Showing posts from 2006

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, s…

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 …

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…

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. I…

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 cou…

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"

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 Waterl…

"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 a…

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 m…

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 compa…

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 &…

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 H…

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.