Picking Winners, Capital Pool Corps Update,
and Coming Events
Picking Winners
This past week has been a very
interesting and refreshing one for me. I've participated in several events with
a common theme: Entrepreneurship.
It started last Thursday
with NewVenturesBC and ended last night with the Ernst & Young
Entrepreneur of the Year Gala. In between, I attended the Investment
Forum's "Venture All-Stars" gathering on Safeco Field in Seattle,
which for the first time, featured not only Seattle's HOT 25 companies, but also
Vancouver's HOT 5. On the following day, the Vancouver Enterprise Forum's
angel network has held its first meeting of the season and later the same day,
the BC Advanced Systems Institute celebrated its first 15 years attended
by dozens of tech entrepreneurs.
In these "gloomy"
times, it's so wonderfully uplifting to see so much action on the
entrepreneurial front. Isn't it time we stopped crying in our soup and got on
with business? Well, that's what these events were all about. (The only problem
is that it's hard to get any work done with all these events taking place!)
I've spent my entire
business career, starting with my own University of Waterloo spin-off company
back in the early 70's (gosh, it doesn't seem that long ago),
working with start-up business ventures. I've watched the progress of literally
hundreds of companies as they evolved into successful enterprises or, in the
worst case, end up being valuable and sometimes expensive learning experiences
for the founders and backers.
You'd think that with this rich lifetime
exposure to so many diverse business ventures, I've been able to draw a few
conclusions. And, indeed I have. We all have our definitions of entrepreneurship
and our theories about what it takes to build a successful company. Here's my
take on it.
How can you identify those that are going to do
well? My most favorite example is Waterloo's well-known Research In Motion
(TSE:RIM). Back in 1987, when I lived in Waterloo, I visited RIM, a fresh young
venture struggling to meet its modest payroll. I agreed to invest $30K (and some
time) for a 15% equity stake. Today, the company is well known for its cute
little Blackberry (TM) wireless email product. Back then, the company was doing
something entirely different - it was developing shop floor automation systems
and later developed a film editing product. Both are far cries from its business
today.
So why was I keen on getting involved in this
company that no one else was interested in? There was
"something" about the entrepreneur, Mike Lazaridis, that told
me he'd be successful. At one point, his stake in the company was worth over $1
billion (mine would've been about half that). To my chagrin, I moved to B.C. in
'88 to head up the B.C. Advanced Systems Institute and severed my connection to
RIM. At the time, the company got a small contract from GM enabling it to meet
payroll and it could survive on its own for the time being - without any
investment from me. You can imagine my surprise when, many years later, I heard
about it again when it surfaced with its IPO on the TSE. Although it was the
fish that got away, I pride myself in having been able to identify it as a
winner way back then.
I'm certain that if RIM was just getting
started today, it would be perceived no differently than the many companies that
make the rounds in pursuit of investors and mentors. I often wonder when I see a
company presentation if this is another RIM in the making. My conclusion is that
the "something" I referred to above is a subtlety which is very
difficult to identify. Sometimes it appears to be there only to evaporate under
adverse conditions. And that's the crux of the matter: it often takes a
challenge and some adversity before you really know if it's there or not.
So what is "it"? Articulating it
isn't easy. Tenacity, perspicacity and commitment are characteristics which are
frequently cited entrepreneurial habits. A strong work ethic, intelligence, and
leadership are good entrepreneurial assets, too. "It" is more than
these.
I often hear students say: "I want to be
an entrepreneur. Is this something I can learn or do I have to be born with
it?". Here in B.C., there are many initiatives (e.g. NewVenturesBC, AceTech)
emanating from many sources which offer boot-camp style courses to teach
business skills. These are all helpful. But even bright people who have absorbed
all this knowledge, foster good habits and work hard often see their companies
tank.
Sometimes those that have "failed"
bounce back and score big on a second or third try. Does that mean that they
didn't have "it" at first and have somehow acquired "it"
after their euphemistically-called learning experience? Or, was "it"
always there and their apparent "failure" just a part of their own
personal development? I've seen many successful first-time entrepreneurs (very
attractive to investors) stumble in their second shot at glory. When do you - as
an investor - jump in? On the first one? Or the second?
What about companies that have had several
entrepreneurs? What's the difference between a startup or small business
entrepreneur versus a corporate builder who takes a small cap company and
transforms it into a large cap one (how about one that can successfully downsize
a large company - as we're seeing in these times - and see it survive a
downturn?). Again, in which ones and when) do we invest?
I've come to the conclusion that neither I, nor
anyone else, can tell you what "it" is. What I can tell you is that
"it" is "knowing". There are some so-called entrepreneurs
that I meet and I just "know" that they'll do well. There are many
that I'm just not sure about but there are those rare few that I just
"know" will do well - perhaps not with their first business plan, or
maybe not even their second. But, succeed they will. You can only know this if
the entrepreneur knows it, too. Some think it, but few know it.
For me, I know it when I can identify within
the entrepreneur (perhaps this is the part that is innate - not learned) the
conviction that, short of death, nothing can be used as an excuse for not
achieving one's goals. As soon as the CEO-entrepreneur says things like "we
missed our target because our suppliers let us down", "we didn't get
the capital we needed", "I couldn't find the right people", or
recently, "the WTC tragedy is to blame for our problems", then I know
for sure that this is not an entrepreneur that I'd invest in. They just don't
have "it".
That's it for Mike's theory. Now let's look at
some of the local good news that's got me excited.
First of all, getting back to the NewVenturesBC
announcement, here's the headline:
AIR GAMES WIRELESS INC.
WINS GRAND PRIZE IN FIRST ANNUAL NEW VENTURES BC COMPETITION - Exceptional
ideas and depth of leadership make judges’ decision difficult; all
participants winners as more than $125,000 in cash and prizes awarded. Here's an
extract from the news release:
"The competition was
intense and the quality of ideas exceptional at the first annual New Ventures BC
Venture Competition. From an original field of more than 170 entries, New
Ventures BC is pleased to announce that the $50,000 Bank of Montreal
Grand Prize Package has been awarded to the Air Games Wireless Inc. team of
Vancouver. Three Second Place prize packages valued at $15,000 each were awarded
to Fundamental Designs Inc. of Port Coquitlam, Clearigo Inc. of
Vancouver, and WearAir Oxygen Inc. of Kelowna."
"More than $125,000 in
cash and prizes was awarded to participants throughout the four stages of the
competition, making it what is believed to be North America’s largest Venture
Plan competition."
"Grand prize winner Air
Games Wireless, a Vancouver-based wireless entertainment software and services
provider, was founded in early 2000 by three Simon Fraser University Engineering
students. In addition to designing and publishing creative wireless
entertainment content, Air Games has developed a proprietary Cloud-9 wireless
content deployment platform, which facilitates rapid wireless content
deployment, integration, and administration. To date, the company has licensed
its platform and products to leading telecom companies in North America and
Europe."
Going back to my theory, I've
met these guys and I just know that Fred Ghahramani will be successful
because he "knows" it.
AirGames, along with four other
B.C. companies - Xantrex Technology Inc., fSONA Communications Corp., WestBay
Semiconductor Inc., and NeroMed Technologies Inc. were recognized at
Seattle's Investment Forum this past Monday as the HOT FIVE from
Vancouver. See www.theventuremap.com
for more details.
Last night, Ernst &
Young recognized 12 B.C. entrepreneurs in 8 categories at the 8th Annual
Entrepreneur of the Awards Gala. You can read all about this in BC Business
Magazine, but here's the list:
Peter Brown, Canaccord
Capital Corporation
Bill Hunter, Angiotech
Pharmaceuticals (TSE:ANP)
Douglas Manning, Bridges.com
Scott Morison &
Richard Jaffray, Cactus Club
Restaurants
Ron Somers, C. Esther
De Wolde & Wayne Nelson, Phantom
Screens
Norm Francis,
Pivotal Corporation (NASDAQ:PVTL)
Jeff Westeinde &
Doug Wynn, Quantum Environmental Group
Ian Wilkinson, Radical
Entertainment
Joe Segal, Lifetime
Achievement Award
Of these, Peter Brown was
chosen as the overall winner - BC's Entrepreneur of the Year. For
more info, visit www.eoy.ca.
As you can see, there's a nice
blend of tech and non-tech businesses represented here. Later this month (Oct
29th), the Science Council of B.C. will be holding its annual awards
banquet at which it will be honoring various achievers. Although not necessarily
entrepreneurial in the business sense, I believe that many of the Science
Council's award winners are also true entrepreneurs (who says entrepreneurship
just means making money?) in terms of the value they have created for society
and my conviction that they, too, "know" that they control their
destinies.
Capital Pool Corporation
(CPC) Update
In this column, I
keep track of Capital Pool Corporation ("CPC") companies (see
chart below) as defined by the CDNX because they may provide funding and
management to, and in the process acquire, technology companies. They provide
companies with an alternative to traditional venture capital financing. CPCs are
the continuation of the former VCP and JCP programs on the Vancouver (VSE) and
Alberta Stock Exchanges.
Since the program
was launched in B.C., more than 250 CPCs have been formed and more than 30 have
completed their so-called Qualifying Transactions (QT). It takes at least a year
- usually longer - for a CPC to find a suitable takeover candidate and another
six months to a year for a deal to be finalized. One way to expedite the
process is to eliminate the need for a special shareholders meeting to approve
the deals - leave it up to the CPC boards.
The new additions to the list are Appulse
Corporation, Fiberoptic One Inc., Greystone Research Corp., Javelin Capital
Corp., New Market Ventures Inc., and Soficap Acquisitions Inc.
Appulse and Greystone are from Alberta. Fiberoptic One
and Soficap are from Quebec. Javelin and New Market are from B.C.
Since the previous update, the following companies have
come to trade: Nova Canada Enterprises Ltd. and Stepstone Enterprises
Ltd.
Since the previous update, the following companies have
been removed from the list because they have completed their QT's: FiberQuest
Networks Corp., Goose River Capital Inc., Modus Energy Industries Ltd., QDM
Ventures Ltd., QIS Ventures Inc. and Semco Technologies Inc.
Check our Capital
Pool Corporation chart (in .pdf format) for a complete list of the CDNX's
CPC and VCP companies, thanks to David Ing of Pacific International
Securities. This list is updated on a monthly basis. The Chart is now
current to September 28, 2001.
An introductory
article explaining CPCs may be found at http://www.bctechnology.com
Coming Up
At its Fall kick-off session,
the Vancouver Enterprise Forum featured early stage venture financing.
The speakers - three entrepreneurs, two of which have become angel investors,
presented their views on the local startup investment climate. I had the
privilege of grilling them a little. The importance of, and the how-to's of,
finding an angel was clearly articulated. These presentations can be found at
www.vef.org. The next event will be held on Oct
23rd and the topic will be the Fuel Cell Industry and business opportunities
therein. The following companies will make presentations: Cellex, QuestAir,
and GreenLight.
In early November (Nov 4-6), the Softworld 2001
conference will take place in Vancouver. This is the best place for Software
execs to meet potential partners drawn from business executives from all over
the world including leading companies like Cisco, Sun, Adobe,
BSQUARE, Electronic Arts, Macromedia, Intel and Nortel.
They are coming to listen to, and learn from, the partnering war stories,best
practices and elevator pitches. And they are coming to do business. Register now
for Softworld 2001 at: http://www.softworld.org/cfm/regpro.cfm
And, as mentioned above, the Science Council of
B.C. will hold its annual awards banquet on October 29th. See www.scbc.org
for info. This event is usually a total sell-out.
A complete calendar of
technology events can be found on T-Net's
Events page.
Footnotes
After investing in Nortel,
I took to heavy drinking. It was pointed out to me that a $1000 investment in
Nortel last year is now worth $49. But, a $1000 "investment" in beer
(the beverage, not beer company shares) will return $79 when I take the empty
cans to the store!
Can you believe that
Switzerland's pride and joy - SwissAir is going bust? And, that cannot be
blamed on the WTC tragedy. Here at home, Air Canada can now be acquired
for pocket change - only a quarter of a mill or so and you can buy the company
on the market. WestJet, on the other hand, the entrepreneurial upstart,
has a market cap four times that of Air Canada's.
In this column two weeks ago, I
mentioned that it probably won't take long until a "get binLaden" game
hits the market. Well, it sure didn't take long for that prediction to come
true. Check http://www.fieler.com/terror/
for a preview!
The launch of at least one new
venture-cap index created by Standard & Poor's is planned for
December. To spark investor interest, CDNX officials have said they would
like to see an exchange-traded fund (ETF) based on a new junior-market index.
Ironically, the junior, small cap CDNX market is the only one that's performed
reasonably well over the past year or two. The plan is to replace the existing
CDNX market index on Dec. 10, to coincide with the proposed date for shifting
CDNX trading onto the TSE trading engine.
The existing Canadian Venture
Exchange index isn't adjusted for the market caps of its included companies.
This has drawn criticism because the price movement of tiny stocks has a
disproportionate effect on the index performance. In addition, the biggest CDNX
companies tend to leave for larger exchanges, creating unusual index turnover.
I like this idea. It'll give
investors a chance to play the junior market without having to pick specific
winners.
SFU's TIME Centre
is open for business - business folks, that is. TIME is an acronym for
Technology, Innovation, Management, and Entrepreneurship. TIME supports the
growth and development of the tech industry in B.C. TIME features a
"Business Centre" (looks like an airport business lounge) which is
open to technology entrepreneurs and business people to use as a drop-in
downtown office facility. Need to plug-in? Make some calls? Do some work? Hold a
meeting? Why hang out at MacDonald's when you can work productively at the TIME
Centre? Drop by and check it out! It is located at SFU's downtown Harbour Centre
campus at 515 West Hastings St. More information can be found at www.sfu.ca/time.
PS - there are some great facilities for holding your company meetings.
For a convenient printable, pdf version of this
column, click
here.
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