“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Over my long tenure in the vanguard of technology trends, I have witnessed a tectonic shift in this comfortable, yet outdated, world order.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 Capitalwhich 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.
I was asked to help this core group from CCAAto 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 Canadianmentors, 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 CAMPorganizers, 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 CAMPparticipant 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.
The Middlebrook Prize for Young Canadian Curators has named Adam Barbu as its third winner and is moving up to a whole new level. Founded in 2012 by John Kissick and me, with initial investments from Middlebrook Social Innovation Fund, to support and mobilize Canadian creative talent, the Prize aims to inspire positive social change through creativity and connectedness in a time of unprecedented economic, environmental, social, and cultural challenges.
In our 3rd year, some exciting changes are afoot as we see our vision for the Prize unfold.
First of all, the Prize has a new home in our partner gallery, the recently re-branded Art Gallery of Guelph. Led by Dawn Owen, the gallery provides a compelling new venue to host the Prize exhibition and to mentor the winner.
Secondly, the Prize now has a physical form and a visual identity as befits an increasingly important Canadian cultural icon. Designed by the immensely talented and award winning creative director, Chris Duchaine, our new visual identity reflects the knowledge integration inherent in modern curating interpreted with the most modern design principles. Paying homage to the “White Cube”abstraction of the idealized art gallery, it also references the forces that are breaking down that cube and moving curation firmly into the future, perhaps embracing new ideas like the Ultra Contemporary Art Movement.
Hear Chris discuss his design:
To accompany the design, Chris selected the recently designed LL Circular font by Laurenz Brunner from Lineto in Switzerland. The font manages to be “geometric without being cold” and timeless while modern.
And, finally, the Prize now has a permanent online home with a website at MiddlebrookPrize.ca to properly highlight the accomplishments of this growing group of young opinion leaders in the arts world. To acknowledge that growing influence, the winners comprise an expert centre, using the cloud-based service ExpertFile to highlight the developing oeuvre of our cadre of winners. To further encourage the growth of this network of leaders, Katherine Dennis, the 2013 Middlebrook Prize winner, was a member of the selection jury for the 2015 Prize. We extend a special thanks to Kendra Martin for managing the design and implementation of our web presence.
In keeping with 6 words in the Prize name, (hence the “cube” in the visual design), we’ve chosen a playfully “cubic”hashtag of #MPfYCC. Stay tuned for more exciting developments, but do check out Adam’s exhibition opening on September 17th and the Middlebrook Prize Award Day on October 24th.
In mid-April, I attended the 10th annual ACA Summit hosted by Angel Capital Associationin 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 Summitwhich 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 Investorswhich 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.
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.Read More ..
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:
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.
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.
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.
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.
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”.
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.
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.
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. This pair of posts will be based on extensive data, but the findings are intended to start discussion rather than be the last word.
Today was a banner day for announcements involving a reset of the technology funding ecosystem in Canada.
For a long time, the slow demise of Canadian Venture Capital has concerned me deeply, putting us at an international disadvantage in regards to funding and building our next generation of innovative businesses. You may recall my 2009 post Who Killed Canadian Venture Capital? A Peculiarly Canadian Implosion? which recounts the extinction of almost all of the A round investors working in Ontario.
Since then, many of us have worked to bridge the gap by building Angel Networks, including Golden Triangle AngelNet (GTAN), where I chair the Selection process and using extreme syndication and leverage to replace a portion of the missing A rounds.
Today, the launch of Round 13 Capital revealed a new model for venture finance centred around a strong Founder Board whose members are also LPs, each with a “meaningful” investment in the fund. My decision to get involved was based both on this strongly aligned wealth of operating wisdom coupled with the clear strength of the core team.
The launch was widely covered by a range of tech savvy media, including:
To illustrate the both the differentiation of Round 13 and show the depth of founder experience, Bruce Croxon, indicated that the founders board has, measured by aggregate exit value, built over $2.5 billion of wealth in Canada. It is this kind of vision and operational experience that directly addresses the second of my three points that Canadian Venture Capital needs to solve.
It is exciting to be involved with the unfolding next generation funding ecosystem for technology companies of the future. Time will tell the ultimate outcome, but I’m certainly bullish on Round 13.
It is notable that much of the recent trend towards Social Innovation has come from people who began their careers in technology startups, in Silicon Valley or other technology clusters. Some notable examples include:
Bill Gates, partly at the instigation of Warren Buffet who added his personal fortune to that of Gates, left Microsoft, the company he built, to dedicate his life to innovative solutions to large world issues such as global health and world literacy through the Bill and Melinda Gates Foundation
Started by Paul Brainerd, Seattle-based Social Venture Partners International is innovating at the intersection of technology and venture capital, with Venture Philanthropy. Paul sold Aldus Corporation (an innovator in desktop publishing applications, including Pagemaker) to Adobe in the mid 1990s. In his mid-40’s at the time of the Adobe acquisition, he was young enough to seek a significant and active social purpose in his life.
Waterloo’s own Mike Lazaridis aims to transform our understanding of the universe itself by investing hundreds of millions of dollars into Perimeter Institute for Theoretical Physicsn and Institute for Quantum Computing, effectively innovating a new mechanism of education and discovery. Notable is that this area of investment is one that may well take years, possibly decades, to show what breakthroughs, if any, are discovered.
Whether or not always attributtable to this connection with technology entrepreneurs, increasingly Social Sector organizations are starting to become much more like the entrepreneurial startups so familiar in the world of high technology. I’ve personally witnessed some of this change, and would like to suggest, that while there remain big differences, the parallels are strengthening over time. The following concepts represent just a small sampling of the key areas of similarity:
1. Founders Versus Artists
Stories are legion of smart, brash (and even mercurial) technology company founders who transform a business sector through the sheer strength of their wills. Many of these founders are “control freaks” and might find employment in conventional jobs a difficult proposition. Venture capital and angel investors have learned to be wary of such founders, citing numerous examples of founderitis – in which uncoachable founders, in a case of “my way or the highway” would rather maintain control than bend to ideas from often more experienced mentors, board members and investors.
Such personalities also exist in the Social Sector. For example, many arts organizations are founded by bright and innovative artistic directors. And yet, many of these same organizations come unravelled by the same mercurial nature that prevents the organization from being properly governed and accountable to funders (investors). With my background on both sides of this divide, the parallels are hauntingly striking.
Since such founders strengths can also be their undoing (or that of their organization), a conscious Board level assessment of such situations is always wise.
2. Running on Empty
Notwithstanding the media coverage of a few lucky technology startups such as Facebook orGoogle, most technology startups run of little or no significant funding. Many seek to change the world with very small amounts of capital, sometimes no more than several million dollars. The recent trend towards building such small capitalization organizations is called the Lean Startup movement. The challenges inherent in their undercapitalization is often the top complaint of such startups. However, Sergy Brin, the Google co-founder has insightfully observed that “constraints breed creativity” to describe how an underfunded state has led to the discovery of innovative ways to build companies and deliver their products.
Likewise, from my experience the vast majority of charities and nonprofits complain about being undercapitalized, and the reality is that most are. It is a fact of life in the social sector. Only now are we starting to see the emergence of social ventures, which by stealing a page from underfunded technology startups are exploring new business models and ways to deliver social change, often leveraging IT or a different process to vastly reduce costs of program delivery.
3. Technology Changes Everything
We’ve seen the emergence of a world where all information is stored in digital form and people are connected, even while mobile, the role of the web and technology can’t be underestimated. Technology-based startups, because they are small and start from scratch, often approach traditional problems in very non-traditional ways. Revenue and funding models change, as do fundamental ways to organize a business or social enterprise. Social media allows ideas to spread in a viral fashion. We have already seen how organizations like Avaaz can mobilize hundreds of thousands or even millions of supporters globally for both local and international issues of social injustices and poverty. This is a direct analogue to how many people now rely on Twitter or Facebook, rather than a printed newspaper, for much of their news and information.
4. Mission Creep – or the path forward
Technology startups have come to learn that success depends on laser sharp focus, attention to detail and execution of a “pure play” strategy (ie. only do one thing well). Thatparticular discipline has time and time again proven to be effective in a sector where technology change is moving rapidly and most startups are generally considered to be underfunded.
Likewise, Social Enterprisesmust adopt similar approaches to deal with underfunding and change. Even in today’s more fluid and fast-changing environment, to avoid deadly Mission Creep, Board and management must have developed a complete Theory of Change roadmap to enable Manage to Outcomes.
In our 3rd year, some exciting changes are afoot as we see our vision for the Prize unfold.
To accompany the design, Chris selected the recently designed LL Circular font by Laurenz Brunner from Lineto in Switzerland. The font manages to be “geometric without being cold” and timeless while modern.
Bill Gates, partly at the instigation of Warren Buffet who added his personal fortune to that of Gates, left Microsoft, the company he built, to dedicate his life to innovative solutions to large world issues such as global health and world literacy through the 
Started by Paul Brainerd, Seattle-based 
Jeffrey Skoll, a Canadian-born billionaire living in Los Angeles and an early employee of 
Waterloo’s own Mike Lazaridis aims to transform our understanding of the universe itself by investing hundreds of millions of dollars into
8 Mar 2016
Go East Young Startup!
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.
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.
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:
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.