By Leo Valiquette
When it comes to the next generation of technology companies taking root in Ottawa, Enablence is definitely at the top of the heap. At OCRI’s Technology Executive Breakfast this morning, CEO Arvind Chhatbar revealed that the company’s meteoric rise over the past 18 months has been driven by the often elusive ability to recognize true opportunity when it arises.
As Arvind described it, Enablence is in the business of making the optical part of optical networks work more like electronics. With more than a dozen different product lines already in its pipe, the company develops and manufactures optical components, subsystems and systems to meet our ever-growing appetite for high-bandwidth services. A key focus is FTTH, or, fibre to the home. Enablence is eager to sing the death knell of copper-based networks that suffer from extreme bandwidth limitations that only get worse with distance.
Arvind offered the telling example of trying to download a movie over a standard “high-speed” Internet connection over copper wire, vs. fibre. What would take a couple of hours on the one is reduced to a mere minute or so on the other.
Over the past four years, Enablence has positioned itself as a key player in this space through innovative product development and timely acquisitions, driven by about $95.5 million in financing to date from angel investment, private placement and a public offering. It has grown from a handful to more than 200 staff. The hockey stick on the revenue projection slide in Arvind’s PowerPoint presentation has to be seen to be believed.
What I found noteworthy is how the company has arrived at this point, which Arvind is quick to say is still an early stage. When Enablence was founded in 2004, the label “optical company” was considered fatal. Ottawa itself was still reeling from the loss of a host of startups in the optical space that had wizened away despite tens, if not hundreds, of millions of dollars in venture backing. Was this a challenge for Enablence? Certainly. But it also provided significant opportunity.
How?
1. Early on Enablence raised $5.5 million in angel financing, a sum that is that much more impressive considering the sour climate at the time. But the money wasn’t raised from local friends and family familiar with the industry. They were still licking their optical-investment wounds. Instead, Enablence looked further afield to contacts who had made their money in other sectors, such as oil and gas, and were looking for fresh investment opportunities.
2. The meltdown that had cut so deeply into the employment ranks at home and abroad had put a lot of top talent into play at a good price. Enablence was able to snap up some of these great people.
3. By the same token, there was a lot of equipment to be had at bargain prices, as well as facility space.
4. Despite the ongoing need for cash, the company wasn’t afraid to say no to the sure thing if the terms were not palatable and instead explored other options, such as listing on the TSX Venture Exchange. In fact, the company turned away a fat cheque that had one key string attached — Arvind had to resign in favour of a new CEO hand-picked by the investor.
5. The company has so far avoided the need to look at outsourcing manufacturing to China by investing in state-of-the-art manufacturing that is highly automated, thereby reducing labour costs from the outset.
It’s by being able to recognize and capitalize on such opportunities that has allowed Enablence to put itself firmly on track to become, as Arvind said, “a force to be reckoned with in the optical world.”
By Danny Sullivan
Yesterday, research analyst Brian Summer posted a blog on ZDNet about how to conduct, or rather, how not to conduct an effective analyst day. While the post is clearly written with more than a little tongue in cheek, his points are well made.
In particular Summer’s comment around over-hyping a product should be taken to heart by many technology companies. He states, “Sure, any one can tell a story but you don’t need someone who’s clearly drank too much of the corporate Kool-Aid giving your pitch. Over zealous pitchmen are unintentionally obnoxious and impossible to believe.” In my experience this is certainly the case, and it ties closely into another of his points that analysts are smart enough to be able to read between the lines.
Working in tech PR, I can relate to many of his points, it’s incredible how many companies will insist on refering to themselves as some kind of “leader” in all their communications, even when this claim has absolutely no founding whatsoever. If you are a market leader, then by all means, shout it from the rooftops. For the rest of us, far better to address your market by focusing on the truly strong elements of your story, than adopting the language of hype to create an impression that will be seen through by most at first glance.
By Leo Valiquette
Google’s new Chrome Internet browser is the largest open-source application release there has ever been, and the fact that it was an open-source project has been greatly underplayed.
Why did Google do it? There’s no immediate financial benefit. All the search engine titan has done is striven to make the Internet better and fired a shot across Internet Explorer’s bow in the process. It’s like Wal-Mart going to the effort to upgrade town centres. There’s no obvious or immediate benefit to the company’s bottom line.
I’ve taken liberties to summarize, but this wise insight came from Tobias Lutke of Jaded Pixel and Shopify last week at The Ottawa Network’s (TON) first Startup Drop-in of the season in the boardroom at Labarge Weinstein.
(And before I continue, while the above examples may not have immediate financial benefit for the companies in question, they’re still great marketing and PR moves, but that’s a subject for another time.)
The evening was a great kickoff for TON’s fall schedule. The theme was Open source Business Models and Opportunities and featured additional words of wisdom from the irrepressible Prof. Tony Bailetti of Carleton University. He expounded on the profound distinctions between open-source ecosystems and conventional business models and how understanding those differences is key to building a profitable business around open source.
What I took away from the evening, beyond a better understanding of the subject matter, was the value of such community engagement in Ottawa’s tech sector. Over the past couple of weeks, inmedia volunteered some time to drum up local media coverage of the good work that TON does. Some brainstorming with TON president Tim Hember and event organizer and sponsor James Smith of Labarge about what kind of message the organization wanted to take to the media emphasized the value of community engagement. There was no shortage of opinions going back and forth about the state of the technology sector in Ottawa, what challenges it faces and how they should be addressed. Such active and frank discussion is vital to building a vibrant and dynamic tech economy in this city.
TON has taken great strides this fall to present an interesting slate of weekly events built around specific and relevant themes to drive up attendance numbers. It’s all about sharing ideas and picking the brains of Ottawa innovative and adaptive thinkers, people who are building great businesses in a host of disciplines, such as open source, and thumbing their noses at the stale perception that Ottawa’s tech sector died with telecom.
We need to escape the “oh, woe is Ottawa” rut and take notice of the next generation of entrepreneurs who accept no direction but up regardless of the state of the venture capital industry, or whatever other complaint we typically hear in Ottawa. Even more importantly, we need more events that bring people together to network, share ideas, partner up and find innovative ways to overcome common challenges.
And if you’re wondering how to do that, checking out TON is a great way to start.
By Francis Moran
I already wrote a post at Dangletech.com, where I try to contribute weekly, about the most fascinating highlight the Red Herring Canada 08 conference held earlier this week at Mont Tremblant. For my money, the best entertainment was the riveting behaviour of Red Herring publisher and CEO Alex Vieux who dominated the event with his bewildering mix of brilliant observation, insightful analysis and boorish, insulting and condescending treatment of those who paid big bucks to attend.
But there was, fortunately, more of value beyond Vieux’s theatrics and here, in no particular order other than how they appear in my notebook, are some of the better gems from nearly two days of presentations, round tables and corridor chitchat at an event focused on technology startups and the venture capitalists they pursue for funding.
Miranda Technology Inc. chairman Brian Edwards said there is a “liquidity crisis in Canada,” leading many funds-seeking companies to consider going the capital pool company route on the TSX-Venture Exchange. “That’s pretty scary to me.” And while he applauded that lots of government money is going into research in Canadian universities, he said there is “very little management of that money. … We need to bet on the creation” of new companies.
Jacques Bernier, senior vice-president at Fonds de solidarité FTQ, was equally skeptical of the temptations of an early or inadequate IPO. “We won’t touch” a company that goes public on the venture exchange for its first million dollars or so and then comes to his firm looking for more. Being public “puts the focus entirely on the wrong place,” he said.
Mike Grandinetti, a senior lecturer at MIT Sloan School of Management, said too many companies looking for funding have “an unhealthy focus on not wanting to dilute” the founders’ ownership. If you’re in it to win, he said, retaining less than 50% ownership — sometimes much less — should not be an issue. As for the view that markets are too unsettled or times are too tough, “turbulence creates opportunity,” he said.
RBC Venture Partners managing director Robert Antoniades agreed with Grandinetti on founders accepting lower stakes in their companies, saying, “You can be a very successful entrepreneur with 10% ownership.” He cautioned founders not to try to remake a “VC process (that) is well understood.”
The critical role marketing plays in the early development and revenue growth of a young company was emphasized by Yahoo Canada general manager Kerry Munro. He encouraged companies to boost their marketing spend when the economy turns sour. “Marketing is the first thing you cut in times of trouble,” he said. “It should be the first thing you invest in in times of opportunity.”
The challenge, he added, is to see marketing in a new light. “Most companies in Canada look at it as a cost and not as an investment.”
One Ottawa CEO who successfully found venture backing earlier this year told the conference he did not share any belief that money is not available, so long as the idea being pitched is worthy. “If you want to raise VC money, you’d better come up with an idea that’s VC-fundable,” said OverlayTV’s Rob Lane, something he defined as having the potential of being worth $100 million some day.
By Francis Moran
I had dinner Friday night with about 70 students and several other folk at the University of Waterloo as the school celebrated the official opening of its innovative VeloCity, a mash-up of student residence and business incubator. The energy in the room, as one speaker put it, was electric and I was blown away by the enthusiasm of the students, the speed with which the university brought this facility from concept to reality, and the massive support shown for it by a wide swath of the Waterloo business community. The prime rib was pretty good, too.
I wrote about this so-called “dormcubator” when it was first announced earlier this year. I said at that time that I’d “keep an eye on this initiative and let our readers know how it’s working.” Well, I did one better than that. That same day, I emailed the organizers and offered to help out in any way we could. Contrary to my expectation that, being a university, they’d take their time responding, I heard back scant hours later from VeloCity founder and director Sean Van Koughnett. Sean took me up on my offer and now inmedia Public Relations is a partner with VeloCity, along with such exalted company as Google, Microsoft, Rogers Wireless and what looks like most of the Waterloo-area technology and entrepreneurship brain trust. I’ll be back on campus next month to deliver a session on media and analyst relations.
Sean, who has been at Waterloo for only about a year, said the genesis for VeloCity lay in his wondering “where will the next innovations in technology come from?” The answer for him was that innovation “will come from students” and he set out to create a facility that “cluster(s) talent and ambition in one place.”
The speed with which his vision was realized strikes me as nothing short of breath-taking, even allowing for the fact that, as Sean pointed out when he showed me around Friday afternoon, a glass wall had been installed just the day before, the furniture in the great hall was borrowed from elsewhere on campus and a couple of other finer touches have yet to be completed. The 70 students are housed in a traditional student residence but have access to a state-of-the-art mobile-device lab outfitted by Rogers with a few dozen of the latest cell phones, smart phones and other handheld equipment. There is also a boardroom for presentations and a great hall for social events and larger presentations, and the entire facility was rewired over the summer to support its focus on applications in mobile communications, the web and new media.
The students are expected to form teams and develop business ideas that will be evaluated every term by a panel of business people who can, as the facility’s web site says, “help take things to the next level.”
If Ayushi Patel is at all an example of the rest of the students, get ready for a torrent of new ventures. This spark-plug of energy and excitement and a third-year honours economics major told me she was working with a group of students who had already met to brainstorm ideas and were working towards soon finalizing the first one they’ll pursue.
It’s an impressive facility with an ambitious mandate, but one that synchronizes nicely with the university’s pro-business-creation attitude. I don’t know how unique Waterloo is with what one speaker called its “creator-owned IP policy,” the philosophy that if you develop something of commercial value while a student, faculty or staffer at the university, you own it, and the school doesn’t try to hone in on your action with licensing or partnering demands.
I intend to get to know Waterloo, both town and school, and its technology community better. This was my very first visit to the city that spawned Research in Motion Ltd., Open Text Corporation, Sandvine Inc. and many other companies that trace their roots back to university-based research. While there Friday, I also dropped in to the very impressive Accelerator Centre housed in the Waterloo Research and Technology Park across the road from the university. (My thanks to Claude Haw of Venture Coaches for insisting I go see the centre.) I have an invitation from operations director Tim Ellis to come back and do a PR lunch-and-learn for the centre’s dozen or so client companies, something I’m very much looking forward to doing.
