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A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
June 17, 2006


By Brent Holliday
Greenstone Venture Partners

BC’s Fertile Ground

“If you start it up,
Kick on the starter,
Give it all you got, you got, you got.
I can't compete, With the riders in the other heats.” – Rolling Stones, Start Me Up

It’s a bit of a celebration this week here at Something Ventured world headquarters…  The staff is throwing me a party to celebrate the 200th column to be posted on the T-Net site.  All of my research team (oh, that’s just me), the copy editors (actually, you may have noticed, they don’t exist) and the admin staff (now that would be nice) are thrilled that this venture has grown from one guy posting columns on a new technology web site in 1998, working late Thursdays for deadlines every other Friday morning to, ummm, well, exactly the same thing 200 columns later.  Happy milestone to me!

Before I go cut the cake and taste the champagne, I thought I’d reflect on a few things and then post some actual content this week, instead of self-congratulatory drivel.  So, on to the drivel!  Who is there on the Web that is dumb enough to leave his original posts from the beginning of the last bubble on the Web for all to see and ridicule?  Just for fun, go back to some of the original columns and click on the links… companies and web sites that don’t exist take you to some pretty interesting and often funny places.  Who do you know out there on the blogosphere that has been posting for over eight years?  OK, so I’m a dinosaur, still posting simple HTML every time, but the content is what’s important, not the delivery.  I can think of only one guy with as long a track record (actually two years longer) and he has made a lot more money than me doing this (possibly because he is a lot smarter and has more to say… possibly) and that is Mark Anderson.  Rafe Needleman has been out there as long, but jumping from web property to web property (he’s now at Cnet.com).  Jesse Berst came and went. Now everyone goes to Om Malik and Paul Kedrosky for their tech fill (BTW, Paul wrote a column in Something Ventured back in 2000 (http://www.bctechnology.com/statics/bh-oct2700.html)… can I sniff talent or what?).

So, rather than mockingly congratulating myself, I should be thanking you because every time I post, the same audience comes back and reads what I have to say (Secret weapon: My mom clicks on all the ads every week, so that T-Net keeps me around.  The origin of click fraud!!!).  So, thank you.  If this is the first time you have read my column, you are probably confused and it will likely be the last time you read it.  Sorry.

One of the themes that I am continually coming back to in BC for our technology industry is where we sit in the technology world and how we become more influential, bigger and with more jobs.  For a couple of years a government funded operation called Leading Edge BC took on direct responsibility for examining this broad issue and performing external marketing about our technology industry to the US and the world.  An organization focused only on the promotion of the technology industry was a coup, given the large and diverse economy that BC has.  Resources were poured into research, including the exit returns study that I began and then Leading Edge and UBC finished, showing how well our industry does against other regions in creating returns on investment.  So, it was a shame that the organization was shut down and the people and the resources will now be shared within the Ministry of Economic Development, where forestry, fishing, mining and tourism will all compete for time and resources with technology.

Others are taking the torch of promotion of the industry on and I will do my part this week.  I noticed an O’Reilly Radar blog post about about which regions in the US are the most fertile for start-ups.  Instead of talking about the factors that create fertile ground (discussed elsewehere http://www.paulgraham.com/siliconvalley.html), it focused on one metric that showed relative start-up activity.  That metric was the number of start-ups listing jobs in the job boards for technology companies.  They performed a search on a huge database of job listings and looked for technical jobs that had words associated with the company that indicated a start-up.  Words like “start-up”, “new company”, “stealth mode”, “emerging company” etc. would give them a pretty good cut at who was offering a position at a newer company (past the friends and family stage) versus an established company (whose descriptors all tend to say “world-leading”, “established” and “global leader”).  As they say in their article, this is not perfect science as some start-ups go to great lengths to hide the fact that they are start-ups.  They then took their number of companies making these listings (dropping all the duplicates of course) and compared that to the total number of technical companies listing jobs.  The ratio would be an indication of new company formation in the area and the higher the ratio, the more fertile a start-up area.

Of course, they didn’t do Canada because there is not a national jobs database that they could access.  In the comments below, you will see that the head researcher would like to know how Toronto, Ottawa, Waterloo and Vancouver compare.  As I mentioned in the preamble, my research team has been busy preparing my 200th column celebration, but I still managed to cobble together a stab at Vancouver’s data.  Using T-Net’s job database (natch), the largest database of technology job listings in BC, by a large margin, I went to work.  I did the analysis the same way that O’Reilly did, making sure that I weeded out non-technology companies looking for jobs and discarding all the duplicates to get to company numbers.  Because the sample is relatively small and because I know the start-up market so well here, I was able to eyeball my results entirely and figure out who were the companies created/announced since the beginning of 2005.  Some more research needs to be done on the listings that are from recruiters who are hiding their clients identity to reveal if those are additional start-ups or not.  For this analysis, I decided not to include them because many start-ups avoid spending money on recruiters except for C-level hires…

My crack research team has put the start-up ratio at 0.11 for Vancouver and immediate area, after weeding out non-technical companies (and a couple from California with job postings here!!!).  That would put us in 3rd place behind the Silicon Valley (0.37) and Boston (0.17) and ahead of Seattle-Tacoma (.08).  A full 11% of the companies listing jobs are start-ups in Vancouver. 

This is not a shock to me as our industry is made up of a lot of companies under 10 employees, many of whom start-up, fail and re-generate.  While it is an impressive number when relating to the fertile ground for starting a technology company, it is not through any concerted effort to do so… it’s just the way our local community is.  We spin out new game companies every month from EA and Radical.  We start new software application companies on a regular basis from our larger companies like BOBJ.  A biotech company generates itself every couple of months from the research labs of UBC and the Cancer Agency.  The angel funding market is vibrant, even more so since the tax credit for angel investing was introduced.  The entrepreneurial spirit is certainly alive and well here, led by more well known mercurial folks like Dick Hardt and a lot of lesser known serial entrepreneurs.  Our problem is getting these companies beyond the $10M revenue point before they sell.  In fact, the tendency to sell early (or fail early due to lack of funding or access to markets) is probably the number one reason that we have such a fertile start-up market out here.

Clearly a more scientific job can be done with this data.  A Leading Edge BC might take up such a project… maybe the Ministry could do it.  If, in fact, the results come back and show we are more fertile ground for start-ups than most US metro areas (which I suspect we are), then we could trumpet that fact and look to increase our exposure as a hot technology market.  However, the most important fact in all of this is not a fact… it is perception.  As long as technology entrepreneurs, investors and buyers of technology assets and companies around the world have the perception that the Silicon Valley and Boston are where the quality start-ups are, then the numbers won’t mean squat.  It’s unfortunate, but true.  The perception of quality comes from the regions track record (lots of successes), which makes it hard for an emerging tech region.  But perception is altered by marketing and promotion as well.  And without a dedicated effort to promote, we could be whistling in the wind with efforts to show our relative positioning with other established areas.  I guess we just put our heads down and keep trying.

 

What Do You Think? Talk Back To Brent Holliday

 



Something Ventured
is a bi-weekly column designed to supplement the T-Net British Columbia web site with some timely, relevant and possibly irreverent insight into the industry. I hope to share some of the perspective and trends that I see in my role as a VC. The column is always followed by feedback (if its positive or constructive. I'll keep the flames to myself, thanks).

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