By Michael
Volker
What's an Entrepreneur?, NewMIC Opens for
Business, Vancouver's HOT 5, Capital Pool Corps Update, and Coming Events
This comment, which appeared in the Globe
and Mail this past Wednesday, takes the cake for market movement rationale:
""stock prices rose in the absence of cataclysmic news"!
Don't you just love it?
On the doom and gloom monitor, I'm pleased to
report that current stock index values have returned (roughly) to their
pre-September 10th index values. Must be the lack of cataclysmic events. Let's
have more of these non-events! Then, we'll see the markets really soar.
We can use this kind of non-news. When I looked
at my small caps recently, I could see signs of a terrorist attack on my stock
portfolio. Turns out that Bin Taken and Bin Had decimated my hopeful, Bin Workin.
As the saying goes, Bin there, done that!
What's an Entrepreneur?
That's a question to which you'll likely get
many different answers. In my October
5th column, I wrote about entrepreneurship and what it really takes to be
one. Since then, I've talked to numerous entrepreneurs and others to help me
answer this question.
If we, as investors, can identify one, then an
early stage investment should provide us with a many-fold return on our
investment. So, how can you spot one and how can you identify a potential
winning company?
To me, an entrepreneur is someone who, as Tom
O'Flaherty - a well known BC software entrepreneur puts is, is someone who
can "make it happen". The way I see it, en entrepreneur is someone who
will make it happen - i.e. achieve his/her business goal and vision - and who
will do whatever it takes to accomplish this. Whether it's a crash course,
teaming up with others, working without setting limits, the true entrepreneur is
totally committed to, and takes the ultimate responsibility, achieving success
as s/he defines it.
There are different types of entrepreneurs. I'm
talking about business entrepreneurs. In this context there are basically two
types: Lifestyle vs Corporate entrepreneurs.
The "Lifestyle" ones like to be
self-employed. They want to be their own bosses and their ambitions are
typically smaller and less risky. These types like to run retail stores or other
ventures in which they retain full control and want to run and manage their own
companies. These entrepreneurs are more process (e.g. style), than goal
oriented. They like to take care of their employees and customers and be right
on top of all aspects of their business.
The "corporate" entrepreneurs want to
go big! They set out to build large corporations. My favorite example is that of
Ray Kroc who built MacDonald's. These entrepreneurs are very goal
directed. They are driven to achieve certain outcomes. Management processes and
internal systems and procedures are just necessary ingredients in making
progress towards these goals. Success to true entrepreneurs like this comes when
their businesses run without him!
In his entrepreneurship course at Simon
Fraser University, Ken Blawatt differentiates an entrepreneur as
someone who has created value (i.e. in an enterprise). I like this definition
especially in the case of those who've been able to create a lasting value (like
Ray, who's been long departed, did).
I mentioned previously that tenacity,
perspicacity and commitment are characteristics which are good entrepreneurial
habits. Although a strong work ethic, intelligence, and leadership also help, it
may still take more.
Tom commented that leadership is important and
good leaders are often able to make things happen, albeit through others.
However, initially the entrepreneur must be able to create events without a
supporting group".
For investors, especially early stage ones, the
trick to making a good investment is being able to pick those nascent
entrepreneurs which have this ability. It does not mean that they have to know
all the details. One successful entrepreneur once told me that his key to
success was knowing not what his strengths were (which is important, too) but
also knowing his weaknesses and addressing these by finding partners with these
complimentary talents.
In the high tech business, you get a winning
combination when a business entrepreneur (not just a manager) and a technology
entrepreneur (not just a scientist). I say "not just" to imply that
one who is not only knowledgeable but one that can, as Tom puts it, "make
things happen".
Investors always talk about the importance of
having a good management team. Where does the entrepreneur fit in? How is an
entrepreneur different from a CEO? Does an entrepreneur have to be a great CEO
or manager? Are CEO's great entrepreneurs? After all, a CEO's job is to
"make things happen".
Entrepreneurs can be, or become, great CEOs.
But great CEOs may never be true entrepreneurs.
True entrepreneurs are different in a few ways:
they do take risks (although the true ones won't admit this - they are so
confident that the only real risk is themselves), they are initiators (they have
the business idea, the winning concept, the vision), and they are goal oriented
and driven to achieve those goals. And, they get their payoff if and when they
are successful. CEOs on the other hand take little risk (they're not supposed to
risk shareholders' money), they are concerned with leading a team in a certain
direction (not necessarily to a defined end-point), and they are process - not
goal - directed. They work for the company whereas entrepreneurs work for
themselves. CEOs are professional managers, with certain skills, and they rent
themselves out at pretty hefty salaries because these skills are not easy to
come by.
A recent salary survey by BC Business
Magazine illustrates this. Norm Francis, founder of Pivotal Corp
(NASDAQ:PVTL), and a recent Ernst & Young Entrepreneur of the Year Award
winner, was drawing a modest salary of $182K, but his payoff is in the millions.
Similarly, Jim Yeates of Burntsand Inc (TSE:BRT) was taking $220K.
Firoz Rasul, on the other hand, who was recruited by entrepreneur Geoff
Ballard to manage and lead Ballard Power (TSE:BLD) is drawing a
whopping salary of $1.4 million (even though Ballard is not yet EBITDA postive,
as we like to see these days).
So what is the difference between an
entrepreneur and a CEO? And what about entrepreneurs as a corporation grows?
Some start off being chief cook and bottle washer, then they bring in a CEO who
takes the company to a certain level, then CEO#2 takes it to the next level and
so on....some entrepreneurs hang in for a long ride, others bail out early.
What I'm looking for is to be able to, in
advance - not 20/20 hindsight - be able to say, "Yes, now that's an
entrepreneur we should back". What makes such person stand out?
This past week I attended a reunion meeting of
a group of ten entrepreneurs which I belonged to back in the 70's and 80's. We
called ourselves the EDG (for Executive Development Group)
pronounced "edge". Each one has, over his lifetime, been a successful
entrepreneur - creating something of value and making it happen. One fellow has
focused on one business in his lifetime - taking it from a small family
enterprise to a half billion dollar Nasdaq company supplying parts to the
automotive industry. Another has focused on creating several new ventures which
were acquired by takeovers while still quite young. Some have been
corporate entrepreneurs and some have taken the lifestyle route. But, all have
been successful because they never lost sight of their goals and never lost
confidence in themselves to achieve these.
In observing these entrepreneurs over many
years, I note that they all know when to get others involved - making that
transition from being a "driver" to being a "leader". The
trick is being able to identify such individuals early in the game.
I like how small business management guru, Michael
Gerber, puts it: "Many 'entrepreneurs' are not entrepreneurs. They are
simply technicians suffering from an entrepreneurial seizure". He makes the
point that just because you may be a top notch programmer, microbiologist, or
car mechanic that does not necessarily mean that you will be good at building a
software company, a biotech firm, or an automotive shop.
It makes me sad to hear when a company such as Polaroid
Corp files for Chapter 11 bankruptcy protection as it did a week ago. Could
it be that one reason for their misfortune is the lack of a driven entrepreneur
such as founder Edwin Land, who holds the second most number of patents
issued to an individual (after Thomas Edison, prolific inventor and
quintessential entrepreneur who founded General Electric Corp)? Land, a Harvard
University dropout - like Wm Gates - founded Polaroid in 1937.
Take a look at Apple Computer Inc. Steve
Jobs, entrepreneur, co-founded it along with Steve Wozniak back in
the mid-70's. In the 80's he recruited Pepsi-Co exec, John Sculley to
take the helm as CEO. Jobs was a tough cat to work for. Fortune Magazine
at one time cited him as one of the "worst" bosses to work for -
ruthless, demanding, condescending, etc because he was so results-oriented.
Sculley squeezed out Jobs - a phenomenon often seen in tech circles - and for a
while the company was performing well. But, there was no entrepreneur in the
picture and Apple was steadily losing ground to other computer makers.
Eventually Jobs came back. And, Apple is still here today - with innovative,
refreshing products.
Closer to home, Norm Francis of Pivotal
recently brought in a new CEO - Bo Manning to run the company. Norm
remains as Chairman but is not active in day-to-day operations.
Similarly, another good example is Sierra
Wireless (TSE:SWE). Norman Thoms brought in David Sutcliffe as
CEO. Seems to me like we've got both an entrepreneur and a CEO here.
Ken Spencer,
co-founder of Creo Products Inc (TSE:CRE) brought in Amos
Michelson as CEO and left the company shortly thereafter. Michelson, quite
unlike Spencer, is the most un-involved-in-the-community CEO I've ever
seen. He steadfastly refuses speaking engagements, networking events, etc. After
all, he has a job to do - and that is to run the company. That may be good,
but it doesn't strike me as being very entrepreneurial. Fortunately, Ken's
founding partner, Dan Gelbart is filling the entrepreneur's shoes.
I could go on. This is a fun subject to write
about. If you've got some views on this - especially those of you who've been
there and done that, let's hear from you!
NewMIC Opens for Business
Yesterday, there was a ribbon-cutting ceremony
at the New Media Innovation Centre (NewMIC). NewMIC is a collaboration
between industry, academia and government that focuses on the research,
development and commercialization of cutting-edge new media technology.
What's "new media"? The word
"media" is a bit of a misnomer. It makes many of us think about
traditional media - newspapers, TV, radio etc. But, it's not that at all.
New mdeia refers to the digital convergence of all forms of information - video,
audio, text, and graphics content and the transmission, delivery, storage,
manipulation, processing, etc thereof. That makes it interesting to
entertainment companies, networking, internet, and communications firms,
artists, advertisers, broadcasters and many others.
Starting with a strong commitment to research
by bringing researchers in-house and by developing a research network combined
with a residency program, there will be lots of fundamental development taking
place at NewMIC - most of which will serve as fodder for technology
commercialization and spin-off opportunities.
Working from a 25,000-square-foot
state-of-the-art facility in Vancouver, NewMIC is an interdisciplinary centre at
which players in the new media industry can share resources, learn from one
another and push the boundaries of how we think about new media. Sustaining
Members are Electronic Arts, IBM, Nortel Networks, Sierra
Wireless, Sony Corporation of America, TELUS and Xerox.
Academic Members include The Emily Carr Institute of Art & Design, Simon
Fraser University, TechBC, University of British Columbia and University
of Victoria. Government Members are the Government of British Columbia,
the National Research Council of Canada and Western Economic
Diversification Canada. Partnership Members include BC Advanced
Systems Institute and TRLabs. NewMIC also has more than twenty
Industry and Professional Affiliates. For a complete listing, please visit www.newmic.com.
Sony Corporation of America recently
committed $1,500,000 over the next five years to sponsor a newly
established research cluster in Rich Media Entertainment. In this cluster,
industry and academic researchers will work together on technologies aimed at
delivering rich media (the convergence of audio, video, graphics, animation and
digital pictures) to the home.
Vancouver's HOT 5 Picks
We were asked to pick some winning prospects
from B.C. and earlier this month, the Seattle Investment Forum recognized
BC's HOT 5 up and coming tech companies at its Venture All-Stars event at
Safeco Field. This event recognized the Pacific Northwest's top 35 hot
technology companies. In selecting these companies, the definitions for
entrepreneurship referred to above where applied, albeit loosley. The HOT 5
were, using their own words:
Airgames Wireless
URL: www.airgames.ca
Industry: Wireless Entertainment
Year Established: 2000
Company Director: Frederick Ghahramani
Company Description: Air Games Wireless Inc. is a leader in delivering -
Mobile, Interactive, Fun - to the next generation of personal wireless devices.
Since its inception, in early 2000, Air Games Wireless has focused on designing
and publishing creative wireless entertainment content. Air Games are
action-packed, multi-player and downright addictive games that are guaranteed to
entice and excite. Games are delivered in multiple languages and geographically
localized for specific target markets. Air Games Wireless combines cutting edge
cross-platform wireless technology, with creative video game production talent.
What results is exciting and interactive new-media channels. These wireless
channels can be commercially exploited for their 'sticky' nature, platform
independence, and engaging human interactivity. With a solid command of the
latest wireless technology, and the promotion of creativity as a core company
value, Air Games Wireless will continue to deliver - Mobile, Interactive, Fun -
to all personal wireless devices. NB - Airgames also won first prize - $50,000 -
in the recent NewVenturesBC competition.
fSONA Communications
URL: www.fsona.com
Industry: Wireless
Year Established: 1997
CEO: Theresa Carbonneau
Company Description: fSONA is a privately owned corporation, based in
British Columbia, Canada. The Company was formed in 1997 after reaching a global
licensing agreement for a free-space optical receiver technology developed by
British Telecom (BT) Labs in the UK. Using this technology as the corner stone
building block, fSONA has developed a series of low-cost, high-performance
wireless products for telecommunications and data networking service providers.
fSONA is committed to being an industry leader in the development and supply of
high capacity, optical wireless telecom products. Their primary customers are
the pioneers of today, building the networks of tomorrow: CLECs, ISP's and
global carriers who provide services within cities and campus networks or within
"the last mile" of the local carrier backbone. fSONA provides
reliable, short haul, high bandwidth wireless links (OC-3 to OC-24) for those
requiring connectivity to existing networks, where ready access is either
unavailable or too expensive. They are committed to assisting our customers in
the buildout of their network infrastructure, so that their customers can
benefit from improved access to new services. The SONAbeam series of products,
use innovative transmit and receive technologies, developed and tested over
several years in both Europe and the US. They are highly reliable and robustly
built, enabling them to withstand extreme climates. The commitment to the use of
the 1550 nanometer wavelength is of significance, because of its enhancement to
the product's eye safe properties - certified ANSI and IEC Class 1 eye safe.
NeuroMed Technologies
URL: www.neuromedtech.com
Industry: Biotechnology
Year Established: 1995
# of Employees: 25
CEO: Natalie E. Dakers
Company Description: NeuroMed Technologies Inc. is an early stage
biopharmaceutical company focused on the discovery and development of drugs to
treat neurological and cardiovascular disorders. NeuroMed's drugs target two of
the most significant healthcare markets namely, pain and stroke. The Company has
fast-tracked the drug discovery process. In less than three years it has taken
its lead candidate for the treatment of chronic pain from conception through
highly promising animal studies and is now preparing its first IND application
to the FDA. In addition, the Company also has lead candidates in development for
the treatment of stroke and migraine headache, and has well advanced pipeline
programs for epilepsy and cardiovascular disease. In the same period, NeuroMed
has raised $26 million from Canadian and international venture capital sources,
expanded from three to 26 employees, built independent corporate and laboratory
facilities and established an intellectual property portfolio of over 35
patents.
WestBay Semiconductor, Inc.
URL: www.westbaysemi.com
Industry: Semiconductors
Year Established: 1999
Employees: 41
President: Tino Varelas
Company Description: West Bay Semiconductor Inc. is a fabless
semiconductor company based in Vancouver, British Columbia. The company designs,
develops and markets ultra high-density broadband integrated circuits for
optical communications network systems. West Bay is focused on developing fully
channelized standard physical layer solutions for Synchronous Optical
Networks/Synchronous Digital Hierarchy (SONET/SDH)-based telecommunications and
data communications networks. The company is also positioned to provide high
density semiconductors for optical transport network (OTN)-based systems,
including Dense Wavelength Division Multiplexing (DWDM). With a sales network
already established in the United States and Canada, Europe, South Korea, China
and Israel, West Bay Semiconductor is establishing itself with some of the
world's largest network equipment manufacturers as a serious player in the
optical networking semiconductor market.
Xantrex Technology, Inc.
URL: www.xantrex.com
Industry: Advanced Electronics Manufacturing
Year Established: 1983
Employees: 700
CEO: Mossadiq S. Umedaly
Company Description: Xantrex Technology Inc. develops, manufactures and
markets leading advanced power electronic and control products for Distributed
Residential and Industrial, Portable and Mobile, and Test and Measurement
markets. The company's enabling technology converts raw electrical power from
any source into high-quality power required by electronic and electrical
equipment. Xantrex products are used every day for various applications: to
supply backup power for homes, small businesses and traffic lights during
electric grid disruptions; for distributed power solutions such as solar, wind,
flywheels, microturbines and fuel cells; to provide power on the move in boats,
recreational vehicles or heavy duty trucks; and to develop, test, and power
precision equipment such as semi-conductor manufacturing and medical equipment.
The company sells its products under the Xantrex, Trace, Heart and Statpower
brands.
(Note - I was just informed this morning that
Xantrex won this year's award for Entrepreneurial Spirit at last night's Burnaby
Business Awards gala.)
Capital Pool Corporation (CPC) Update
In this column, I keep track of Capital
Pool Corporation ("CPC") companies (see chart below) as defined by
the CDNX because they may provide funding and management to, and in the process
acquire, technology companies. They provide companies with an alternative to
traditional venture capital financing. CPCs are the continuation of the former
VCP and JCP programs on the Vancouver (VSE) and Alberta Stock Exchanges.
CPCs and Angel investors may be
the primary sources of investment capital in B.C. for the next few months while
Venture Capitalists figure out what to do. It seems that most of them (i.e. the
VCs) are sitting on the sidelines, preserving their cash hordes for follow-on
investment in their current companies since they, too, are finding that this is
a tough time to be raising additional capital for new investments. I believe
that Angels will ultimately become the driving force behind early stage new
venture creation. To learn more about local angel activities, check the
Vancouver Enterprise Forum's site at www.vef.org.
Since the CPC program was launched
in B.C. a few years ago, more than 250 CPCs have been formed and more than 30
have completed their so-called Qualifying Transactions (QT). Right now, there
are dozens just sitting there with modest amount of cash - usually around $500K
- not knowing what to do with it. I'm even seeing a number of CPCs looking at
merging with one another to pool their capital.
On the negative side, though, it
can take at least a year - sometimes longer - for a CPC to find a suitable
takeover candidate and another six months to a year for a deal to be finalized. One
way to expedite the process, in my view, is to eliminate the need for a special
shareholders meeting to approve the deals - leave it up to the CPC boards.
Check our Capital
Pool Corporation chart (in .pdf format) for a complete list of the CDNX's
CPC and VCP companies, thanks to David Ing of Pacific International
Securities. This list is updated on a monthly basis. The Chart is now
current to September 28, 2001.
An introductory
article explaining CPCs may be found at http://www.bctechnology.com
Coming Up
The next Vancouver Enterprise Forum
event will be held on Oct 23rd and the topic will be the Fuel Cell Industry and
business opportunities therein. The following companies will make presentations:
Cellex, QuestAir, and GreenLight. Details at: www.vef.org.
By the way, at a recent Board meeting of the VEF, a simple catchy tag line
describing what the VEF is all about was created. It is: "VEF - Advancing
Technology Entrepreneurship."
In November (Nov 4-6), the Softworld 2001
conference will take place in Vancouver. This is the best place for Software
execs to meet potential partners drawn from business executives from all over
the world including leading companies like Cisco, Sun, Adobe,
BSQUARE, Electronic Arts, Macromedia, Intel and Nortel.
They are coming to listen to, and learn from, the partnering war stories,best
practices and elevator pitches. And they are coming to do business. Register now
for Softworld 2001 at: http://www.softworld.org/cfm/regpro.cfm
The Science Council of B.C. will hold
its annual awards banquet on October 29th. See www.scbc.org
for info. This event is, as I predicted, already a total sell-out. But, if
you're really keen, you can try going on a stand-by basis. I'm always amazed how
many sold-out events end up with vacant seats.
A complete calendar of technology events can be
found on T-Net's
Events page.
Footnotes
Did you hear about the American economists who
won the Nobel prize for their "asymmetric theory"? Joseph Stiglitz,
George Akerlof and Michael Spence theorized that markets are not
efficient, i.e. some people have more information than others and this tends to
throw markets off-kilter. Hmmm, I always though that anyone who invested in the
junior markets, e.g. CDNX companies, knew this! Are you an asymmetric investor?
I mentioned that a number of junior public
companies (e.g. ACD Systems, Triant Technologies, Ignition
Point Tech) are in the market buying back their own stock (i.e. a good sign
for investors insofar as the company has cash, confidence in its own future and
not a cash burner). Another local one to join the ranks is Burntsand Inc
(TSE:BRT) which has received Toronto Stock Exchange approval to commence a
normal course issuer bid to repurchase for cancellation up to 4,217,452 shares,
which represents 10 per cent of the public float of the corporation or 6.4 per
cent of the 65,390,471 issued and outstanding common shares at Sept. 30, 2001.
I mentioned Imagis Technologies Inc (CDNX:NAB),
a Vancouver software company, a couple of weeks ago. At that time, Imagis traded
up to $1.75. Today it hit $2.80 (don't say I never give any good tips!). The
company is faring well because of the interest by law enforcers in its facial
identification software technology. The company's software is getting installed
at various airports around North America. Before the Sept 11th attack, the stock
was in the low $.60's.
A reminder: SFU's TIME Centre is open
for business - business folks, that is. TIME is an acronym for Technology,
Innovation, Management, and Entrepreneurship. TIME supports the growth and
development of the tech industry in B.C. TIME features a "Business Centre"
(looks like an airport business lounge) which is open to technology
entrepreneurs and business people to use as a drop-in downtown office facility.
Need to plug-in? Make some calls? Do some work? Hold a meeting? Why hang out at
MacDonald's when you can work productively at the TIME Centre? Drop by and check
it out! It is located at SFU's downtown Harbour Centre campus at 515 West
Hastings St. More information can be found at www.sfu.ca/time.
PS - there are some great facilities for holding your company meetings.
For a convenient printable, pdf version of this
column, click
here.
Michael
Volker is the Director of the University/Industry Liaison
Office at Simon Fraser University, Chairman of the Vancouver
Enterprise Forum, and a technology entrepreneur. He owns shares in many of
the companies he writes about. Copyright,
2000.
What
Do You Think? Talk Back To Mike Volker
Tech Futures is
a bi-weekly column that focuses attention on new and emerging BC publicly listed
technology companies.
Contact: mike@risktaker.com
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