Growth Times

Karen Mazurkewich, Financial Post, in an interesting article on Monday entitled “The new uber-angels” comparing the VC-fund approaches of Ontario and Quebec, declares on the Ontario Venture Capital Fund that “What Ontario didn’t — or couldn’t — predict was the lack of potential co-investors for these funds.”

Karen, I would invite you and Ontario’s decision-makers to step up your due diligence and review Growth Times’s August 4th, 2009 blog post entitled “Who Will Match Ontario’s $250M Emerging Technologies Matching Fund?”……………..

Really, was it that hard to anticipate? Ontario could have predicted this, but there were political and financial forces at play and incompetence at the top. Let me guess that the persons in charge will actually get rewarded with more assignments and rewards for their mistakes, while the rest of us in the private sector get to work harder to actually make innovation happen.

[Addition to the post following subsequent inputs I received: the setup of the Ontario Venture Capital Fund remains such that Business Angels can barely play. The restrictions pretty much rule it out ($1MM min investment, full net worth disclosure, etc.). They should reduce the barriers for Angels to participate, given they are one of the few true sources of capital these days.]

As a rule, I am starting to realize that the public institutions in this province, and that includes a lot of the nonprofit hubs, are not quite designed to really encourage innovation. Except in rare cases, they are designed to grab taxpayer’s money and redistribute it to their supporters based on loyalty, not performance.

One thing Ontario and Canada really needs to get urgently, is that smart regulation has much more leverage than direct intervention. If Ontario really wants investments, it should work to repel section 116 to get American capital flowing here.

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Canadian entrepreneurs, Fund Due diligence, Financial Post, Financial Services, innovation, Investment, Karen Mazurkewich, Ontario, venture capital

Last month I gave a presentation at the Research Innovation Center in Mississauga, looking at the topics I discussed in my last post, and presenting some implementation of a CRM system, which I did for a client.

The video of this presentation is now available at http://www.youtube.com/user/RICCentre and the slides are here: http://www.riccentre.com/images/Greg_Boutin.pdf 

Canadian entrepreneurs, Market, Scale Angel investor, Customer relationship management, Mississauga, sales process

A great post today by Suzanne Dingwall Williams of Venture Law Associates LLP in Toronto, regarding the recent considerations by the U.S. to increase the number of H1B visas for skilled foreign workers, apparently thanks to a push by venture capitalists.

The stats she quotes are startling: 

“A recently released study by the NVCA notes that (a) immigrants have started more than 25% of U.S. public companies that were formerly venture backed, and (b) more than 50% of the employment generated by U.S. public venture-backed companies has come from immigrant-founded companies like Intel, eBay, Yahoo!, and Sun.

The New York Times has also taken note, citing Harvard Law professor Vivek Wadhwa’s claim that 52.4% of today’s Silicon Valley startups have at least one foreign founder. US VCs are figuring that, to expand domestic deal flow, they need to expand the immigrant entrepreneur base.”

Having lived in six countries including the U.S., I can tell for a fact that the amount of energy I deployed to learn about and obtain the visas and other administrative passes giving me the right to stay and to work is stupendous. In volume, it easily equals the time required to launch the operations of a start-up. This truly is wasted time. If the U.S. had made it easier for me to stay after my years at Stanford, I’d likely be there. I truly love Canada and Toronto is my favorite city in the world – but on a professional level, for tech entrepreneurs the environment is just not comparable to California. So the main advantage of Canada over the U.S., as Suzie points out, is that it is easier to immigrate as a skilled worker here.

But if that advantage diminishes, what’s left to retain immigrant tech entrepreneurs in Canada?

Better public support for start-ups? More grants? Sure, that’s one thing we have over the U.S. But it’s also a double-edged sword: in the previous years and months, the government and semi-public/nonprofit bodies have rapidly enriched their offering to better support the local tissue of tech entrepreneurs. That part is great. But a problem that’s not often raised -no one wants to publicly irk the hands that feed them, I guess- is the increasing institutionalization of venture commercialization actitivities that came with it: internal competition between agencies and “nonprofits” (whose employees clearly profited from this boom) are now leading some of them to expand into the private sector’s realm, for example by offering free market research and consulting services for start-ups. That move even goes against the public service mandate, as those services are generally only available to handpicked “clients”.

Even though it is motivated by a will to better support start-ups, it troubles me that the government and the bodies it supports increasingly choose to nationalize this activity as opposed to supporting the private providers already present. I didn’t leave the most successful communist country in the world – I’m talking of France – to land back in a growingly soviet-like environment, and have to make a living by begging for public grants! Hubs and catalysts are much needed. But it is to complement and promote, not replace, our private entrepreneurial ecosystem.

Sure, there is a lot of good work done hand-in-hand by private, public and publicly subsidized nonprofit organizations here, but when it comes to actual commercialization projects, it’s been my experience again and again that someone with a guaranteed salary and an institutional job simply doesn’t deliver as much value as a private sector provider whose next job depends on the quality of the one at hand. But unfortunately for us, it’s hard to compete with free. ”Free” also creates the wrong culture up north, with start-ups getting used to focusing on the technology and not investing much in commercialization and marketing, which obviously comes back to bite them. The higher valuation Americans place on commercialization activities, in my opinion, is another characteristic of the U.S. entrepreneurial ecosystem that still makes it more compelling than the Canadian one. With higher quotas for H1B visas, it won’t just attract better entrepreneurs , it will also attract better professionals to support those entrepreneurs.

As for VCs in Canada, there are few left, and so companies here are forced to look south or reduce their fundraising expectations and go after angels (who have done a tremendous job filling the gap left by VCs in early stages, but simply don’t have the same financial firepower). Interestingly, the VCs that are left also tend to only provide small amounts and thus really start looking more like angels with extra overheads. Among the Canadian clients I helped this year, and other start-ups I know here that received term sheets from Canadian VCs, not one accepted them. They went for local angels or U.S. VCs. Canadian VCs are stuck in the middle.

Luckily for Canada, U.S. H1Bs are not as compelling as the permanent residence our country is handing over to skilled workers, since they are tied to employment – it’s E visas and green cards the U.S. should make easier for entrepreneurs to obtain (and perhaps they are working on that too, I haven’t checked). But if the great Canadian advantage in facilitating entry and residence of skilled workers goes away, there will be little left here for immigrant entrepreneurs. A Canadian spouse and public healthcare (also something the U.S. may address) as the main reasons for most of them to stay here doesn’t make for great headlines about the state of our entrepreneurial system.

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Canadian entrepreneurs canada, Entrepreneur, h1b, immigration, permanent resident, Silicon Valley, skilled workers, Start Up, tech venture, toronto, US, venture capital, visa

I will soon have another opportunity to test my beta talk on the Divide between Technologists and Business folks, and why that is the number one root cause of tech venture failures (see my slides – torn apart by Slideshare, here!). Communitech has kindly invited me again to speak, this time at their entrepreneur group in Guelph, where I currently reside. It will take place from 6-8pm at SYNNEX Canada Ltd, 107 Woodlawn Rd W.

As a preamble to this talk, I just came across a very interesting blog post, recommended by Guelph’s very own Brydon of start-up Brainpark, arguing for the need to shift from a product development mindset to a customer development approach. I added some comments there too.

I look forward to seeing many Guelphites and having a good chat about this topic. Bring your war stories!

Canadian entrepreneurs canada, divide, entrepreneurship, Guelph, innovation, market development, marketers, product management, start-ups, tech divide, techies, venture

It’s official, the Ontario’s Emerging Technologies Fund (ETF)  is now open for business. This $250-million fund will co-invest into companies in high-growth sectors such as clean technology, life sciences and advanced health technology and digital media and information and communications technology. Co-investments are made along with qualified venture capital funds and other private investors. For more information see http://www.ocgc.gov.on.ca/

I am generally not a fan of public sector intervention in the private sector, but this comes as a positive move in contrast, since the government has wisely decided to let VCs and angels screen investments for the fund money instead of trying to do it itself. And frankly, after distorting the economy through massive subsidies to under-performing foreign car manufacturers, any public money directed towards innovative ventures is welcome. It also comes as somewhat of a relief to the Venture Capital industry in Canada, which is doing much worse than in the U.S. (yes that’s possible, apparently!), and is down to almost nothing according to this report by their association. Not that there was much in the first place!

The main question is whether there will be dollars to match. In other words, this program unlike, say, SR&ED, doesn’t make investments more attractive. It just makes it possible to invest in more companies. Since the VC model is under attack for its supposedly poor returns (with arguments I am still quite skeptical about, but that’s another story), all eyes are turned towards them to see whether they make use of that fund, or it goes primarily to Angel investments. After all, as the book Fool’s Gold asserts (thanks to the National Angel Capital Organization for the link), Angels Finance 27 Times More Start-ups Than VCs, at least in the US.

To ventures who wish to apply for a slice of this pie, my recommendation is to work both on your frontend, i.e. ultra-targeted pitches, b-plans, networking with VCs and Angels, influential advisory board, and your backend: management team, sales process, go-to-market and scaling strategy, monetization, exit. Those are both sides of the same coin, and unfortunately one of them often get neglected. Needless to say, we can help.

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Canadian entrepreneurs, Fund Angel investor, canada, Canadian innovation, emerging technologies fund, Ontario, venture capital

I am glad to report that Canadian Business decided to reprint the main part of a post I wrote in May on this blog, pointing out the weakness of their argument against the Green Energy Act.

It’s not online so I can’t point to it, but you will find it on P8 of the August 17, 2009 issue (they pre-date their magazine), the first comment on the page, entitled “California Dreamin’” (unfortunately this title misleads the reader about the nature of the argument, but let’s not be too picky…)  The fact that they publish a pretty strong critique like this one speaks volume about the willingness of the magazine to show all sides of a story. Kudos to Canadian Business!

Canadian entrepreneurs, Market Canadian Business, cleantech, commercialization incentives, green energy act, innovation incentives, innovation policy, public support, R&D incentives, renewable energy

As previously announced, I was at Communitech last Friday to talk with their Product Management group about the key challenges to launching blockbuster tech products. I decided  to tackle the divide between Techies and Biz types, as this has consistently been one of the main hurdles I saw at the ventures I work with. I was a little worried as at first I expected possible controversies over some of the points I brought up, but to my surprise this resonated well and strongly with most people in the room. About half the room were techies and the other biz types, so the distribution was spread nicely in the middle. There were no punch exchanges, mud fights or even light food fights (or food light fights for that matter).

I posted my presentation on Slideshare, so you can find it below. I had two hours at Communitech so this is quite a long deck of 40 slides. It’s all there. For those who attended, note I revamped quite a bit of it and there are several slides I didn’t show during our discussion. So you  can take a fresh look at it.

Slideshare did a poor job with the graphics so, for example, the cover page I was so proud of is all scrambled. Time permitting, I am available to deliver this presentation at other forums and welcome invitations. Rest assured I have unscrambled slides to present.

Canadian entrepreneurs, Develop blockbusters, business plan, commercialization, consultant, Digital divide, divide, Fundraising links, go-to-market, market hit, marketers, mental models, monetization, Product manager, Revenue model, Science and Technology, techies, venture

I was invited by Communitech in Waterloo to give a talk to their Product Management peer-to-peer group. It will take place next week, on June 26th at 10am. I will test a few themes I have been playing around with, on the topic of launching successful market hits. Here is the blurb, feel free to communicate this widely:

Vampires vs. Werewolves, Pirates vs. Ninjas, Techies vs. Marketers (BETA)

A beta discussion on creating market hits, with Greg Boutin, founder of Growthroute Ventures www.growthroute.com

On my left, mad-science Techies: “One really doesn’t need marketing if the product sells itself. Look at Apple etc.”. On my right: snake-oil Marketers. “It’s all about PR and advertising, not building things in the lab”. A rivalry as ancient as Vampires vs. Werewolves or Pirates vs. Ninjas. Let the fight begin (with Product Managers in the middle?)

Canadian entrepreneurs, Scale angels, blockbusters, canada, communitech, market hits, marketers, product developers, product development, product launch, techies, University of Waterloo, ventures, Waterloo

Canadian Business totally misses the mark in its poorly researched editorial on Ontario’s Green Energy Act and the Emerging Technologies Fund in the June 15 issue.

I support innovative ventures in the cleantech space on a daily basis through my consulting practice at Growthroute Ventures, and I recently co-authored an article entitled “Could Ontario be the Next Germany?” with regard to both the Act and the Fund, published in Renewable Energy World Magazine, the most widely-read magazine on clean energy.

As we all know, Ontario has been pouring money by the billion into the car manufacturing industry and other dinosaurs. It is about time some public support be devoted to innovation in cleantech. The Green Energy Act is modeled after the German incentives, which are recognized in the industry as widely successful. California, which Canadian Business refers to as a great model, has in fact been seriously discussing moving towards the German system. But more importantly, Canadian Business’s assertion that California’s model is significantly different in its support of clean energy — claiming it does so less selectively– is downright incorrect. Among many other examples, the western State pays a premium for 5 years on all solar photovoltaic projects, and offers select incentives to wind and biomass projects. This “winner-picking” approach Canadian Business criticizes is a constant in the energy industry, as a quick look into the huge tax incentives our government is offering for oil sand exploration, or all the public money that has gone into nuclear power R&D, would have told the editor. The support now offered to cleantech is a minuscule fraction of those amounts. If Canadian Business advocates for a leveled field, it should make sure it is looking at the entire field first.

As for the Emerging Technologies Fund, it is again just a drop going to innovation against the ocean of dollars poured into the US car manufacturing black hole. Canadian Business forgets to note that Quebec recently announced the launch of a fund offering over 3 times the amount of Ontario’s fund, and that la Belle Province is increasingly being seen as much more supportive to innovation than Ontario. Dismissing the Ontario’s ETF initiative on the basis that there is little venture capital money to match, and that “most VC-backed investments fail”, demonstrates a serious misunderstanding of how venture capital works. VCs bet that out of 10 investments, nine are going to fail or just get by, and one or two are going to make up in a big way for all the others. The metric that matters here is the investment ROI on the entire fund, not on individual investments. The VC industry raises its money from larger funds, who allocate their investments based on ROI and risk. Until now they had found it quite lucrative to place bets on VC funds.

But Canadian Business argues that VC investments are inherently too risky. Taking the magazine’s logic to its conclusion, it is not advocating against the Ontario fund as such, but against the VC model as a whole, in essence saying that VC investments are bad investments, and that no money should be put into that model. The truth is, the VC model may be under fire, but again, one needs just to take a look at the broader picture to see that is but a flawed assumption: how about the recent financial returns from the securities industry, the car manufacturing industry, or real estate? If we are to invest anywhere, I say putting more money in the hands of VCs (and angels too, by the way) is as good a bet as any. Actually, it is a much better bet.

The VC industry in the US is widely seen as a critical catalyst for the rise of the Silicon Valley. Companies like Google, eBay, Facebook, Cisco Systems and a number of other innovation heavyweights act as vivid proof that the model works. In my daily job, I constantly witness how the quasi-permanent lack of funding for early-stage innovation in Canada stifles growth and highly-qualified employment. I am not arguing against Canadian Business on the importance of letting markets do their magic, and getting out of the way, but at a time when the government is distorting those by throwing money at any moribund dinosaur that can still shout, I say any effort to direct funds to the innovative sector through the existing channels should be encouraged and supported. Certainly, reducing taxes and removing regulatory barriers to all forms of investment is needed (making it easier for US VCs to invest here is a definite need!), but it does not prevent other initiatives that leverage the power of targeted incentive towards sectors of strategic importance for our collective future.

Shame on you, Canadian Business, for popularizing half-baked arguments on the Green Energy and Green Economy Act and Ontario’s Emerging Technologies Fund. You couldn’t serve the purpose of traditional corporate money-grabbers any better, at a time when the job-creating innovative economy is in dire need of your support.

PS. And while I’m on Canadian Business, what is it with its choice for the “25 most influential people in business“? All white male except for one woman! The magazine might want to drink a bit of its own medicine, see their last-page article “Women wanted“, as I doubt there aren’t more females or visible minorities in the top 25…

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Canadian entrepreneurs canada, cleantech, emerging technologies fund, Fundraising links, green energy act, innovation, innovation policy, Ontario, venture capital, ventures

Jacqui Murphy of Tech Capital wrote a fascinating blog post today, listing the top resources any venture in Canada should be aware and possibly take advantage of in this downturn economy. Quote:

1. There is amazing talent on the street right now. Many of these folks have received severance packages and are approaching the job market with “flexibility” in mind. Reach out to these people and engage with them as advisors, employees who are interested in working for equity, and/or potential co-founders/partners.
2. Map your industry ecosystem, identify strategic partners and customers, prioritize them, and use FREE social media tools (LinkedIn, Twitter) to reach out, ask for introductions, and ask for help — shorten your path to market any way you can.
3. Attend the “unconferences” (StartupCamp, BarCamp, DemoCamp, mesh) to meet people like you who are wanting to roll up their sleeves and help others (and themselves) build companies with limited resources. These entrepreneurs are not waiting around for venture capital, they are building in the absence of financing with customers, value propositions, revenue and profits in mind.
4. Look to existing government programs for support. Make sure you are filing for SR&ED Credits and applying for the Ontario Interactive Digital Media Tax Credit. Introduce yourself to your local IRAP and OCE representatives to see if they have any programs you might qualify for.
5. Reach out to MaRS, Communitech, and OCRI and hook in to their Entrepreneur-In-Residence programs. These organizations are very knowledgeable about tools that are available to entrepreneurs and they know how to efficiently access a number of government programs.
6. Check out the Microsoft BizSpark program for free development resources and support.

Tech Capital Partners Blog, Feb 2009

You should read the whole article.

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Canadian entrepreneurs barcamp, communitech, democamp, government programs, irap, Jacqui Murphy, mars discovery district, mesh, oce, sr&ed, talent, tech capital partners