approached us in terms of wanting to have an initial chat and, indeed, it was a very good fit on both sides," she said.
"It was a circuitous route," said Patterson.
He, like Shaw, wouldn’t name the man who initially suggested the two companies connect.
Unique has a small office in California and it is opening a sales office in New York City aimed at brands that might participate in the kiosks.
"It’s free to the consumer," Shaw said. "The brands pay when their recommendation’s shown."
Brands including Levis, The Gap, Talbots, DKNY, Paige Premium Denim and Old Navy have already signed on to the service.
"They pay a per transaction fee for each recommendation that comes up," she said. "It might range, as an example, between 35 cents and a dollar per recommendation."
Unique Solutions, which has deployed mobile scanners across the United States for the past few years, installed its first permanent machine at the King of Prussia Mall in Philadelphia last September.
The scanners provide a service to men and women and use "very, very low power and very safe" radio waves to give people recommendations about what will fit them in specific stores, Shaw said.
It takes 10 to 20 seconds to scan a person and people can keep their clothing on during the process, which isn’t true for similar offerings from competitors.
"The brands are seeing a significantly higher conversion rate," Shaw said. "So if 10 people go into the store, normally 2.5 would purchase. They’re seeing, some brands, five out of 10 people, and some brands as high as nine out of 10 people purchasing."
The scanners are "extremely popular" with shoppers, Shaw said.
"Customers, they’re loving it and the ones that don’t have it in their city, we get . . . emails looking for it to move to their city."
The company plans to roll out about 45 scanners this fall in U.S. cities including Atlanta, Dallas, Chicago, Boston and Phoenix.
"The majority of them will be in the U.S.," Shaw said. "We’re just evaluating where in Canada we may have strategic locations."
Northwater Capital controls three funds valued at a total of about $500 million, Patterson said.
It was a "significant funder" of a small Toronto firm called i41 that won a massive legal battle last month against Microsoft Corp. when the U.S. Supreme Court upheld a record $290-million jury verdict against the software giant for infringing on the Canadian company’s patent.
Northwater also invested in a Chicago company called Textura that revamped the way construction workers are paid.
"It’s a breakthrough technology also, but in a different field," Patterson said.
Components of the Unique Solutions scanner are made in Philadelphia and China, Shaw said. The Dartmouth company, where the scanners are put together, now has 32 employees. It plans to hire 11 more people here.
Shaw and Unique Solutions figured prominently in a New York Times feature over the Easter weekend on the problem of inconsistent sizing in the clothing industry. She also talked about her company’s 3-D body-scanning technology earlier this year on Good Morning America. That’s led to spots on CNN and a story in People magazine.
"To be capitalized properly with the media timing is perfect," Shaw said.
Nova Scotia Business Inc. the province’s business lending arm, has invested about $5.6 million in Unique Solutions. Private investors have also injected "far in excess" of what NSBI put into the company, though Shaw wouldn’t divulge the total.
"It’s great that they got it far enough along that a more commercial investor like ourselves could come in and move it along a little further," Patterson said.
Nova Scotians can visit Unique Solutions head office at 133 Troop Ave. in Burnside Park once a week to try the scanner.
"It’s kind of by appointment or chance," Shaw said. "They can pop in on Thursdays between 9 a.m. and 6 p.m."
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