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Angel of the Year Award: Yuri Navarro, Jérôme Nycz, Randall Howard, Michelle Scarborough

At the NACO Summit in Québec City, it was truly humbling to receive the Canadian Angel of the Year Award. I see this partly as a calling to be an ambassador to continue to help raise the Angel bar in Canada in the coming years. I wish to thank all those kind colleagues who, unbeknownst to me, wrote letters of nomination. Also, this is all based on the remarkable people at GTAN and in the Waterloo and Canadian ecosystem generally.

In response to the award, and recognizing the opportunity to build on current success, I shared the following observations and future challenges at the closing Keynote on Friday 3 October, 2014.

“TODAY’S CRITICAL MASS CAN POWER A QUANTUM LEAP”

Closing Keynote NACO Summit, Québec City Friday 2 October, 2014

Bonjours, mesdames et messieurs. Good morning, ladies and Gentlemen.

I hope that Yuri was aware of what he was unleashing by inviting me to share perspectives and future challenges of Angel investing in Canada! Not unlike a startup running on “fumes”, Canada’s angel sector reminds me of the quip from cartoonist Bill Hoest: “I just need enough money to tide me over until I need more”. I’ll start by looking back to help us paint a future directional context.

As Angel investors, we’ve watched a powerful people-driven engine, coming from nowhere, to become a key enabler of Canada’s future prosperity. As Angels, we fuel innovation companies with our capital and mentorship, ultimately creating some of the highest value jobs for 21st century Canada. What’s not to like about that?

Let’s turn the clock back about 5 years. In 2009, the global economy endured the infamous credit crunch, perhaps the worst economic correction since the Great Depression. I observed this to be the final nail in the coffin for a large number of Canadian venture capital firms, for years struggling to generate viable returns. The seeming extinction of venture capital A-rounds and the bleak landscape for young, emerging companies, compelled me, as a seasoned tech investor, to get involved with the founders at Golden Triangle AngelNet (GTAN) in Waterloo-Guelph-Wellington-Stratford area. In a pattern surely repeated across Canada, Angel Groups from a slow start quietly and persistently worked to fill the funding gap through a labour-intensive “syndication” of Angel capital, with other groups and with government co-investment. In Ontario, this meant repurposing MaRS IAF from its origins as a VC on-ramp to co-investment in Angel rounds, lobbying that ultimately led to the Feddev “Investing in Business Innovation” (IBI) program, and BDC convertible notes.

A typical syndication for a top tier investee company might entail half a million dollars of Angel money being spun into $1.5 million or more. I used to describe this approach as providing “half the money of a VC A round for 10 times the effort”. At the time, I imagined this to be a strategy for a short term “bridge” of Canada’s innovation ecosystem to a more sustainable future. How did this market correction turn out for Canadian Angels?

NACO stats show a remarkable growth in total Angel investment. Between 2012 and 2013 alone, Canadian Angel group direct investments grew a stellar 120% from $40 million to $89 million. Of course, this doesn’t capture the aforementioned co-investment leverage that Angel investors attract nor does it cover investments outside of NACO members. All of us rightfully deserve to be proud of such collective impact.

But is it enough? Both from my own international investing and available statistics, it would appear that Canada’s Angel ecosystem is ahead of Europe on the maturity curve. I would estimate Canada has a 3-5 year head start on Europe. On the other hand, our American friends are definitely well ahead in maturity, deal dollars and information gathering. Angel Capital Association (ACA) data shows almost $25 billion of total US angel investment in 2013. To be at this level, on a per capita GDP basis, Canada would need about $2.8 billion of annual Angel investment. Even counting all the leverage, Canadian angel investment needs to grow 5 to 10 times over the coming years just to achieve parity with the US.

In Waterloo, home of Perimeter Institute, we tend to love Quantum Mechanics metaphors. Thus, propelling today’s critical mass through a quantum leap is a mission all of us need to work on collectively and individually, whether as angels, angel groups, NACO, governments, venture capitalists, sponsors, in fact, each and every ecosystem participant.

So, I will conclude by identifying just five of the gaps that we collectively need to fill:

  1. Scaling: Recently, my friend Steve Currie, VP Strategy at Communitech, observed “Canada is great at starting companies, but not so good at growing them beyond the 5 year horizon.” This means less job creation but also smaller exits. In a study of 183 recent high tech exits versus 2300 comparable US exits, the average US valuation was US$384 million versus US$100 million for the Canadian companies. I don’t know about you, but I find it simply tragic to leave so much value on the table. Angels have a huge role both in mentoring management skills around scaling, but also pivotal to financing that scaling. And, bigger exits, will in a virtuous circle, drive more Angel investment.
  2. Giving Back: We need more of our successful serial entrepreneurs to become (super) angels and continue to start new ventures. In the Silicon Valley, Paypal alone had 14 serial entrepreneurs like Peter Thiel and Max Levchin whose experience and wealth helped build legends like LinkedIn, YouTube, Tesla, Kiva and Yelp. While we do have a few super angels, we have yet to spawn someone like Ron Conway whose 600 investments include Google, Facebook and Twitter. Canada needs more titans like Mike Volker and Jim Estill.
  3. Deal Discipline: Great companies grow and scale partly because of external motivations. In the 1990’s the hottest companies all wanted to do an IPO and that involved a playbook of enhanced management, systems and processes that also helped the companies scale into better organizations. VCs also played a part, but today, this role often falls onto Angel investors, hence requiring a more “institutional” approach versus becoming just another retail asset class.
  4. Co-investment: Government funding has been critical to our success and it is key that funding increasingly backs Angel choices rather than governments having to choose winners. That said, there is plenty of room for more. For example, our Feddev IBI program in Ontario provides a 50% match while the almost identical “Double Equity” program in Austria does a 100% match to angels. And, the Angel Tax Credit, so common internationally, in parts of the US and in BC, would provide a much-needed boost to overall Angel resources.
  5. Operational Innovation: Currently, most angel groups run as nonprofits using largely committed volunteer deal structuring and with little automation of the process. A big reason for this is Securities Regulations, especially in Ontario, that put a chill on innovations that might trigger an expensive regulatory burden. While there is some hope that the proposed Equity Crowd Funding rules might provide the clarity for such innovations, there is also the risk that this is a force that further pushes deals into a retail mode when what we need instead is more institutional discipline.

With these key points in mind, and assuming the right environment, I have no doubt that greater innovation in business models will fuel growth of a larger and more sustainable Canadian angel landscape. All of us can play our part. To dial up our game, will be an aggressive, yet I believe achievable challenge. And, we need even better measurement so we can regularly monitor, and report back to ecosystem participants, our progress.

The road forward isn’t just about traditional business. Because Angel investors’ motivations uniquely straddle the ever-blurring boundary between “passion capital” and Wall Street-style finance, Angel investing will increasingly be a great exemplar of Social Innovation. To me, the culture of collegiality and sharing resembles my experiences in nation-building around charitable foundations.

The last five years have witnessed an unprecedented expansion of Canadian Angel investing and we are poised for even more remarkable growth in the next five. In the words of the incomparable Alan Turing,

“We can only see a short distance ahead, but we can see plenty there that needs to be done”.

Now, let’s get to work …

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Gof7-2013June06_DIL6202

Last year, I signed up for a wonderfully ambitious initiative spearheaded by our Governor General, His Excellency David Johnston. I was invited to join a Group of Seven who will serve as catalysts to rolling out David Johnson’s vision of a Smart and Caring Nation built by a set of Smart and Caring Communities, ultimately aimed to be a major national initiative to commemorate Canada’s 150th birthday, or sesquicentennial, in 2017.

I was very much honoured to be asked and, although it is a dauntingly large not to mention a somewhat unspecified, goal, as a proud Canadian who knows first hand David Johnston’s unique ability to lead and motivate, I quickly agreed to this call. I’ll share more about this initiative in order to seek your input. Since no small group can be representative of our huge and diverse nation, it is important the we engage in much dialogue from Canadians of all ages and demographic profile, in order to achieve maximum impact and relevance.

As a way to start that conversation, I’d like to share some of my perspectives on Smart and Caring 2017.

David Johnston’s Smart and Caring Vision:

This whole project starts with a great foundation in our Governor General’s Smart and Caring vision for Canada. And here is why his singular leadership is so critical to this initiative.

David Johnston has a long track record of motivation. Back in 2006, as President of Unviersity of Waterloo, he challenged the already ambitious and successful business, community and government leaders in Waterloo Region to reach even higher. Issued in November 2006, his Ten Goals to Make Waterloo Region Canada’s Knowledge Capital are a blueprint that inspired and motivated real change and continue to have an impact today.

Similarly, on 1 October 2010 at his installation speech as Governor General in the Senate Chambers in Ottawa, David Johnston laid out his vision for nation building in Canada, challenging us to build  a Smart and Caring Nation:

“We are a Smart and Caring Nation.
A nation where all Canadians can grow their talents to the maximum.
A nation where all Canadians can succeed and contribute.
But there is much work to be done to fully achieve our vision of a Smart and Caring Nation. I believe it is essentialTo support families and children,
To reinforce learning and innovation, and
To encourage philanthropy and volunteerism.” 

To build on that vision as we near the sesquicentennial of Canada as a country in 2017, His Excellency has challenged Community Foundations of Canada and the growing network of 191 grass roots Community Foundations across our country. He wants them to lead a groundswell movement, in each and every community and nationally, for Smart and Caring 2017.

Canada – A History of Evolutionary Nation Building:

With that vision as inspiration, and as a passionately proud Canadian, here is my perspective on Canada as a nation. We were not formed by revolution, as is the case in many other countries like the USA or France. True to our character, our particular style of nation-hood opted instead for  evolution at a slow almost glacial pace. You might almost say that Canada pioneered nation building by committee. Specifically, a series of  meetings commencing with the Charlottetown Conference, 150 years ago in 1864, led  to Confederation on 1 July 1867.

I would argue that, as a nation, we were more defined by what we were not — ie. no tea parties or revolutions to overthrow a king. Instead, via peaceful change we enjoyed a tabula rasa upon which to architect a unique nation in those lands north of the growing United States of America. The process was slow. We remained essentially a colony with large parts of the country feeling more British than Canadian for many years. Consider how long it took us to have a non-British Governor General (Vincent Massey, 1952), our own flag (1965, replacing the Union Jack) or our own constitution (repatriated from Westminster in 1982).

Until the late 20th century, innumerable British colonial vestiges remained. Many people argue that Canadian heroism and sacrifices for the motherland in World War I, just 100 years ago, started the modern trend of a strengthening Canadian identity both internally and as a nation on the global stage.

Gof7 WAG 2013-06-06 19.57.00Shortly after WWI, an influential group of painters, the original Group of Seven artists, created a truly Canadian vision of our country through direct contact with nature and our awe-inspiring landscape. Their work was notably distinct from the prevailing British styles of Turner, Constable and later British or European artistic styles.

Canada’s Centennial in 1967 marked a major inflection point for Canada. We had come through two world wars with a strong sense of national identity, supported by the burgeoning post war economy. Canada proudly led on the world stage with the likes UN Peacekeeping, Expo ’67 in Montréal and the uber cool federalist Prime Minister Pierre Elliot Trudeau.

Set right in the middle of the swinging 1960’s, our centennial celebrations in 1967 were a wonderful time to be alive. Besides Expo ’67 and the quaint historical “centennial” costumes people wore, today we are left with innumerable Centennial arenas, parkways, libraries, etc. These major investments in infrastructure are present with us today. I recall that time with pride and fondness.

CFC Smart and Caring Project:

Because the 21st Century seems so different than the previous, what kind of movement should honour Canada’s 150th birthday. It is a complex question, but I believe that if we can mobilize almost all communities across Canada into activities and projects inspired by the “Smart and Caring” mantra, like a national pot luck dinner we would effectively crowdsource some of national, and even, international significance.

Once again, we have a unique opportunity to make positive changes while setting a positive example for the world.

It is important to understand that, because each and every community is unique, communities must have the freedom to launch initiatives that directly suits their unique needs.  Nonetheless, with diverse initiatives considered collectively, I believe that, taken as a whole we can shape and inspire the Canada of the future.  We have so many advantages and the time is right to embark of nation building for the 21st century.

I would further hope that we would see collective action and partnership, both at the community level and national level, to increase the impact and effectiveness of the Smart and Caring 2017 initiatives. We must speak to and be meaningful to all Canadians:

  • young and old
  • recent immigrants or multi-generational Canadians
  • from east to west to the most northern reaches
  • Aboriginal, English, French or any other heritage

Because no group, no matter how large, can be sufficiently inclusive, that is why it is absolutely imperative that we, who have been honoured to help make this happen, hear from as many Canadians as possible.

Please weigh in here with comments or find other ways to get involved. And, I hope to provide more updates and opportunities to engage, participate, shape and drive Canada’s 150th birthday celebrations – Smart and Caring 2017.
Please start by sharing your thoughts on what Smart and Caring 2017  means to you.
AJ-Casson-The-White-Village-500x500

A J Casson – The White Village

 

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Credit: CTV News London

As we enter 2014, well into the 21st Century, one lesson for me from the year just past was that Canada seems to be hobbled with 19th century infrastructure. Let me explain.

During 2013, my home in Ontario was subject to not one, but two, different ice storms – in April and December. Both brought down large chunks of trees and both caused multi-day electrical power outages. In decades, this is the first time I can recall losing power for more than 1 day. To have this occur twice, with a combined 8 days of power outage, in a single year is even more striking.

After the first ice storm in April, I recall discussing this with a European colleague who was surprised by the very notion of a power outage. From a European perspective, he suggested the last power outage, of any length, that he could recall was 30 years ago. This started me thinking about why the difference.

In Canada, we have always prided ourselves on being one of the world’s richest countries, with modern infrastructure. However, much of our infrastructure was built for a different time and need. Much of it is really a testament to truly inventive Victorian design. It was indeed wonderful but no longer makes sense in the 21st Century. So, why indeed do we still have most of our electrical power lines above-ground on poles, while the rest of the (rich) world generally buries them? Why do our railways still rely on switches that freeze in winter and need to be operated by workers with propane torches? Why is a city like Toronto paralyzed by a major rainstorm?

Our homes, utilities, drainage and much more was built for a world predating our current period of rapid climate change. Surprisingly there remain in this world Luddites, who bizarrely continue to deny the fact of climate change. While we still have much to learn, on-the-ground results are here for all to see.

I gained significant insight into these issues when as a Director of Gore Mutual Insurance Company, a leading property insurer, I attended an enlightening presentation by the poignantly named Institute for Catastrophic Loss Reduction (ICLR). This industry-funded organization is a world leader, collaborating globally in research and advocacy around the causes and solutions for large scale insurance losses, known in industry jargon as a Catastrophe or even a Cat.

ICLR gathers data and works with many academic researchers to increase both understanding and awareness of what causes insurance losses. The data shows that the last ten years have seen huge increases in the number of severity of large scale losses, particularly from damaging wind, water and ice events, which are all significantly driven by climate change.

For example, with increased wind events (typically tornadoes in this area of Ontario), a call for more homes to be built with windows structurally rated to withstand 200 mph wind events makes sense.

Furthermore, climate change means that rainfall in 1 hour can equal what used to occur over 24 hours or more, with flash floods ensuing. In such an environment, instead of our historic practice of getting rid of water as quickly as possible, it is better to slow it down and buffer the potential for flash flooding.

For me, the power outages are a metaphor for how we in Canadian society need to look at our infrastructure with a sense of long term vision. We really need to invest to upgrade utilities, transportation and drainage for the needs of the 21st century. This in no way takes away from the heroic efforts of Hydro workers over the holiday season. I’m simply surprised that attention has never been focused on the root cause and long term prevention.

In an era of political infighting and embarrassing city Mayors, I’m wondering where the leadership necessary to achieve this will come from?

“Toronto Flooding” (Credit: National Post)


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Almost four and a half years ago, I penned what some called the obituary of Blackberry (see “How You Gonna Keep ‘Em Down on the Farm”). My intentions in writing that missive were, in fact, quite the opposite.  Back in 2008, a year after the first iPhone, Blackberry didn’t appear to be heeding the threat of major market disruption, let alone making a response. I thought that writing such a post might incite some action. Sadly, while I got loads of reaction from all over the world, the one missing piece was that this was singularly not registering inside the “Faraday Cage” of RIM headquarters at Philip and Columbia in Waterloo.

For many years, to continuously hone my expertise as an investor and participant in the next generation mobile ecosystem at VERDEXUS, I have maintained a “production” device and a “testing” device which allows me to sample the greatest number of new applications and platforms in my daily business and personal life. At the time of the 2008 blog, I switched from Blackberry as production device and iPhone as testing device. At that time, I promoted iPhone to production and introduced an early Android device into the testing status.

The four and one-half years since then, representing four to five mobile device generations at the rapid pace in which these are deployed, has seen a lot of innovation and change in the mobile universe. The first production version of Android occurred one month after the aforementioned post. Today,  over nine releases later, Android 4.2, known as Jelly Bean, is a mature and polished mobile platform.

Mobile user experience has, as it were, come up from the Farm and we are now definitely in Paree. It’s hard to imagine how things could get much better, yet an even more exciting future in mobile will undoubtedly unfold. The pace of change has been almost mind boggling, with Android appearing to move almost twice as fast as iOS, the more proprietary Apple platform running iPhone and iPad.

As a young platform, Android has long shown promise. Being an open source operating system primarily developed by Google, but customized by various device manufacturers, not to mention the ever-meddling carriers, has been both a blessing and a curse. Initially, Android seemed “rougher around the edges” and more techie in feel than the uber-polished and legendary iPhone experience, which is produced end to end by Apple.

Conversely, the limitations of the Apple closed ecosystem approach are starting overtake the advantages. There are numerous examples. If you simply want to plug in your device via USB and load music and other files, Android shines by bypassing the need to go through iTunes. While iTunes has its advantages, many of us simply want more control over our cross-device media file deployments. Another even more telling example is the recent debacle in which Apple turfed the tried and true Google Maps application in favour of a badly implemented and incomplete version of their own. This is but a single example of where Apple’s legendary quest for control is wearing thin.

While giving more control to mobile application developers has its challenges, it is clear that no one company, no matter how sainted, can determine, let alone sully serve, the desires and needs of the entire mobile universe.

It is a combination of this clear advantage, coupled with the incredible progress inAndroid and its handset manufacturers, that has led me to promote my newest device to production and render the formerly top-billed iPhone second tier status of my test device.

For me that device is the Samsung Galaxy Note 2, which with its 5.5″ screen is sometimes dubbed a “phablet” (ie. a combination of  phone and tablet). Essentially a super-sized Galaxy S3, this phone is nimble, fast in computational processing and with speedy network connectivity. I first saw Europeans use it a few months ago, a cool and capable device, but perhaps an acquired taste for some

 

Perhaps it is simply my poor vision, but the large screen size is versatile and a joy to work with for all sorts of browsing, content and documents. The S Pen styluseven for those who don’t want to do handwriting or line drawings, transforms the mobile browsing experience by removing the navigation problems on many sites with menus which are small on mobile screens. Samsung has even developed an SDK around the S Pen which could create a whole new application ecosystem, assuming this next generation stylus gains sufficient market traction.

Is my recent promotion of Android to top device spot the end of my quest for mobile perfection? Absolutely not! In fact, only one week ago, I personally promised my colleague Alec Saunders, the ubitquitous and transformational new VP of Developer Relations for Research In Motion, that I will definitely  give the new Blackberry BB10 devices a serious try. And, not just because “Devs, Blackberrry Is Going to Keep on Loving You”. I truly do like much of what I’m hearing about their capabilities.

Stay tuned – the mobile world is a fascinating and ever changing one.

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Business Strategy

Tech Terroir

October 29, 2012

In the world of wine, the concept of terroir describes a centuries long process in which the climate, soil, grape varieties and dedicated vintners, symbiotically develop a unique “sense of place” for a wine region. A favourite of mine, the garrulous  and quintessential Californian vintner, Randall Grahm, while trying to establish the old World notion of terroir in California postulates that it

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{Book Review}: The Innovator’s Dilemma

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The Bun Reunion “AfterMath”

August 17, 2012

After welcoming people to the 050th Reunion of the ‘Bun and other 1970’s computing at University of Waterloo in mid-August 2012, I’ve gathered together a photo album, the brief presentation from the Gala and the many comments received outside of the earlier blog post.

Before the Gala, almost 100 photos were gathered which have grown to almost 250 contributed by various attendees.

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Business Strategy

Have Lean Startups Helped Us Scale Larger Technology Companies?

August 4, 2012

Building larger technology companies is critical for our future economic well being, yet somehow we seem to pay more attention to the seed and startup phase. This post and a subsequent missive, Wisdom from Recent Waterloo Technology Acquisitions, aim to analyze some recipes for building technology businesses to scale first from the perspective of recent companies and then specifically through the lens of local acquisitions.

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{Book Review}: The Idea Factory

August 3, 2012
Book: The Idea Factory The idea factory by Jon Gernter

Published by Penguin Press WorldCat • LibraryThing • Google Books • BookFinder

A marvellous exploration of a research and innovation powerhouse that, even viewed from this age of innovation, surprisingly anticipated many approaches we think of as modern breakthroughs.

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The ‘Bun Reunion – Celebrating the 1970’s Roots of the Digital Age

July 16, 2012

If you are in any way connected to this story, see link to event invitation at end of this post.

In August 1972, just before the start of fall classes, a new arrival was causing a stir in the Math & Computer building at University of Waterloo – a brand new Honeywell 6050 mainframe size computer running GCOS (General Comprehensive Operating

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