By Leo Valiquette
“Venture capital is dead. It’s gone.”
Sir Terry Matthews didn’t mince words Thursday morning as the keynote speaker at OCRI’s Technology Executive Breakfast. Not that he ever does. And while some might argue that statement about the status of Canada’s venture capital industry, or at least its level of activity in the nation’s capital, may be a bit premature, that’s not the point.
The point is, who cares?
Matthews and partner Michael Cowpland began the first incarnation of Mitel in 1972 with persistence, sweat and a $4,000 bank loan. That was enough to get their first product to market in nine months. This was followed by Mitel’s breakthrough product: a PBX phone system with a software switch. Mitel beat out about 40 larger competitors to win a watershed contract with AT&T, the first time, Matthews said, that the telecommunications giant contracted out. That deal, and a $250,000 grant through Canada’s IRAP program, took Mitel from zero to a 20-per-cent global market share in five years and made millionaires out of penny investors.
And while sheer persistence and hard work were part of the secret sauce for Mitel’s success, and for every success Matthews has had since then as the man behind the creation of more than 80 high-tech ventures, he cited an even more important ingredient: the core competency of partnerships.
Partnerships build technology clusters. Partnerships allow a company to capitalize on another’s strengths without having to carry the overhead of developing a particular area of expertise in house. Partnerships take advantage of another’s time and money invested in R&D to compliment your own.
Matthews holds Nortel’s utter aversion to partnerships to blame in no small degree for the company’s misfortunes.
And while there undoubtedly are challenges in the marketplace at present, Matthews insisted there is a resurgence at hand as ambitious and nimble entrepreneurs of the next generation make their mark. They just need a commitment of time and mentorship from those with experience and money to invest. Venture capital is irrelevant. Time is what’s important.
Matthews’ approach is to find the key contact in a post-secondary institution passionate about commercializing ideas into start-up companies to help him cherry pick the cream of the crop from among new grads. He wants to work with the handful who have the drive, ambition and adaptability critical to surviving and thriving in tough times. He puts these teams together, puts his resources behind them, and sets out to identify and develop a viable product and market niche. By engaging with the market, he will guide this team through the process of honing, refining and focusing the idea until there is a viable business ready to be formally launched.
In return for this intensive mentoring and a high-pressure work schedule that pays little attention to weekends and holidays, each team member is paid the lofty salary of $25,000. However, what they should be paid but are not is parlayed into ownership stakes in the new company.
Matthews believes there is no more effective way to quickly bring a product to market. And being first to market is the only way for North America and Europe to compete in a global economy that is now flat with few if any true trade barriers. With Asia pumping out engineering talent that works for a 10th of what ours does, trying to compete on cost is a death sentence.
So the next time you hear someone pining for the return of the good ol’ days of the telecom boom, or whining about the demise of the venture-capital industry, do as Matthews does and take a chapter from Darwin: it is not the strongest or the most intelligent that survive, but the ones most capable of adapting.
By Leo Valiquette
It was business building 101 this morning at OCRI’s monthly Technology Executive Breakfast, with three executives representing different stages of a company’s growth offering pearls of wisdom and insights learned at the School of Hard Knocks.
Mark Edwards, president of Bent 360: MediaLab represented start-up companies; Rob Woodbridge, CEO of Rove, spoke for growing companies, while Jim Roche, founder and former CEO of Tundra Semiconductor and president and CEO of business and management consultancy Stratford Managers, represented established companies.
Here’s a rundown of the key points discussed by the panel:
1. Diversity among a group of partners or company founders is key to ensure one person’s weaknesses are offset by another’s strengths. Diverse backgrounds and skill sets are vital.
2. Focus. Focus. Focus. A company must have a clear understanding of its own identity. To whom is it selling? Why? What is its value proposition? As Jim commented, if an organization suffers from this lack of clarity, there will be confusion within the ranks, people will come to work at cross purposes and revenue growth will stagnate. Rob shared his experiences about the benefits of Rove’s decision to refocus around one single enterprise product rather than chasing multiple opportunities in both the enterprise and consumer markets with eight products.
3. There is no such thing as overnight success. Citing author Malcolm Gladwell and his book Outliers: The Story of Success, Jim talked about the 10,000-hour rule — the amount of hard work needed to truly master something and achieve success. He contended that behind every “overnight success story” there are, in fact, years of effort under the radar and behind the scenes.
4. Cold calling. Few people tackle this one with gusto, but as the panelists emphasized, if you start with people you know, your list of prospects will run out in short order. If you’re not making contact with clients or prospective clients on a regular basis, then you’re not in business. Mark himself aims to make five calls a day (not necessarily all cold). He emphasized the importance of using tools and databases such as LinkedIn, Dun & Bradstreet and Hoovers to develop contact lists. From there, the trick is to start calling and work through an organization until you have found the receptive individual who has buying authority, or can serve as your internal advocate with those that do. Just leaving a phone message breaks the ice and makes the follow-up call a warm one, he said.
5. When to shake up the management team or make a change was also discussed. Jim acknowledged that most organizations tend to be slow to identify and act on weaknesses that affect an organization. He emphasized the importance of executives acting on their gut instinct since they rarely have the luxury of making a decision with all the facts in hand. If you think there is a problem, there likely is. He considers it a sign of good leadership to be able to provide clear and consistent feedback on a subordinate’s performance with direct, and even brutal, honesty.
6. The value of mentoring was also discussed, not just in receiving it, but in giving it. According to Mark, the rewards flow both ways and he isn’t afraid to seek out as mentors people younger than himself if they have opinions he values and experiences that are relevant. Jim commented on more formalized mentorship in the form of advisory boards or boards of directors and spoke about the leads these people can provide into new customers or financing opportunities.
7. And then there was the cold hard truth that any company operating in the B2B space will have to look outside of its own backyard if it wants to growth. Jim said a Canadian B2B company should expect 70 to 80 per cent of its revenues to come from outside its home market. And though it is a challenge for an earlier-stage company to manage it, a presence on the ground in a foreign market, especially one as distant both geographically and culturally as China, is critical. The challenge is ensuring these staff remained linked into the organization and its culture through frequent contact with the home office, both by phone and in person.
8. And lastly, I can’t fail to mention Mark’s endorsement of engaging with a PR resource to help raise a company’s profile in its target markets.
By inmedia
In case you missed them, here’s a roundup of our posts from December.
(Francis’s note: December was, clearly, a thin month for our blog. We pledge to be more faithful with our posts in this new year. In the meantime, belated best wishes for the holidays and to all our readers, we wish you a peaceful and prosperous 2009. Thank you for reading our blog.)
Francis
Dec. 1: A Christmas gift for Lesotho
Dec. 18: Attention software company CEOs: Boost your PR investment to survive downturn
Leo
Dec. 4: The best laid plans …
Dec. 8: Plain talk and hard numbers about PR
Dec. 12: Naughty or nice a matter of circumstance
Danny
Dec. 31: Embargos: What’s all the fuss about?
