Showing posts from May, 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…