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Something Ventured: April 13th

Insight For BC Technology Entrepreneurs

By Brent Holliday

A Local Legend

"And when things start to happen, don't worry. Don't stew. Just go right along. You'll start happening too." - Dr. Seuss, Oh, The Places You'll Go!

One of the most fascinating technology stories of the 20th century, a true rags to riches story, has its roots right here in Vancouver. Since I personally believe that we can learn and be inspired by incredible stories about entrepreneurs that made it big, I want to make this week's column more of a story. What follows are the events and decisions that created a massive technology company that has been in the Fortune 100 longer than Bill Gates has been alive. Intrigued? Let me tell you a little story:

Our story begins in Manchester, England on August 6th, 1900, but it doesn't stay there for long. A young boy and his parents soon set sail for San Francisco. In the brave new world, the boyís father sought employment in mining concerns. About 1906, he decided to venture north to a new place called Vancouver.

In a nearly disastrous decision, he left his wife and the young boy behind. San Francisco then quaked and burnt to the ground. The boy and his mother were homeless and penniless and had no way of getting to Vancouver. A complete stranger listened to their plight and gave them enough money to board a ship north. The 6-year-old boy remembered this generosity and it helped shape the man he became.

Fresh off the ship in Vancouver, a rather unruly logging town, the mother and boy set about searching for their husband/father. Legend has it that they actually walked right into him on Hastings St. (Picture that moment next time you are standing at Granville and Hastings). Reunited, the family decided to stay in Vancouver.

The boy became a man, attending public and high school in town and then attending UBC, when it was a McGill campus downtown. In 1921, he left for Boston, MA and a prestigious school called MIT. He earned a Master's in Electrical Engineering by 1924, specializing in a leading edge technology field of the day, steam turbine electricity generation (!).

He bounced between jobs in Boston, at one time working on gaseous tubes with a company called Raytheon. He then traveled across the country to Palo Alto and worked for a small company called Federal Telegraph (IT&T) (at the time, the largest telecommunications equipment provider). It was here that the engineer started to see new ideas.

There was a new field emerging in the labs, using a technology called reflection seismograph (later, called sonar). In the height of the depression, mid 1930, the young man's knowledge of this new technology impressed two founders of a new start-up in New Jersey. He joined the company and immediately started to implement his seismology techniques in oil exploration. The company was intuitively named Geophysical Service (yup, engineers - not marketing guys).

The young man then led a "nomadic life" in the world's oil patches for the rest of the 1930's. The new technology slowly started to show promise in predicting optimal drilling locations. The Company started looking for oil on its own and had some success. Our young man becomes one of four key executives in the company. Then, something called a world war started to play havoc with their business. Oil companies were not into overseas exploration anymore and the company lost contracts and money.

In a period of one month, the founders of Geophysical Service had become reluctant owners as an alternative to being out of work. Then they had become submarine detecting equipment suppliers as an alternative to closing up shop.

On December 6th, 1941, an ultimatum was made to the company's four founders. The geophysical unit was to be split from the oil discovery business. If the founders couldnít buy the unit themselves, Standard Oil would buy it (and they would most likely be looking for work). Our now 41 year old man is part of the group decision to mortgage everything they have to buy the unit. The deal closed on this day. The next day, The Japanese bombed Pearl Harbour.

Within 3 weeks, the small, struggling company had a new ultimatum. This time it was from the US Government. Oil exploration was way, way down on the list of priorities. Uncle Sam was telling every company in the U.S., "make something for the war effort or we conscript your employees".

The four founders discussed possible products. A man from the US Navy had seen their technology and proposed that it could be used to detect enemy submarines. The founders agreed that this was their best course of action and, after all, the military could afford to pay for expensive equipment.

In a period of one month, the founders of Geophysical Service had become reluctant owners as an alternative to being out of work. Then they had become submarine detecting equipment suppliers as an alternative to closing up shop. Only one thing left to do after refocusing the company: give it a new name. Since their headquarters had moved to Dallas a few years before to be closer to the oil, the men decided to call their new fledgling company... are you ready for this.... Texas Instruments.

The company went on to make more radar equipment in the 40's and in 1952, purchased some licenses for a brand new technology called transistors. Texas Instruments (TI) listed on the NYSE in 1953, the same year they released a pioneering new consumer device called the transistor radio.

They followed that up in 1954 with the first commercial silicon transistor, beating Bell (AT&T) to market, even though Bell's scientists had invented the transistor in the first place. And to top it off, in 1958, TI was the first company in the world to demonstrate an integrated circuit. If you bought 100 shares of TI in 1953, you would have 6,000 today through share splits. If you were one of the founders, you became very, very rich.

The man in the story is Cecil H. Green. Remember the stranger that was his benefactor at age six? Cecil, and his wife Ida, became great philanthropists in the name of technology and education. Have you been to Stanford? You might study in the Cecil Green Library. Have you been to MIT? Possibly been by Cecil Green building there. And yes, he did own that beautiful house at UBC, which he then donated. They named a residence after him for good measure.

And next time you go to Science World, possibly for the Vancouver Enterprise Forum, stop in the front foyer and take a look at Cecil's picture. He helped save Science World, along with Milt Wong, Haig Farris and others. You know what else? This guy is still alive! He is 97. Can you imagine the stories he must have?

He used to return to Vancouver every summer and go fishing. He used to take along a friend of his, a local VC named Haig Farris and tell Haig some of those stories. Haig told me the story of Cecil Green when I was in his entrepreneurship class at UBC. It inspired me as I hope it does you. What can you learn from this? You tell me.

One last thing - I was married at Cecil Green Park at UBC (the house that was his) on August 6th (Cecil's birthday). At the time, I had no idea who he was. Strange coincidence? I think not. Now, if I could just find the next TI here in Vancouver....

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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Responses from last week (I have selected a few that made some good points. Keep ëem all coming):

Good story (on T-Net). The old idea of an anchor tenant has been bouncing around for a long time. But what to do about it? I advocated that the BC government should ride the wave of the BC high tech success stories and put a promo road show together to attract other players. So far, they have only been successful in blatantly ignoring multinationals who showed an interest in BC. This is a pity. I know that blue collar workers are on top of the NDP agenda, but additional tax revenue should be of interest to any government, even this one. And as we all know, the tax revenue from the natural resource industry keeps going steadily in a southern direction. Tax incentives are a touchy subject for most politicians. But at least, we could have an open door policy for high tech industry. We should receive them on a red carpet because this is a competitive market place and juicy opportunities like getting a Motorola Centre of Excellence (with loads of Ph.D.'s and world famous research) have many other options around the world. I suggest a major marketing initiative to put BC on the map for the high tech industry. We are already called "Silicon Slopes" for our software industry, but that too is a well kept secret.

Wolfgang Strigel

-- Well put, Wolfgang. However, I had not heard the Silicon Slopes tag line before.

I agree 100% with your assessment of the potential growth here in B.C. and I would like to add a major player to your list of anchor companies: Newbridge Networks Corp.

Since being "taken into the fold" of Newbridge as a Product Manager for Starvision Multimedia Corporation, I've seen an unbelievable massing of technology dollars flowing into Burnaby to build what I call "Kanata 2". If you've ever been to Kanata Ont. and seen Newbridge's headquarters, you will understand what I mean -- massive!

Frankly, I think Newbridge is light years ahead of Ballard in becoming an anchor for B.C.'s technology industry and I can't wait until the high-tech company spin-off begins...actually, it already has, but I'm not one to kiss and tell.

Emilio Bernabei

-- An admittedly biased perspective. But I like the enthusiasm. I am planning a column on the Burnaby high tech ëhood and other pockets of tech companies in BC. It might actually be a cluster of companies that creates the economic pull and necessary infrastructure to accomplish a technology ìgold rushî in BC. See the next comment.

I agree with the view of the anchor but that is only the tip of the iceberg. The more complete goal should be a diverse infrastructure. Without an multi-disciplined support infrastructure companies build there own internally out of need. I have been there and done that as well as many others. The problem with building internal infrastructure is cost and rigidity.

The technology markets of today change quickly. A company building a large production operation is at a serious cost and time disadvantage if the market changes slightly. Sometimes they can accommodate. Other times they quickly lose market share to competitors in areas like southern California, Boston, parts of Asia where a company selects a different subcontractor down the road. Overly simplified but the trend is well known.

Anchors are part of the process-building infrastructure with spin outs and building the subcontractor and support groups. The danger of course is limited or linear diversification with in that infrastructure. Try getting production optical components done in BC or even Canada. Many local groups need lens, filters and special interfaces ranging from still and video camera users to the telcos with fiber optics. Yet one sees that lenses and precision electro-optics are dominant in select areas of the world. Without a supporting infrastructure in a new area, these manufacturers have little motivation to move or diversify.

There are many examples of clustered infrastructures that have anchors. My question is which comes first? There are many examples of both. I see that anchors create spin offs and infrastructure support. I also see that having an infrastructure encourages companies to grow in specific directions or attract new ideas or new companies to move to an area. For example without the infrastructure companies go outside the local area to the US, Europe and Asia to get their components and support. Again I have been there and done that.

A good diverse infrastructure keeps money and talent local and is a good element in attracting the international giants to set up locally. The general exception is in the software industry where the US is coming to Canada to hire consulting companies of software people. The low dollar and shortage of software talent will drive this for a number of years. It also has the negative effect of recruiting many good talent people to the higher salary and lower tax base of many parts of the US. So who is left behind? Is it the non motivated, the ones who could not get a job in the US, those with inadequate education or experience and so on? To large extent there is a talent drain south but money and taxes are not the only thing in life.

The quality of life if BC and Canada is supposed to be better than say California. Maybe this is a good time for some ads showing how great our winter was compared to California and the east. It may encourage some good managers and entrepreneurs to tolerate the lower salaries, high taxes and overpriced housing while bringing their talent here. Maybe? Probably not. Seattle / Bellevue has as much to offer as Vancouver except it is in the US.

Ballard is a good example but like many Canadian companies it is much easier to purchase Ballard or the good parts (e.g. as has started with Germany in the JV) than to set up a manufacturing division in BC. My forecast is that Ballard will continue to do well but there will be a transfer of technology to Germany and potentially other new partners over time. Germany and Daimler will benefit more from this than the local economy, as much of the subcontract and subcomponent manufacturing work will not be done locally. As the subcontractor's expertise grows in Germany then more work will be awarded to them and given geographic areas will spiral upwards in the new infrastructure while BC continues to do R&D and maybe a bit of service in the distant future.

I believe everyone knows the what the problems are locally. I believe the verdict is still out on whether BC can make it as a technology center or if it will be a handful of stand alone lone-ranger companies that do well. I applaud the individual companies and the wealth it brings to a few. There are always a few outstanding fishermen more by good luck than will become shining stars. Luck and fishing are unpredictable so most successes are by good management and a little bit of luck. With the shifts expected in the world economy over the next handful of years I feel that now is the time to aggressively do it or lose it as a center.

Ask yourself why Boeing and Microsoft have grown in the Seattle area while similar companies in Vancouver have not. Boeing was a serious player in BC many decades ago and left for Seattle. Why? The fantastic technology companies map from PW) shows Boeing's roots.

Keep up the good work and I am looking forward to your next article.

Tom Mitchell

-- Thanks Tom. Yes, it remains to be seen if Ballard management thinks it is a good idea to set up manufacturing here in BC. Even so, if sub-components are assembled in another country, the key brain trust of the company will likely remain here. Itís like the ìfablessî semiconductor companies. The brains are designing and testing the chip, but the manufacturing is done by contract.