Two contrasting views on exit strategies

Matt Inglot went to the Infusion Angels seminar -- I assume the one organized by the Entrepreneurs' Association on Wednesday in Waterloo -- and has written a very good summary of the talk. I wasn't there, but I had lunch with the Infusion guys in March and ran into them again on Thursday during the official opening of the Accelerator Centre. Infusion Angels is a new division of Infusion Development, a company based in New York and Toronto that is filled with UW grads and is now coming back to the area in hopes of funding the launch of a few startups a year here.

Matt says the Infusion presentation emphasized that the number one point that a VC wants to see covered in a pitch is exit strategy.

Which is interesting, and a little ironic, given what was said the day before the Infusion talk -- on Tuesday -- at a presentation hosted by WatStart by Derek Smyth, partner at Toronto-based VC EdgeStone Capital Partners.

Derek, who was a successful tech entrepreneur before becoming a VC, said that exit strategies are over-emphasized in business plans, and that when he and his partners make their case internally to invest in a company, exit strategy is a small consideration -- perhaps comprising a few sentences in the document they prepare for the other partners.

I won't pit the two comments against each other -- maybe if I had been at the Infusion talk and heard everything in context I would have interpreted it differently than Matt did (or not) -- but exit strategy is certainly not the main point you have to communicate to a VC. Market need, business model, and scalability all trump exit strategy by a wide margin.

Not that exit is immaterial -- I can think of one business plan I wrote where I thought the section on exit strategy was quite compelling. There were a couple of multinational companies that were snapping up -- by the dozens each year -- smaller companies in the market space being targetted by the company I was working with. I certainly made sure that this was outlined in the plan, and probably gave myself a virtual high-five when it was done. Unfortunately, this company had what may have been the most convoluted business model I've ever seen (despite my efforts to get them to change it) and the greatest potential exit strategy in the world can't overcome a business model where you can't figure out how anyone is going to make money.

In most cases, I wouldn't spend a lot of time at a seed stage worrying about exit strategy. It's good to present some plausible possibilities -- companies that you think might acquire you, and why. But it's not going to be the biggest hurdle you'll have to clear.

(Thanks to Ken Dyck for the link to Matt's blog.)

Life after SCOTUS eBay ruling for "patent trolls"

My next column in Rex magazine -- coming out later this month -- is about patents and the RIM-NTP battle that became the most widely covered Waterloo Region business news story of all-time.

RIM's patent misfortunes have helped stir up an angry rabble demanding that something be done about patent trolls. Nobody knows exactly what a patent troll is -- from context, the only definition I can infer in many cases is "someone who holds a patent that we don't think should be enforced" -- but these days they seem to be ranked somewhere near steroid-using athletes on the most-despised list.

They're so hated that many wishful-thinking folks were eager to interpret a U.S. Supreme Court ruling earlier this week as a slam-dunk victory over the trolls. "Supreme Court buries patent trolls," proclaimed a Forbes headline.

Whatever patent trolls are, I'm sure they weren't pleased by the court's decision, but don't be fooled by reports of their interment.

The specific case that the Supreme Court heard was between eBay and MercExchange, largely over the buy-it-now button that eBay uses and MercExchange (and the U.S. Patent and Trademark Office) says it has patented.

Following the ruling, eBay is still on the hook for infringing on the MercExchange patents, it's still facing the uncertainty of whether a judge will impose an injunction, and it still has to pay MercExchange the full award previously determined by the courts -- tens of millions of dollars -- plus ongoing royalties. About the only thing that changed is that the likelihood of an injunction being ordered is now less than near-certainty. How much less? We don't know.

Four of the nine justices attached their names to an opinion that was sensitive to the issue of patent trolls and seemed to imply that entities that "use patents not as a basis for producing and selling goods but, instead, primarily for obtaining licensing fees" may be less entitled to an injunction than other patent holders.

The problem is, if that's their definition of a troll, then many university professors and individual inventors would have to be placed in that category. And it's a surprising definition because Supreme Court justices would have to know that holding a patent on an innovation doesn't entitle you to manufacture and sell it. For example, implementing your patent may require other patents which you do not own. If you can't license them, then you won't be able to manufacture products that incorporate your patent.

While it may seem preposterous that a non-operational entity like NTP can threaten the business of a multibillion-dollar corporation like RIM in its biggest market, I suspect that reforms that try to target trolls directly will fail.

Despite all the analysis and commentary that's been published on patent reform, no one has come up with a proposal that would clearly be an improvement on the current system. As bad as things seem to be now, they could be even worse under some of the reforms that have been suggested.

Getting more by giving up more

Rick Segal mentions the odious practice of some VCs to insist on participating preferred shares when they make an investment. As he explains, it can drive a wedge between the interests of investors and entrepreneurs, and leave company founders with little financial motivation to make a company successful (unless it can be a home run on a Barry Bonds scale).

As a VC, Rick says he will typically ask for non-participating preferred shares, which are much more reasonable. Tech Capital Partners in Waterloo goes a step further and will make an investment in exchange for common shares. There aren't many VCs who will do that, but for an entrepreneur it is usually ideal. You and your VC both own the exact same stock and will share the same reward down the road.

What this usually means is that you will have to give up a bigger piece of the company -- or at least, what seems today to be a bigger piece. That's why Tech Capital usually wants 50% of a company when making an initial investment. It sounds like a lot, especially if you have other offers that apparently ask for a much smaller percentage. But the important number isn't how much you're giving up now, but how much you'll get in the future.

Founders generally have an aversion to giving up a lot of their company. Of all the terms in a proposed financing, the percentage and the valuation are the two that grab entrepreneurs' attention. But they can be very misleading. You can create a spreadsheet and run a bunch of 'what-ifs' comparing what you'll end up with under various scenarios under common share, non-participating preferred, and participating preferred offers. Giving up what seems to be a bigger piece of your company will often actually give you a bigger return when there's money to be divided up.

Panel provides refreshing perspective on commercialization in Canada

I wasn't expecting much from the report of Canada's Expert Panel on Commercialization, published a couple of weeks ago. The group was put together by Industry Canada under the previous government, and I was anticipating yet another report full of ivory tower wonk-speak on commercialization.

Frankly, I had good reason to be skeptical. Whenever governmental groups or think tanks discuss commercialization, they usually completely miss the point that it's all about creating innovative products that succeed in the marketplace. If these groups aren't superficially discussing far-too-tidy concepts like "technology transfer" and "receptor capacity" that should have been retired from our lexicon over a decade ago, they're usually providing some useless 30,000-foot-high analysis of the wonk's favourite chimera -- Canada's productivity gap. Policy makers seem to eat that stuff up with very little critical thought.

But the Expert Panel surprised me. It integrates products and market demand into its definition of commercialization, and acknowledges that it is "fundamentally a private sector activity." It sees universities as a vital part of developing commercialization capabilities, but without making the common error of treating them as if their purpose is to create commercializable technologies.

It's a refreshing perspective, and one that I hope policy makers will listen to.

The Expert Panel's first recommendation is the creation of the Commercialization Partnership Board (CPB). We should have someone looking at these issues on a continuing basis, and the Expert Panel emphasized that the CPB must be rooted in the marketplace and led by someone from the private sector. A good proposal, as long as those principles are followed.

After that, the recommendations are divided into three categories: talent, research, and capital.

Under talent, other than proposing that Canada should do more to attract skilled people to the country (okay), the recommendations only address students and recent grads. This doesn't go deep enough into the issue. There's a wealth of people in Canada with expertise useful in commercialization, but improving access to this expertise isn't addressed in talent section of the report. The role of service providers and other entrepreneurs offering commercialization services is hardly discussed at all.

The Expert Panel wants to provide an incentive to companies to hire people with research capabilities (in science, technology, or business) -- especially firms in industries that don't commonly hire people with those skills. It proposes the creation of fellowships that would significantly underwrite the cost of hiring a student or grad. "Reduce the risk by allowing firms to 'test the waters' and discover the value ... [of] highly qualified workers" [Boy, what a pompous label that is. Does that make other employees unqualified or not-so-highly qualified?]

Students and recent grads are not commercialization experts (and so, in fact, are under-qualified workers ... maybe we should go with that tag). We hope many of them will develop that expertise over time, but it's not something you receive with your degree, or that comes from having taken a course.

The Expert Panel may be placing students and grads in an unfair position where the weight of demonstrating the value of "highly qualified workers" falls entirely on to them and their inexperienced shoulders. Students can do a lot, but when you target companies that are skeptical of the value of these employees and, therefore, require a government subsidy to pay for them, you're setting students up to fail with some unrealistic expectations of what they can achieve.

And every student or grad who gets hired by one of these companies because of the government subsidy is taken away from whatever company they would have worked for without the financial assistance. We need to see more discussion around what firms would qualify for the program and what impact this could have on those that don't.

Providing help to start-ups and small companies is at the heart of two of the three recommendations on research. (The third -- proposing the creation of a $250 million-a-year "commercialization superfund" -- isn't described in enough detail for me to comment on.)

The Expert Panel wants to help start-ups at the proof-of-concept or proof-of-principle stages, and recommends increased spending on IRAP, an Industry Canada initiative that has delivered a lot of value to early-stage companies. Good idea.

Another proposal would see the government make it easier for small companies to receive market research and marketing support -- something that is definitely needed.

In the section on capital, the Expert Panel wants to improve access to angel financing, something that has long been a challenge. It suggests the creation of government-funded community-based funds that would co-invest with angels. That could be an excellent idea, and it's similar to something I've been trying to create with Communitech (except I was looking at getting VCs to provide the funding).

I think the Expert Panel puts too much faith in angel investment networks -- which have largely been a flop in Canada, and I'm skeptical of how effective they've actually been anywhere (whenever someone does a story on angel investment groups, they always talk to the people who run one ... who amazingly always have great things to say about them. But ask entrepreneurs and VCs, and you'll get a very different view, and one that I now lean toward).

The Expert Panel would also like to see the government change the tax laws to encourage foreign investment, and wants a review of how well the Canadian VC community is meeting the needs for expansion capital.

A lot more needs to be done to refine these recommendations -- which come with a very heavy price tag of $1.1 billion a year (which means they're unlikely to be implemented anytime soon -- the new Industry Minister says he's looking forward to reviewing the recommendations). But this was a significant improvement over what we've seen in the past.

Does the GTA need ICT Toronto?

I read the 100+ pages of the ICT Toronto "cluster development strategy" that the City of Toronto is backing. It proposes the creation of ICT Toronto, which would promote the interests and reputation of the information communication technology sector in the Greater Toronto Area.

The report mentions a few times that the GTA doesn't have an organization like OCRI in Ottawa or Communitech in Waterloo Region. (Interestingly, it doesn't use the term GTA; it renames it "the Toronto Region" ... but it's a different "Toronto Region" from the one that the Toronto Region Research Alliance is supposed to be serving. That one includes Waterloo Region, Guelph, and Hamilton.)

The backers of ICT Toronto have to walk the line between its claims that the GTA's ICT sector is the third largest in North America ... and that it's hard done by -- a victim of government neglect (which can be righted, of course, with additional funding).

I agree that the GTA could do more to let everyone know about its ICT sector. But sometimes the report doesn't pass the laugh test, particularly when it tries to paint a picture of how Toronto companies are at a disadvantage when it comes to accessing venture capital. Yes, what a terrible blow it must be to be located in Canada's financial capital and the home to offices of most of the biggest VCs in the country. Waterloo Region didn't have any VC firms based within 75 km of here until a few years ago. Now we have one.

Of course, there are many companies in Toronto that haven't been able to make a persuasive case for their fundability. That's true everywhere and always will be. But there are scores of VCs and others in Toronto's VC ecosystem always looking for fundable companies.

You could try to make a case for the creation of a Tech Capital Partners-like organization for the GTA. It would be hard to pull off with all the VCs based in Toronto. In that environment, I don't think a new fund would be able to become the VC for early-stage GTA companies as Tech Capital has in Waterloo Region.

And there's already the Toronto Venture Group which has been working for years to help make it easier for Toronto companies to get funded. Why create a new organization to put its feet in the same waters?

I'd say the same thing for ICT Toronto's interest in lobbying to get an NRC research lab in the Toronto Region, which is already being done by the TRRA. Marketing the area's ICT cluster? Already being done by the GTMA (the group that came up with the statistic of the GTA having the 3rd-largest number of ICT employees).

(The whole thing about lobbying for an NRC lab seems so oldschool in 2006. Is Industry Canada supposed to put a lab in every city in Canada that wants to boost its economic development? The GTA doesn't have an NRC lab, but it certainly receives a lot of other funding from Industry Canada. And Toronto already has the largest university in the country ... which ICT Toronto suggests isn't doing enough to reach out to the business community.)

There are already so many organizations promoting innovation in the GTA. Does it really need another one? MaRS, which at one time was an acronym for "Medical and Related Sciences," has already outgrown that name and expanded into IT. It has taken on the role of being Toronto's OCRI or Communitech. It feels like ICT Toronto is too late to the party and is repeating a lot of initiatives that others are already spearheading.

The GTA isn't a community and won't become one in the forseeable future. It's just too big. It encompasses over 40% of the population of Ontario and extends from Darlington to Lake Simcoe to Burlington ... just short of Guelph. The quaint stories repeated in the ICT Toronto report about how everyone gathers at one spot in other tech clusters 1) are folklore anyway, and 2) will never happen in the GTA.

And, just in general -- as with almost everything written by policy wonks or academics on innovation and commercialization -- you could read the entire ICT Toronto report and never get the feeling that anyone grasps that clusters become successful when the companies within it create products that people want to buy. They aren't big on market forces and entrepreneurs.

Everything in the report revolves around having all these government organizations and associations coordinating their activities. A couple of times, it states that collaboration shouldn't be a goal in itself, and that's right. But you get the feeling that someone was just repeating a line they were told. I found it to be too navel-gazy and disconnected from the needs of companies trying to become successful in the IT space. There was little representation from SMEs and startups on the advisory committee, and it showed.

Having said all that, the report sure sounds like the kind of proposal that governments are funding these days, and that was probably its main purpose. But I wouldn't be surprised to see the whole initiative rejigged to become part of MaRS Discovery District.

The word is "premier"

As someone who has typed "reigns" for "reins" more than once (I stopped after my mother-in-law was kind enough to point this out to me), I know it's easy to be tripped up by homonyms. And, in the Web era, typos are something you learn to expect and ignore.

But these days, I seem to see an example every week -- in documents that have been formally prepared -- where the word "premiere" is confused with "premier."

The most recent case? I'm reading the ICT Toronto report that was issued last week (and prepared by a professional communications firm) and just read that Toronto "is a premiere location for ICT R&D and commercialization."

A quick scan of news releases on my computer found these other recent examples:

"MADD Canada, the country's premiere anti-impaired driving organization."
IMS, March 23, 2006

"enhance our position as a premiere provider of integrated flight operations solutions to airlines"
Navtech, March 17, 2006

"Survivor.com, a premiere online fan site for the popular TV program"
LiveHive, February 27, 2006

"Waterloo Region is becoming one of North America's premiere technology centres."
Communitech, January 6, 2006

"Navtech's strategic goal of becoming a premiere supplier of integrated flight operations solutions to airlines around the world"
Navtech, November 22, 2005

"tour one of Ontario's premiere trades and technology facilities"
TechAlliance, October 26, 2005

"We are extremely pleased that we have secured Class B certification with NOVA, one of the premiere processors in the U.S."
RDM, September 1, 2005

There have been MANY more examples.

Premiere refers to the first showing of something -- usually a play, movie, or TV show. Everything else is "premier," which is usually defined as "first in importance" and can often be replaced in a sentence by "leading." It really isn't difficult.

This has gone far beyond a simple typo. I thought it was pretty funny for a while. Now it's just getting embarrassing.

UPDATE: I see Mark Evans typed "reigns" for "reins" today (which may be fixed by now), so I'm not alone on that one! Maybe my mother-in-law can read his blog.

No Canadian VC money for startups?

Mark Evans today in his blog says there's little high tech venture capital in Canada and "no money for start-ups," since overly-cautious Canadian VCs insist on investing in "companies with customers, revenue and a track record."

You hear that a lot, but from a Waterloo perspective it's hard to make the case that Canadian VCs have set the bar too high.

Sure, we could always use more funding options, and customers are unquestionably a huge milestone -- one that makes it easier for any start-up to attract funding.

But there's hundreds of millions of dollars sitting out there ready to be invested by VCs eager to find fundable deals.

Just in Waterloo alone, Tech Capital Partners manages nearly $100 million in capital and has over $40 million waiting to find a good home. Very few of its portfolio companies -- no more than two, I think -- had customers or revenue when the deals were made. Most communities don't have an equivalent of Tech Capital, so the Waterloo experience probably isn't typical.

But it's not just Waterloo. GrowthWorks has an entire fund -- albeit a small one -- devoted to companies that are typically pre-revenue. BDC and EdgeStone both have Waterloo-based companies in their portfolios that were funded before customers existed.

In fact, I can't think of a single start-up company in Waterloo Region over the last few years that should have been VC-funded but wasn't able to find a Canadian VC to take the deal. The only start-up companies I can recall that needed to go outside the country to get funding are ones that I wouldn't have touched with a bargepole while wearing rubber gloves. There may be an exception I'm forgetting, but I doubt there's more than one.

I wouldn't want to make it sound like it's easy to get VC money. Of course it's not. Few companies will clear that bar -- and that's equally true in the VC-rich U.S.

I said a couple of weeks ago that if people want to complain about the scarcity of VC money, they should be able to identify companies they think should be funded but haven't been able to get a deal. Maybe in Toronto and Ottawa there are lengthy lists of such companies (if there are, maybe they should just move here). But I'm skeptical about that. And in Waterloo, I'd be hard pressed to come up with one.

Now, angel-level funding, on the other hand ... is a topic that will have to wait for another time.

"Scarcity" of venture capital?

The CVCA -- Canada's Venture Capital and Private Equity Association -- today came out in support of the Ontario budget, praising it for addressing "the scarcity of venture capital" in Canada.

Oh please. VC funds across Canada have hundreds of millions of dollars they would love to invest, if only they could find fundable companies. If they go through that, there's more where it came from. There is no scarcity.

If anyone at the CVCA would like to name a fundable company in Ontario that can't find VC funds, please let me know and I'll be happy to put it in touch with some VCs desperately searching for deals.

Additional sources of funding are always welcome -- different sources have different funding criteria, and the more sources there are, the better a company's odds of finding investment dollars. As much of a farce as LSIFs are in some dimensions, at least they increase the number of sources of VC money. LSIF managers like GrowthWorks and VenGrowth provide additional feet on the street actively looking for and shaping investment opportunities. I don't see anything in this budget announcement to suggest that it will have a similar effect.

Pretending that there's a shortage of venture capital isn't helpful.

Ontario budget - supporting startups?

In its budget yesterday, the Government of Ontario announced that it will spend $160 million over the next four years to "accelerate commercialization and growth of innovative startups."

At first blush, it sounds great that the province is paying attention to the needs of startups -- and I'm still hopeful that this will help in the creation of promising new companies -- but some of the details have me wondering if the government has allocated the funds in the most effective way.

Of the $160 million, the biggest chunk -- $90 million -- has been earmarked for direct investment in early-stage companies "in partnership with venture capital funds, pension funds and the federal government."

The problem is, there's no shortage of VC money out there now waiting to be invested. Startups can find it difficult to reach the point where there are VC-fundable, but once they get there, there's more than enough money to go around. I don't see the point of allocating money to co-invest with VCs. If a company can clear the bar of VC fundability, then the money is already there, and no additional government funding is needed.

VCs certainly aren't going to start investing in companies they otherwise would have judged unfundable just because the province will kick in some funds -- and we wouldn't want them to do that.

If a VC, or group of VCs, was ready to invest $2 million in a company, and now can put in just $1.5 million with the balance coming from the government, I don't see what has been achieved. The end result to the startup is a $2 million investment one way or the other. All it seems to do is delay when a VC fund will have to go back to its LPs to raise another fund. Not harmful, I suppose, but not really helpful either.

The province also allocated $46 million over four years to help startups "become more investor-ready by acquiring business management and entrepreneurial skills and to help them move a product or service idea further along the commercialization process, from the technical feasibility stage into the market feasibility stage." This sounds more encouraging. We'll have to see what the government means by helping people acquire skills. Does this mean subsidizing continuing education classes? I don't see that as a priority either. If they want to put money into efforts like WatStart that immerse very-early-stage managers into an entrepreneurial environment, where they can learn from other entrepreneurs and local resources I can see that being worthwhile, but I suspect that's not what they have in mind.

Getting companies to the point where they can attract investors by achieving some very-early-stage milestones is the piece of the budget that sounds the most promising. I'd want to see how this money will be allocated and managed first, but I think this is looking in the right direction.

But we don't need the government to become a VC, or to top-up VC investments, and it was disappointing to see the bulk of the $160 million being announced for that purpose.

The appeal and perils of alternative markets - the Sandvine IPO

Shares of Sandvine will begin trading tomorrow on the Alternative Investment Market (AIM) of the London Stock Exchange. The IPO is expected to raise £20 million, or about CDN$40 million. That will make it the first significant IPO from a tech company in this area since Descartes was listed on the TSX over eight years ago. (ARISE pulled off an IPO in 2003 -- no small feat for a company in its position -- but it only raised about $1 million.)

AIM and some other international exchanges have become increasingly popular with companies in North America. In Sandvine's case, since it isn't profitable, I don't think that it would yet meet the requirements for a TSX listing, and with that option not available, AIM becomes an alternative to the TSX Venture Exchange.

The allegedly onerous requirements of the U.S. Sarbanes-Oxley Act ("SOX," as it has become known) is usually cited as the main factor in AIM's rise in popularity. Even in Canada, where we don't force companies to wear SOX, there are still several regulatory requirements around disclosure and shareholder and exchange approval of management decisions that companies -- or, more accurately, their executives -- would be happy to avoid.

I say "allegedly onerous" because I'm not convinced that some SOX consultants haven't made the requirements out to be more burdensome than they need be, but there's no question that for smaller companies, all of the public listing requirements in North America -- SOX or no SOX -- are a big drain on resources. If you ever have to prepare quarterly reports, the first thing you learn is just how quickly three months zooms by.

But, as annoying as they may be, disclosure and accountability are vital for public companies. And that brings up the question -- how little is enough? Starting tomorrow, you can buy Sandvine shares, but finding the company's financial statements might prove to be more difficult. In Canada and the U.S., you can look up every listed company's financials and other filings going back for years through SEDAR and EDGAR. You don't get that with AIM, and that does concern me. Companies with, let's say, malleable integrity, might be tempted to loosen the reins more than their shareholders would like.

Sandvine will be a very good test-drive for AIM in this area. It's a real company with solid management, top-notch investors, and real technology -- not some fly-by-night flip play like you see on OTCBB or even, at times, the Venture Exchange. We'll get a chance to see first-hand how it handles disclosure and accountability to shareholders. If it succeeds, Sandvine could make AIM look very attractive to companies in this area.

What I did on my winter (blog) vacation

When it comes to DVDs, we've always been a bit behind the times in my house, and just after I started my blog in December we bought our first DVD recorder (a Pioneer DVR-633H-S).

And now, with the next generation of DVDs poised to change the world, we've gone from from having zero first-gen DVD writers to having three in about two months, with the subsequent addition of two DVD-writing drives.

So I've been drowning in the arcane world of DVD recording. Learning about VOB and MPEG and DVR-MS (Microsoft's pointless MPEG replacement) and VRO (Pioneer's MPEG replacement) -- and all the esoteric elements of DVD authoring that I've been missing out on.

I soon learned that the Pioneer appliance had spoiled me. The longest it takes to create a finished DVD that can be played on any standard player is about 11 minutes (single layer).

When I got a new computer with Windows XP Media Center Edition and hit the button to create a DVD, a pop-up let me know that this could take "several hours." Even after upgrading the software, it can still take over an hour to create a DVD. I wasn't ready for how slow and inefficient it is to create DVDs on a computer.

I could avoid the whole mess and just keep everything as MPEGs -- I keep all my music as MP3s and WMAs -- but the software I have for playing them is too limited (no fast-forward or rewind in WMP10, for example) and our TV screens are still much bigger and better placed for family viewing than our computer monitors, so that's not really an option now. Some day everything will be integrated ... and I'm sure I'll be behind the curve when that happens too.

So that's where I've been over the winter -- converting videotapes to DVDs, moving files from my hundreds of data CDs to DVDs, recording video with Windows MCE, converting MPEGs to DVDs, configuring my new computer, and learning more than I ever wanted to know about DVD authoring.

I'm sure I've created more coasters in the last two months than I did in the previous five years with my CD writer.

Now I just have two months' worth of untouched weekly magazines and unread blogs to catch up on.

Comments on Reqwireless and Google

I don't intend for this blog to be focused on the day's events, but since the "Google acquired Reqwireless" story unfolded and broke here, I've received a few requests for comments. To save myself some time ... here they are.

I've known the principals behind Reqwireless since 2003 and Google got some excellent people with this deal. The core team was very small, but they did a great job in building Reqwireless and developing their software. I'll now be able to say that the first Waterloo company that I brought in a Toronto VC to meet with ended up being acquired by Google.

What the deal will mean to the community remains to be seen, but it's cool to have Google in town. We don't get many $125 billion companies dropping by ... certainly not with Google's cachet. They haven't announced yet what the plans are for the local site. Adobe -- which is bigger than RIM -- been here for years and hardly anyone knows about it. We had Cisco and AOL and HP here in the past, so it's too early to speculate on what this might mean long-term.

Some background: Reqwireless was founded in 2001. The principals are UW grads. The company's WebViewer and EmailViewer had become -- partly by accident -- very popular applications in the Java-based mobile device market, which was just beginning to take off. It had raised about $400,000 in seed funding by mid-2003. The company didn't intend to be in the business of selling applications in a retail market, but people around the world were willing to pay for the products and Reqwireless ... for a while ... was happy to accept their money. By mid-2004 it was looking at either bringing in more investment or being acquired. By the end of the year, there were some offers on the table. The deal with Google was made a few months later but not announced. The July edition of the Waterloo Tech Digest reported that Reqwireless had been acquired.

Google was tight-lipped about the deal, and only made its presence in Waterloo known officially a few days before Christmas. There had been speculation for months -- about both Google and Reqwireless, although not necessarily together.

It's official ... Google acquires Waterloo's Reqwireless

It's true ... Google is in Waterloo. It acquired Waterloo's Reqwireless last summer. Confirmation was made today by Google following months of speculation -- both about Google coming to Waterloo and about who acquired Reqwireless.

Reqwireless developed a mobile application toolkit as well as two successful Java applications for mobile devices -- a browser and an e-mail client. The applications were originally developed to demonstrate the toolkit, but they ended up generating healthy, profitable revenues for the company. About a year ago, Reqwireless had been in acquisition talks with a few suitors. The company was founded by UW grad Roger Skubowius in 2001.

In a statement, Google said it acquired Reqwireless "because of the talented engineers and great technology. We're thrilled to have them here." And it's looking to hire some more engineers here.

Google in Waterloo revisited

Reqwireless, a Waterloo-based developer of mobile wireless applications, was acquired last summer by a company that very much wanted to remain anonymous. One of Reqwireless' principals, Joanne McKinley, is speaking at the CUTC conference next week as a representative of Google, where she is a software engineer. According to her bio, she still lives in Waterloo.