Management

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8 Mar 2016

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Go East Young Startup!

“The journey of a thousand miles begins with one step.”

“千里之行，始於足下”

Laozi c.580 BCE

Building on 19th Century US westward expansion (“Go West Young Man”), much of the current innovation in technology has been West Coast focused, particularly in California’s Silicon Valley, which has for more than 50 years been an intellectual epicentre of the technology world.

Source: Wall Street Pit

Over my long tenure in the vanguard of technology trends, I have witnessed a tectonic shift in this comfortable, yet outdated, world order. Today the best and brightest innovators and entrepreneurs must also look east, especially to China, to fully embrace global reality of the 21st Century.

Many of you might be wondering about the slowing growth rates in China? Like many aspects of China, there are many perplexing contradictions that are beyond the scope of this post. It is certainly true that Chinese infrastructure investments and some manufacturing has been overbuilt. Not so in the technology industry. The difference is that there is a huge gap as  the Chinese population increasingly moves to middle class status and the country needs to solve some huge issues (e.g. environmental issues around air quality). As a result, ICT, Green Technology, Life Sciences and other knowledge-based businesses continue to provide huge upside opportunities.

There is no question that China is a complex and difficult market to access. Knowing this, how can Canadian entrepreneurs master the new globalization landscape? Read on …

In 2015, my assistance was requested from an innovative group of investors and social entrepreneurs to pilot a new program, called CAMP (short for China Angel Mentorship Program) aimed at forging new international linkages tied to the momentum of startups. By identifying some of the best Canadian startup entrepreneurs, investing in them and helping them to engage with China, this program has the opportunity to drive a whole new generation of engagement between China and Canada, in the fast moving world of startups, technology and innovation.

CAMP is created and led by Liu Zhishuo (Peter Liu), Wang Tong (Tony Wang), Liu Yingna (Angela Liu), Zhang Yi Chin and Yang Jun (Alan Yang), all very savvy strategists and investors who aspire to “cross-border ecosystem building” between China and Canada. They work in Canada through CCAA (China Canada Angels Alliance) which made 23 investments in 2015 and in China through River Capital which made 50 investments in 2015. Since, as a westerner, you may not know these leaders (pictured below in Beijing), I will provide some background and context.

  • Peter and Angela Liu at CAMP Beijing 2015
  • Angela Liu. Tony Wang & Qi Lin at CAMP 2015 Beijing

I was asked to help this core group from CCAA to help find a pivotal group of Canadian mentors, who were able to assist CCAA to shape the CAMP program and ensure that the most qualified cadre of startups were selected to fill the 2015 cohort. Many of us, including Aron Solomon, Peter Evans, Benton Leong, Chris Flood and yours truly were in Beijing to also assist in the work that was much more focused on the Chinese mentor group, many of whom are indicated at this link.

Now let’s turn to the CAMP framework. As a uniquely conceived variant of the classical “startup accelerator”, CAMP involves CCAA, along with the Canadian mentors, selecting the 10 best Canadian startups (initially restricted to Ontario) who are uniquely engaged with:

  • an up to $200,000 equity investment
  • a detailed orientation session in Canada to build the groundwork for the best China experience
  • matchmaking with one or more mentors in China, who are chosen specifically for each company based on market and need.
  • an intensive 2 week immersion in Beijing, including many company visits, one-on-one meetings and a demo day in front of top Chinese investors
  • an 18 month post Beijing engagement with the chosen mentor to provide targeted assistance while the company grows and expands.

Because this was a first iteration, many companies had no idea of what to expect. Many were a bit sceptical, but being true entrepreneurs, they took the plunge. I can say that each and every startup from the first 2015 cohort of CAMP found the immersive experience in Beijing to be an exhaustingly intensive experience, but one that was profound and life-changing. The level of access to high level networks (“guanxi”) was extraordinary. That, coupled with the strategic insight of the CAMP organizers, and matched mentors, elevated the experience in Beijing.

Based on the inaugural CAMP, the organizers are committed to making the second cohort in 2016 even better. That call for the best startups will open up in the coming weeks. Until then, you might ask: why should you pay attention to CAMP and what sets it apart?

Access and Understanding: First of all, although China is a huge and growing market, it is very difficult for most companies, not the least a young startup, to properly engage with it. It is a complex market, fraught with pitfalls and unknown territory, from language, customs and even different regulation. CAMP provides personal connections (guanxi) through the mentors, and a degree of wisdom not likely to be available anywhere else. No company should consider China without a strong relationship with a trusted guide and mentor.

Canada-China Engagement: I firmly believe that CAMP has the potential to open up very senior intergovernmental engagement between China and Canada, but through the lens of building the new economy via innovative startups. Yet, startups have not historically been a major focus for governments at the national, provincial or regional level. I firmly believe that CAMP  has sown the seeds that may increase bi-literal impact.

Huge Market Gaps: The unprecedented growth and transformation of China over the last quarter century has created huge demand and huge needs. Much has been written about that. But, less obvious, is that there are many companies in China looking for unique international opportunities. It is as challenging for them to engage outside China as it is for a Canadian company to understand China.

Growth Hacking: Perhaps the number one reason that startups go to California is to tap into the “growth hacking” expertise, an area in which Silicon Valley continues to be a world-beating innovator. Less well known in the west is that a new generation of Chinese tech firms, particularly in B2C and mobile, has taken growth hacking skills and strategies into hyperdrive. Surprising as it might seem, these may well make Silicon Valley growth vectors look tame by comparison. Every CAMP participant will have a unique opportunity to tap into this expertise.

Whether you are a startup with world-beating ambition or an tech ecosystem leader looking for future opportunities, stay tuned for the launch of the CAMP website, which will be accompanied by a call to find the 10 best startups Canada has to offer.

Randall (郝狼盾)Looking east and savouring the journey..

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30 May 2015

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Snapshot of the ACA Summit 2015

In mid-April, I attended the 10th annual ACA Summit hosted by Angel Capital Association in San Diego. With about 600 people in attendance from dozens of countries, it was an excellent chance to get tuned into the latest trends happening in angel world at large.

And since Angel Investing is now a global phenomenon, it is interesting to note that ACA Summit can have two faces. On one hand, it is a very international gathering of Angel investors and yet sometimes the content reflects the fact that ACA is primarily an association of US Angel investors, for example by showing trends without regard that Canadian angels are just across the border.

The international range of attendees was striking, with many delegations from various European countries; Latin American countries like Mexico, Chile and Barbados; India; a particular concentration from Australia and New Zealand and of course Canada. Regarding this antipodean concentration, one attendee found it odd that there were more of participants from halfway around the world than from Canada.

I am a member of the program committee for Canada’s own 2015 NACO Summit which is being held October 6-8 in Niagara-on-the-Lake, Ontario, right on the US frontier. I see a huge opportunity to learn and connect with more US and global angels.

Each year, the Angel Resource Institute publishes statistical information and trends in US Angel investing and at ACA released their 2014 Halo Report.

I’ve chosen some personally curated highlights both of that report and the overall conference:

  • Overall US Angel investment was about US$25 billion in 2014, surpassing venture capital investments. This represents over 300,000 investors in over 70,000 deals. We continue to have less comprehensive data for Canada, but we still lag on a per capita basis, but the gap is narrowing.
  • Although Crowdfunding was a major topic of discussion, it is still less than 2% of the above $25 billion figure, definitely lagging places like the UK where it is already at 5%.
  • Median deal size grew over 10% to $2 million in 2014, when co-investment is included. Median pre-money valuation grew 20% to $3 million.
  • The largest region for  deal dollars (17.2%) was the Great Lakes Region (from Wisconsin to Ohio), surprising to those who thought most deals happen in California. Further, almost 50% of all deals are in states on the Canadian border, clearly presenting cross-border syndication opportunities.
  • Perhaps because of high valuations in the tech “hot spots”, such as New York City and California, more syndication across greater distances was reported, which goes against the traditional notion of investors focusing within a one-hour drive. Again, while the studies of greater cross-country syndication didn’t extend into Canada, it is easy to extend this trend cross-border. A drive could be to focus on those sectors requiring specialized skills such as medical technologies and life sciences.
  • There were a lot of great sessions on emerging, and ongoing, issues, such as crowdfunding, the new SEC Regulation A+ (mandated by the JOBS Act to simplify raises up to $20 million even from non-accredited investors), an ever increasing push to build new and innovative Angel Funds and even post investment Board governance.
  • In that vein, I ran an open panel on “Best Practices to Build a Private Equity Portfolio – Tools and Strategies”.  What was notable was how primitive such angel portfolio management really was. One participant suggested angels portfolio management was comparable to that of public company portfolios 100 years ago. As Angels learn that a passive approach with little portfolio management is sub-optimal, leading Superangels, the advanced Angel groups and the trend to angel funds are all pushing for more professional portfolio management. Although historically they have worked separately, the increased involvement of Family Offices in the world of angels is also starting to drive greater portfolio discipline. New software tools are emerging to help here as well, such as Seraf – Portfolio Management for Angel Investors which was built by angels unable to find a way to automate their portfolio management.

In summary, ACA Summit 2015 was a fabulous opportunity to meet, network and learn from some of the best global angels and understand about emerging models and best practices. Many side bar conversations, dinners and drinks in the garden were packed with wisdom from around the world.

In October, our own NACO Summit will be a great opportunity for Canadians to similarly share and learn and to connect with a more global perspective as our Angel ecosystem continues to grow from strength to strength.

2015 National Angel Capital Summit

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8 Feb 2015

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Top 25 Waterloo Technology Acquisitions – Wisdom from the Data

The acquisition of MKS by PTC in 2011, caused me to reflect a bit on what good acquisitions might look like and what they might teach us about building (sometimes elusive) long term shareholder value. As a result, over the last 6 months, I’ve progressively assembled a collection on the most significant acquisitions in the Waterloo area. To my knowledge, such information has hitherto never been collected. We all love to speculate, but it is more productive to ground that speculation with facts.

The following table is intended to summarize value creation through the lens of several key benchmarks.

Rank Company Acquiror Acquisition Price [4]
(UIS$ millions)		 Date Acquired Date Founded Company Age
(years)		 Employees LTM Sales
($US Million)		 NOTES Price/Sales Revenue/Emp CAGR $/Employee
1 Pixstream Cisco 369 December 21, 2000 1996 4 196 5.4 2 68.3 27 551 47.2 1.88
2 Dalsa Teledyne Technologies 341 February 14, 2011 1980 31 1000 200 3 1.7 200 000 0.85 0.34
3 MKS PTC – Parametric 304 May 31, 2011 May 1, 1984 27 360 75   4.1 208 333 0.96 0.84
4 Mitra Imaging AGFA Healthcare 252 January 3, 2002 1990 12 400 50   5 125 000 3.38 0.63
5 Bluegill Checkfree 250 April 28, 2000 1996 4 150 20 5 12.5 133 333 68.57 1.67
6 Unitron Phonak 91 November 22, 2000 1965 35 300 62.6 6 1.5 208 667 0.67 0.30
7 SlipStream RIM 91 June 1, 2006 2000 6 120 13 7 7 108 333 14.33 0.76
8 Tsavo Media Cyberplex 75 June 10, 2010 2001? 9 120 110 8 0.7 916 667 6.83 0.63
9 WATCOM Powersoft 74 February 11, 1994 1981 13 100 8 9 9.3 80 000 2.4 0.74
10 LivePage Janna Systems 68 September 20, 1999 1990? 9 12 1 10 68 83 333 3.64 5.67
11 EMJ Synnex Canada 64 July 14, 2004 1979 25 350 303 12 0.2 865 714 1.18 0.18
12 Dspfactory AMI Semiconductor 51 September 9, 2004 1998 6 75 16   3.2 213 333 14.87 0.68
13 MapleSoft Cybernet Systems 49.8 September 1, 2009 April 30, 1988 21 50 12 13 4.1 240 000 1.17 1.00
14 PrinterOn Samsung 40 September 2, 2014 2000 14 50 10   4 200 000 2.15 0.80
15 SS Technologies Woodhead Industries 35 July 31, 1998 1991 7 75 50 14 0.7 666 667 11.6 0.47
16 Reqwireless Google 32 2001 June 23, 1905 4 15 1   32 66 667 30 2.13
17 TribeHR NetSuite 30 October 22, 2013 2009 4 24 4.5 18 6.7 187 500 45 1.25
18 GBG HighJump Software 26 November 1, 2006 1991 15 200 22 11 1.2 110 000 2.09 0.13
19 PostRank Google 25 June 3, 2011 March 1, 2007 4 20 0   n/m n/m n/m 1.25
20 Kaparel (Pixstream) Rittal 21 December 10, 2000 1996 4 30 7.1 17 3 236 667 50.62 0.7
21 VideoLocus LSI Logic 20 November 14, 2002 May 1, 2001 2 17 0   n/m n/m n/m 1.18
22 RapidMind Intel 19 August 19, 2009 2004 5 25 3   6.3 120 000 18 0.76
23 BufferBox Google 17.5 December 30, 2012 2011 2 10 0   n/m n/m n/m 1.75
24 Software Metrics Equitrac 8 February 1, 2000 September 1, 1992 8 35 3 16 n/m n/m n/m 0.23
25 Volker Craig NABU 5.9 1981 1973 8 45 5.9   1 131 827 6 0.47
TOTAL     2364     11.16 3779 982.5   11.5 259 998 15.8 0.62

NOTES:

  1. Sources: public records, internet, personal recollections and interviews with 25 key ecosystem participants. In the interests of data utility, I welcome any revisions or comments regarding accuracy or completeness.
  2. All data are “normalized” into US Dollars, using an exchange rate current on the date of the acquisition. The use of US$ reflects the fact that most technology companies are really valued in US$ and hence that makes comparisons, both across the data and to other jurisdictions, more meaningful.
  3. The sample set is limited to my sense of what a technology company is – your mileage may vary.
  4. Acquisition PRICE includes cash, stock and post deal incentives, including earn outs.
  5. Several companies were re-acquired after the first acquisition (e.g. WatCom and LivePage). These follow on transactions are not reflected in this data.
  6. Some companies spun out several acquisitions, such as Kaparel which was sold out of Pixstream or SS Technologies, originally spun out of Sutherland Shultz.
  7. AGE represents the time in years from founding to the (first) acquisition.
  8. EMPLOYEES is the world wide count.
  9. SALES, given the high growth nature of many of these businesses, levels generally reflect the run rate at acquisition, rather than purely using an LTM (“Last Twelve Months”) measure.

CONCLUSIONS

The above data suggests a lot of trends and insights. It contains a wealth of insights, and also the individual narratives of each of these companies is, in itself, worthy of more discussion and analysis. In aggregate, however, the data suggest some key ideas to me:

  1. Acquisition prices are a great proxy for long term shareholder value, precisely because leading global technology companies provide an informed, third party valuation that likely has way more science than most earlier stage technology company valuation.
  2. Building larger companies takes time. The myth of the “quick flip” startup is (mostly) just that.
  3. As I discuss in my next post, building major technology companies is hard. We don’t (yet) seem to have “cracked the code” on this and need to learn how to build more over time.
  4. The aggregate scale of these companies, at the time of their acquisition, is materially significant to our region – almost 4 000 employees and almost $1 billion in revenue.
  5. Companies take much longer to build than most would expect. While the range in ages from 2 to 35 years is quite diverse, the average age of 11.2 years shows the time, resources and hard work to build real businesses.
  6. Acquisitions are good for our economy. Many people consider acquisitions to be a bad thing, but for those companies that were already at reasonable scale, most have continued to grow post acquisition. In addition to the wealth generated and its spinoffs, the acquirors bring new ideas and often jobs to our region. This is yet another reason why building larger technology companies is so important.

I am hoping that this data collection regarding acquisitions, and my initial take on conclusions, might stimulate further discussion around the notion of building significant value in businesses.

Please feel free to comment, or even contact me, with insights, questions and corrections.

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4 Jan 2015

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The Downside of Meeting Requests

“Expectation is the mother of all frustration.” – Antonio Banderas

Meeting requests are an amazing invention. Pioneered, and standardized, almost 20 years ago by companies like Microsoft (as part of Outlook/Exchange), Novell (Groupwise) and Lotus (now part of IBM Lotus Notes) this innovation had great promise to automate an essential, yet completely routine, aspect of modern life.

The ascendency of meeting request usage, also rides several trends:

  • In the 1990s, I had an Executive Assistant who scheduled my time, acted as a “gatekeeper” and also worked on many projects. She was a master tactician who managed to keep 3 or more Type A executives productively multi-tasking. In many ways, sadly, such personal assistance is being subsumed by..
  • Increasing computational power means that automation of routine tasks, personalized to the needs of individuals is much more of a reality,
  • The mobile revolution has made meetings much more multi-modal and virtual, but also means that most executives must be productive even while being mobile nomads, and
  • Calendars have migrated from paper – I switched about 20 years ago – to desktop computers using Outlook and the like, and now to the ubiquitous smartphone and tablet devices. Such mobile devices are both convenient for calendars, but also frustratingly fiddly places to enter complex meeting details.

Thus, enter the humble Meeting Request which has swelled in popularity. I received my first such request from an Outlook/Exchange user around 2000 and they remained rare until perhaps the last 5-10 years. Now they seem to be everywhere.

In homage to my friend and colleague, Jim Estill, the quintessential time management guru, I ought to be cheering this time saving invention.

And, yet my enthusiasm is sorely tinged by a frustrating implementation resulting in suboptimal user experience …

Top 10 Meeting Request FAILs:

  1. Trojan Horse: It has always seemed odd to me that a thiFrustrating Meeting Requestrd party inviting me to a meeting could embed their own meeting information in my calendar, and yet I am unable to edit this “foreign” request that has invaded my calendar.
  2. Split Personality: If Jennifer invites me, Randall,  to a meeting, then why does my meeting title say “Meeting with Randall” instead of “Meeting with Jennifer”? Computers are designed to automate routine tasks so there is absolutely no excuse for this one.
  3. No Annotation: I write comments in the notes fields of my calendar all the time. Why can’t I say, for example, “Joe is a bit dodgy” or “First met back in 2001”?
  4. Duplication: Many times I receive a meeting request for a meeting that I have already carefully crafted an entry in my own calendar. Again, computers are supposed to be smart enough to figure these things out and merge them in an intelligent way.
  5. Bad Versioning: Many times when meeting information is changed, such as time or venue, the update isn’t seamless. For example, it is common to have both the original and the updated version lingering in my calendar.
  6. No Scheduling: Meeting requests are often used as trial balloons in trying to schedule busy people into meetings. The endless rounds of “Accept”, “Maybe” or “Decline” responses can end up being quite frustrating, especially for many person meetings. These, often fruitless, interchanges underscore the fact that meeting requests don’t automate routine scheduling. Instead, people have to resort to tools like Doodle to vote on alternatives, and then manually schedule the winning result.
  7. Verbosity by having superfluous words in the limited real estate of the meeting subject line. E.g. pre-pending “Invitation:” or “Updated Invitation:” onto the front of a subject, effectively burying the important words. Many times they are put there to increase the impact and readability of the email subject line to ensure opening, but distract in the actual Calendar entry.
  8. Invitations from Google Enterprise Apps or GMail tend to be the most arcane and ugly. Originally, I chalked this up to Google Calendar‘s relative immaturity compared to Outlook, but the brutally long notes and long subject lines continue to stand out as worst in class, almost to the point that I dread getting invited by Google users.
  9. Lack of Anticipatory Computing: in an age where mobile devices know location, existing meetings and other personal habits, the trend to predictive intelligence could be incorporated into smarter meeting requests. For example, combining meeting requests with shared “Free/Busy” data could remove many manual scheduling steps.
  10. No Personalization: Like my contact list, I put a fair bit of thought into crafting a calendar that is both useful now, but also provides a detailed audit trail of my business interactions. To do this, I use conventions, categories and other techniques that, sadly, cannot be injected into these un-editable meeting requests that instead reflect the third party initiator’s preferences.

Do let me know in comments if I missed any major points.

Given the power of networked computing to automate, why is there such a lack of excellence and progress in this particular area?

In fairness, I believe that part of the problem lies in the interplay between competition and the vagaries of formal industry standards. That said, this should be no excuse.

It is admirable that, unlike word processing formats, the various pioneers started to develop standards call iCalendar (and later vCalendar) around 1997 to standardize file formats (like .ical and .ics) and email server interactions. I do know the Microsoft attempted to extend the functionality with some very useful things around that time. But, for some reason, a great idea got off to a good start, but seems frozen at an almost Beta level of functionality.

To conclude, please read this post, not as a gripe, but instead as a call to action to developers to help take the humble meeting request to the next level of user experience. Any takers?

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3 Oct 2014

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Canadian Angel of the Year Award

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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22 Nov 2012

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“How ya gonna keep ‘em away from harm?” – The Sequel

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 stylus, even 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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2 Sep 2012

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[Book Review]: The Innovator’s Dilemma

The innovator’s dilemma by Clayton M. Christensen

Published by HarperBusiness
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This summer I took time to re-read an oft-overlooked volume that I believe to be the essential to anyone working in marketing and innovation. In this review, I’ll provide a few examples of why this book needs more attention, particularly here in Canada where we definitely need to up our game in marketing of innovation and technology.

Clayton Christensen, as Associate Professor of Business Administration at Harvard Business School, is a leading academic researcher on innovation. Yet, he still manages to provide practical and pragmatic strategies that real companies can use. And, most importantly, his theoretical groundwork is based on extensive, data intensive research over longer period of time with real companies and markets going through disruptive innovation.

The latter term is often thrown around lightly in technology company circles. A Disruptive technology (or innovation) typically has worse product performance in mainstream markets while having key features that interest fringe and merging markets. By contrast, sustaining technologies provide improved product performance (and often price) in mainstream markets.

The book covers real markets, including the various generations of disk drives starting with 14″ drives in the 1970’s to today’s 2.5″ (and smaller) drives. By studying hundreds of companies that emerged, thrived and failed over a 25 year period, some clear patterns emerge. Further examples across a broad range of markets, include he microprocessor market, the transition from cable diggers to hydraulic “backhoes”, accounting software and even the transition of industrial motor controllers from mechanical to electronic programmable models.

The key message of the book is that the playbook for normal (“sustaining”) technology innovation must be thrown away for disruptive technologies. Disruptive technologies break traditional rules in many, often counter-intuitive ways:

  • Financial – typically disruptive technologies are more expensive and have lower performance than existing products. This effect causes financial managers to kill many such innovations.
  • Marketing: the normal rule to “listen to your customers” must be thrown away – instead many educated guesses with repeated failures are the only path forward.
  • Organization: given the ability of normal strategies to reject disruptive innovations, such practices as heavyweight teams (which silo the team with more autonomy) and even spin-outs are the order of the day.

Entrepreneurial writings, not to mention my own experience, encourage us to celebrate failure. Beyond the power of learning by trial and error, The Innovator’s Dilemma, for the first time, provides an analytical framework as to why such failure is so critical in new markets.

One area where the book could provide more guidance is that of differentiating disruptive from sustaining technologies. Such discrimination is absolutely critical to ensure the right strategic approach to the new technology is adopted. Generally easy with the benefit of hindsight, such determination can be very tricky, and error prone, when first confronted with such new technologies.

This is a book that anyone working with products in fast moving markets needs to re-read regularly. It surprises me that, 15 years after publication, how few product marketers and senior executives appear to have benefited from the deep wisdom Christensen imparts.

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3 Aug 2012

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[Book Review]: The Idea Factory

The idea factory by Jon Gernter

Published by Penguin Press
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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.
I’ve long admired Bell Labs and feel that many of its researchers and innovations interacted with an impacting my own career. While in University, the notion of working with or at Bell Labs was the highest aspiration for top thinkers in many fields. The Idea Factory is an engaging read and showed me how limited my understanding of that institution really was.

First of all, from the 1920s to the 1980s, it was way ahead of its time as an agent of innovation. The approaches were brilliant and could be applied today, including the notion of building architecture and organization structures to encourage interdisciplinary collaboration. Breaking down “knowledge silos” was definitely countercultural in a century known for specialization.

Secondly, the sheer number of transformational inventions, including the laser, transistor, fibre optics, satellite communications, the cellular mobile network, integrated circuits and the notion of information as digital that came from a single institution is both surprising and would be impossible in today’s world. Sadly, in the modern competitive marketplace, there is likely no room for a monolithic regulated monopoly, as was AT&T, to support such a single engine of innovation and basic research.

My primary connection with Bell Labs was through computer science with innovations such as UNIX and C Programming Language. The historical context this book outlines shows how surprising this is because AT&T was, by regulatory decree, precluded from entering the computer industry. That said, it is ironic that most of the inventions of Bell Labs, collectively contrived to make telecommunications as a separate industry obsolete. Instead, as predicted as early as 1948 by the remarkable information age seer, Claude Shannon, much of the modern economy has by transformed by our current digital age of networked and pervasive computing.

Lastly, Gertner explores the culture of those who drove innovation. Often eccentric, and to outsiders perhaps impossible or unemployable individuals, had the sheer force of will and brainpower to achieve breakthroughs that others either hadn’t even considered or thought impossible. Given my own small town origins, the deliberate strategy of finding these small town prodigies to populate the largest research-oriented brain trust in the world resonated.

All too often, societies believe that they are the first to master innovation. Sometimes we should stop and consider successful strategies from the past. Far from being solely a modern preoccupation, innovation has always been a hallmark of human advancement. Yet, with no clear place for a lucrative and regulated monopoly to fund pure research, where will the fundamental research of the future originate?

The book cites John Mayo, a former Bell Labs chief,

“Bell Labs substantial innovations, account for a large fraction of the jobs in this country and around the world”

In a world driven by global markets and the quarterly thinking of Wall Street, we really do need to consider how our next leap of fundamental research will be unleashed. John Pierce, another Bell Labs chief summarized the “Bell Labs formula” in four main points:

“A technically competent management all the way to the top.
Researchers who didn’t have to raise funds.
Research on a topic or system could be, and was, supported for years.
Research could be terminated without damning the researcher.”

Beyond learning from the wisdom of the leading research institution, where will we find the vision and resources to enable innovation on such a transformational scale? Beyond the Venture Capital and now Angel funded technology startup ecosystem, perhaps exemplars like Mike Lazaridis‘s pioneering Perimeter Institute of Theoretical Physics will chart a course for the 21st century.

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1 Jul 2012

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[Book Review]: How Will You Measure Your Life?

How Will You Measure Your Life

How Will You Measure Your Life by Clayton M. Christensen, James Allworth

Published by HarperCollins
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 I’ve always had the luxury to work in jobs in which I’ve had great passion for the core mission. I’ve come to realize how rare that is. And, with the twenty-first century making career and personal choices an ever more complex labyrinth, that fact is indeed a shame.

With this in mind, I was so pleased to be pointed to a book by Clay Christensen, one of the leading gurus of innovation with fresh insights on the topic of individual choices. As befits the author of The Innovator’s Dilemma, Christensen brings a fresh and personal perspective to the assist people in shaping their life to match personal motivation with life, relationship and career choices. I was pleased to see the issue of personal integrity covered in this book. What distinguishes this book from typical self help tomes is that, instead of providing generic answers, it defines a strategic framework for navigating the increasingly complex and personalized world.

The book is well informed by his existing recipes for strategic innovation, an example being the balance of emergent strategy with deliberate strategy. Where else could Christensen’s unique notion of “the job to be done” speak to the notion of empathy, as in intersponal relationships? Sometimes new concepts do come from other fields. In this case, the leading Harvard Business School commentary on innovation brings a new approach to an old topic.

I strongly recommend that people read this slim, yet insightful, work.

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downonthefarm

3 Aug 2010

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How You Gonna Keep ‘Em Down On The Farm?

“How You Gonna Keep ‘Em Down On The Farm” (excerpt) by Andrew Bird

Oh, how ya gonna keep ’em down? Oh no, oh no
Oh, how ya gonna keep ’em down?
How ya gonna keep ’em away from Broadway?
Jazzin’ around and painting the town?
How ya gonna keep ’em away from harm?
That’s the mystery

______________________

This week, my 18 month old Blackberry finally bit the dust. Out of this came a realization that led me to the challenge I issue at the end of this post.

Please don’t view my device failure to be a reflection on the reliability, or lack thereof, of Blackberry handsets. Rather, as a heavy user, I’ve found that the half life of my handsets is typically 18 to 24 months before things start to degrade – indeed, mobile devices do take a beating.

The obsolescence of one device is, however, a great opportunity to reflect on the age-old question: What do I acquire next? That is the subject of this posting, which focuses on the quantum changes in the mobile and smartphone market over the last couple of years.

I’ll start with a description of my smartphone usage patterns. Note that, in a later post, I plan to discuss how all this fits into a personal, multi-year odyssey toward greater mobile productivity across a range of converged devices and leveraging the cloud. Clearly, my smartphone use is just a part of that.

I’ve had Blackberry devices since the first RIM 957, and typically upgrade every year or so. I’ve watched the progression from simple push email, to pushing calendars and contacts, improved attachment support and viewing, even adding the “phone feature”. For years, the Blackberry has really focused on the core Enterprise functions of secure email, contacts and calendar and, quite frankly, delivered a seamless solution that just works, is secure and fast. It is for that reason that, up to the present day, my core, mission critical device has been a Blackberry. Over the last few years, I’ve added to that various other smartphone devices that have particular strengths, including the Nokia N95 (powered by Symbian OS), various Android devices and, my current other device, the ubiquitous Apple iPhone.

My current device usage pattern sees a Blackberry as my core device for traditional functions such as email,  contacts and phone and my iPhone for for the newer, media-centric use cases of web browsing, social media, testing and using applications, and so on. Far from being rare, such carrying of two mobile devices seems to be the norm amongst many early adopters. Some even call it their “guilty secret.”

Over the recent past, I’ve seen my expectations of the mobile experience dramatically escalate. In reality, the term smartphone is a bit of a misnomer as the phone function is becoming just one application among many in a complex, highly functional, personal, mobile computing device. The state of the art in converged mobile devices (smartphones and, increasingly, tablets) has indeed crossed the Rubicon. I believe that this new mobile universe is as big a break with the past for the mobile industry as was the rise of the internet (particularly the web) to the older desktop computing industry. Indeed, in several markets, 2010 is the year when smartphones outsell laptops and desktops (combined).

To summarize this new palette of capabilities of this new mobile computing generation, they fall into several areas:

  • rich web browsing experience, typically powered by WebKit technology, which ironically was pioneered by ReqWireless (acquired by Google) right here in Waterloo. With the advent of HMTL5, many such as Google, view the browser as the new applications platform for consumer and business applications,
  • robust applications ecosystem, with simple AppStore function to buy, install and update. iPhone and Android are pretty solid in this regard. Blackberry’s ill fated AppWorld is an entirely different matter. For me, it was hard to find, not being on my Home Screen, application availability seemed to be (counterintuitively) dependent on the Blackberry model I was using, and also the OS memory security didn’t seem up to the applications actually working reliability. (Translation, I found that loading applications onto my Blackberry made the device slower and less reliable, so ended up removing most applications). Whatever the reasons, the iPhone AppStore has 250,000 applications with 5 billion downloads. Android Market has over 80,000 applications and Blackberry AppWorld lags signfiicantly behind this.
  • user friendly multi-media interface, including viewing of web, media, and images, drop & drop and stretch & pinch capabilities. So far, touch screen technologies used in both iPhone and Android seem to have won the race against competing keyboard-only or stylus-based alternatives. Personally, I believe there are still huge opportunities to innovate  interfaces optimized for small screens and mobile usage, so I will remain open to the emergence of alternative and competing technologies. I’m convinced that one use case scenario doesn’t fit all.
  • a secure, modern & scalable operating system on which to build all of the above and to drive the future path of mobile computing. Given my heritage in the UNIX world starting in the 1970’s, it is interesting to me that all modern smartphones seem to be built around a UNIX/LINUX variant (iOS is derived from BSD UNIX and Android from Linux) which provides a proven, scalable and efficient platform for secure computing from mobiles to desktops to servers. Blackberry OS, by contrast, appears to be a victim of its long heritage, starting life less as a real operating system, but more a TCP/IP stack bundled with a Java framwork that morphed over time (it sounds reminiscient of the DOS to Windows migration, doesn’t it?). To be fair, Microsoft’s Windows Phone OS also suffers from its slavish attempt to emulate Windows metaphors on smaller, lower power devices and the translation doesn’t work well.

I want to stress an important point. This is not solely a criticism of Blackberry being slow to move to the next mobile generation. In fact, some of the original smartphone pioneers are struggling to adapt to this new world order as well. My first smart phone was the Nokia 9000 Communicator, similar to the device pictured on the left, and first launched in 1996. Until recently, Nokia with their Symbian OS Platform was the leader in global smartphone market share. Likewise, Microsoft adapted their Windows CE Pocket PC OS, also first released in 1996, for mobile computing market earlier in this decade, and that effort is now called Windows Phone, shown on the right. Both vendors just seem to have lost the playbook for success, but continue to thrive as businesses because smartphones represent a relatively small fraction of their overall businesses. However, respectively, feature phones and desktop OS and applications, are hardly likely to continue to be the growth drivers they once were.

I need to stress another point mentioned earlier. There will be competing approaches to platform, user interface, and design. While it is possible that Android could commoditize the smartphone device market in the way that Wintel commoditized the mass PC desktop and laptop marketplace, I suspect that being ubiquitous, personal and mobile, these next generation smartphones are likely to evolve into disparate usage patterns and form factors. That said, there will be certainly be signficant OS and platform consolidation as the market matures.

At last I get to my challenge. As an avowed early adopter, I have aggressively worked at productivity in a “mobile nomadic” workstyle which leverages open interfaces, use of the cloud and many different techniques. Even I am surprised by the huge enabling effect of modern hardware, communications and applications infrastructure in the mobile realm. Essentially, very few tasks remain that I am forced back to my desktop or laptop to accomplish. However, the sad fact is that the current Blackberry devices (also Nokia/Symbian and Microsoft) fail to measure up in this new world. Hence the comment about Farms and Paris. The new mobile reality is Paris.

My challenge comes in two parts:

  • What device should replace my current Blackberry?
  • Since the above article doesn’t paint a very pro Blackberry picture, what is RIM doing about this huge problem?

I should point out that I have every reason to want and hope that my next device is a Blackberry. RIM is a great company and a key economic driver for Canada and I happen to live and work in the Waterloo area. Furthermore, I know from personal experience that RIM has some of the smartest and most innovative people in their various product design groups, not to mention having gazillions of dollars that could fund any development. Rather, I would direct my comments at the Boardroom and C-Suite level, as I am baffled why they have taken so long to address the above strategic challenges which have already re-written the smartphone landscape. Remember that iPhone first shipped in Janaury 2007 and the 3G version over 2 years ago, so it’s not new news. Android is a bit slower out of the gate, but has achieved real traction, particularly in the last few quarters. And, to be clear, I’m not alone in this – see “Android Sales Overtake iPhone in the US” – which goes on to show the the majority of Blackberry users plan to upgrade to something other than Blackberry. The lack of strategic response, or the huge delays to do so, remains an astonishing misstep.

Therefore, if anyone senior from RIM is reading this, please help me to come to a different conclusion. I very much would like to continue carrying Blackberry products now and into the foreseeable future.

For other readeers, please comment with your thoughts. What device would you carry, and more importantly, why?

[NOTE: this post was written a week before today’s launch of the Blackberry 9800 Torch with OS 6. There are definitely some promising things in this design, but it remains to be seen if, indeed, this device represents the quantum leap that the new marketplace reality requires]

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