29 Oct 20120 Comments
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 is a long term proposition and can take centuries to develop.
As both a wine lover and serial tech entrepreneur, I firmly believe that building a tech cluster is similarly a very long term process. Ironically, the epicentre of tech clusters is in California. The Silicon Valley, which got its start in the 1950s remains the major cluster worldwide as “… no other place as yet has the Valley’s scale and resilience.”
Although I started my tech startup career in the US, it was in the Canada’s leading tech cluster of Waterloo where I built major companies and was one person who got that cluster started. Like Silicon Valley’s origins in Stanford University, the Waterloo cluster was initially fuelled by University of Waterloo. Over time, a combination of executive and programming talent, capital and professional services capabilites led to the current state of almost 1000 technology companies. By contrast to Silicon Valley, Waterloo is a must younger cluster, having started just over 25 years ago compared to the 60 years of Silicon Valley. It continues to mature around some key ingredients such as global strategic marketing capabilities and sufficient capital to fund on a globally competitive basis. Experienced people may well be the most important ingredient in a cluster’s maturation.
Further, I feel that all who have been fortunate to build wealth and experience in business, owe an obligation to “pay it forward” to the next generation. My own contributions include significant startup mentoring, Board and strategic roles in organizations like Communitech and Innovation Guelph, and for the last 3 years a Board role and chairing Selection Committee for the Golden Triangle AngelNet (GTAN). In just 3 years, GTAN has grown to about 150 paid accredited investor members who bring a wealth of experience to the 25 funding transactions to date. And, it goes without saying, that many of those financings might not have happened without GTAN having emerged to fill a significant funding gap as VC’s became largely extinct. Acting as a superangel to syndicate angel network deals is a tremendously labour intensive exercise, but one that I and others believe will pay off in the long term economic prosperity of our region.
I firmly believe knowledge-based companies to be the key ingredient of our future economic prosperity, so such company-building competence is mission critical for our region, province, country and globally. As globalization occurs, we see more and more regions clambering to reap the riches of the innovative, tech startup world.
To that end, at Verdexus, we have always taken a transatlantic perspective, primarily to have a more global window on building companies that can achieve world leadership in their chosen businesses. Over the years, I’ve worked with startups across the United States and Europe in the dominant clusters such as Boston, Chicago, Silicon Valley, London, Munich, Berlin, Stockholm and more. To round out my experience, over the last few years, I’ve sampled some key emerging regions by volunteering as an expert judge in places as diverse as Brussels area, Warsaw and Torino. A week ago, I had the opportunity to judge startups associated with the European Space Agency in Toulouse France as well as in Istanbul, Turkey. The latter Istanbul venue, EU Venture Forum was jointly sponsored by EUREKA (the pan-European research and development funding and coordination organization) and Europe Unlimited from Brussels. Collectively, these more than a dozen regional events ultimately feed into a pan-European venture prize in Berlin in December.
It has been very instructive to visit various clusters. This grassroots view, from the perspective of startups, reveals much in common globally but also a few surprises. Based solely on interacting with local startups, on a global perspective, it is clear that culture and experience vary greatly across various Euroopean regions. For example, I was pleasantly surprised that Warsaw had some of the smartest and most sophisticated business startups I’d seen anywhere. And, remember, they are pitching in English which is not their native language. Conversely, the cluster around Torino appeared to have a long way to go before its startups would begin to measure up globally.
Pitching in Istanbul
Similarly, the startups I saw in Istanbul were impressive. Some companies, following a model also common to the emerging markets of Central and Eastern Europe, were essentially cloning an existing business model into the 80 million strong Turkish market. More significantly others were clearly building globally strong technology startups. One pleasant surprise was that, of the eight companies that I coached the day before the forum, three had women CEOs. This was a surprise for Turkey, but sadly women-led companies remain all to rare in Canada
The calibre of engineering and basic technology talent was very impressive. That said, it was also clear that the level of support ecosystem around these startups is very limited – at least compared to what we see here in North America. One direct challenge was that in Europe companies appear to receive generous R&D funding which seems to encourage more of an engineering mentality than a market-driven one. In essence, projects stay too long as “science projects” and the culture and skills to get projects to market seem to suffer as a result. Although this is a generalization, there are many exceptions.
In the area of capital, the meltdown in Venture Capital A Round investments is about 3-4 years behind what already occurred in Canada. One particularly European challenge is that more and more of the VC funds have moved their offices and focus from regional markets to London, meaning that companies in the regions often have less direct access to capital. Conversely, the growing role of Angel Networks and Superangels to fill the gap is still in its infancy in Europe. I suspect that will change over the next two or three years. Venture funders like to either be close (1 hour travel) to their portfolio companies or, at the very least, to have a local investor who can “provide adult supervision”. Increasingly, experienced serial entrepreneurs will be called on to fill that key local role as Angels and Superangels. It is clear that the notion of Tim Draper going to Estonia and finding Skype is definitely the exception rather than the rule.
And that takes me right back to the notion of “tech terroir”. As global innovation increases, and people around the world vie to build ever stronger tech startup ecosystems, it is the dedicates entrepreneurs in the sector who magically nurture these maturing ecosystems. As one of the entrepreneurs that I coached mentioned, she wants to:
“make innovation easier in Turkey and to make life easier for entrepreneurs”
So, in addition to building a great global business, she also takes time to help move the needle of her local ecosystem forward. It’s a very encouraging sign that continues to inspire me as I engage with the new globalized world of tech startups.
1 Jan 20140 Comments
Ice Storms Highlight Canada’s Obsolete Infrastructure
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?
A GO Train is stranded on flooded tracks in Toronto on Monday, July 8, 2013. THE CANADIAN PRESS/