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Something Ventured:
Jan 8th


Insight For BC Technology Entrepreneurs

By Brent Holliday

Missing The Big Dance

"You are young and you are the future
So suck it up and tough it out
And be the best you can "
- John Cougar Mellencamp, Minutes To Memories

So here we are: The last year of the 1900's. Assuming that doomsday cults and Y2K chicken-littles aren't correct, we'll all celebrate at a massive New Year's Eve party in a little under 12 months. Before then, you will be subject to all sorts of {fill in the blank} Of The Millenium/Century/90's lists and fearless predictions for the coming century. All cynicism aside, it will be neat to reflect on all of this chaos that is our world. Tell you what, I'll kick it all off with a rant about Canada and what it might become in the next century. If you don't want to read the whole column, I'll give you the punch line: Not much.

I promise that I won't mention the word "tax" in this entire article. Oops. We've kicked that horse enough already.

I've been up on my virtual soap box before about what ails Canada and what ails BC from an economic point of view. Most of the problems and possible solutions discussed here have related to the environment for business. That is, the political climate, the prohibitive t _ x rate, the currency situation, the financial markets, etc. I want to aim the blame for our dyspeptic situation back at you and me, Canadians in business. Specifically, the individuals that are running or financing businesses are where the buck needs to stop (pun intended).

First, a few data points:

- Financial Post, December 21st 1998: Canada Missing Out On Boom In E-Commerce - While the superlatives are flying in the U.S. about how Christmas '98 will be remembered as the turning point in e-commerce, Canadians were asleep at the mouse. This article described how there is virtually no on-line retailing in Canada. It gives no clear reason for the lag. One guy pointed the finger at the telcos for charging too much for Internet access. Tsk. Tsk. How Canadian. If it ain't working, blame the big guy. Did you go to Chapters On-Line and send a book to your aunt in Winnipeg?

- Red Herring, January 5th, 1999: E-Commerce Companies Rejoice - US$3.5 billion was exchanged at web sites in the fourth quarter of 1998. (Click here for more) AOL claimed US$1.2 billion alone. They sold $36 M worth of travel, goods, etc. in one day (Dec 17th) vs. $1M a year ago. Quick, name 1 Canadian e-commerce company. OK, smartypants, name 2 (assuming you got Bid.com the first time).

- Financial Post, January 6th, 1999: Amazon.com Sales Soar - Guess what their revenue was for the year, 1998? 1997 sales were US$66 million. 1998 - US$607 million. Profitable? Not yet. In fact, not even close. (Click here for one point of view) Stock price: $470 a share. Market cap? US$24 billion. $8B bigger than the Royal Bank. Say it again, slowly... biiiiggggeeerrrrr than the biggest bank in Canada. Sheesh.

- Number of billion dollar revenue technology companies in Canada: 4
Number of billion dollar revenue technology companies per million people in Canada: 0.13
Number of billion dollar revenue technology companies in the 408 and 650 area codes of California: 25
Number of billion dollar revenue technology companies per million people in the US: 0.30
Number of billion dollar revenue technology companies in Finland: 1
Number of billion dollar revenue technology companies per million people in Finland: 0.20
Number of billion dollar revenue technology companies in BC: zero (closest is at $220 million)
(sources: Fortune 1000, Financial Post 500, Funk and Wagnalls Online)

- 80% of the technology companies in BC have under 20 people. That's a lot of really small business.

Obviously, the boom in e-commerce has my knickers in a knot because Canadians are not reaping the rewards. It's not like we didn't see this coming. Here's a paradox: We are one of the most wired countries on a per capita basis, but we have failed to get the jump on this incredible new on-line market. E-commerce isn't just retail. It's about businesses having orders placed on-line on customer extranets. Is your company selling product or providing customer service on-line? My point is that the hesitancy to jump into e-commerce is typical of the Canadian entrepreneurial culture: Wait and see.

We are a cautious bunch here in Canada. The conservatism probably relates to our British heritage. We just don't like taking risks. Our stock market performance certainly reflects that. There is a very low tolerance of failure in our somewhat cynical society. It permeates our culture. Pop quiz: Be honest, when preparing for something big at work, you assume the worst case in your mind, so if the outcome is bad, you won't be disappointed. It's as if failure isn't the problemÖ it's the embarassment of failure that we want to avoid.

Another quirk of the Canadian condition is the fact that the U.S. is right next door and we really love to hate them. Ohhh, the flag-waving pride makes our skin crawl. Secretly, deep down, we really envy them. Come on, admit it. In business, they are kicking the world's ass heading into the new century. They are the better-looking older sister that gets all the dates for the prom and we are the four-eyed, younger sibling staying home to count all of our spelling bee ribbons. Damn them for being so good!

We are also guilty of not thinking big. This is the fundamental problem with Canadian business today. Don Mattrick, President of Electronic Arts Worldwide Studios, told me recently that he sees that as a Canadian psyche problem. When a Canadian entrepreneur thinks a million, a U.S. entrepreneur thinks a billion. Without setting the sights high, the planning inevitably falls short. It drives me absolutely around the bend when an entrepreneur elects to pursue a Pac-Man sales strategy (Just gobble up whatever little customers are in your immediate path). They get so busy focusing on the small ones that they miss the big fish (too hard, might fail). I'm more of the mind that landing the biggest customers first makes all of the little ones much easier to get later. Go big or go home.

Sure, we have some notable exceptions to this anti-big rule. No one ever accused Terry Matthews of not thinking big (he's Welsh, go figure). But far too many businesses are content aiming for small niches or regional areas. It's not just the entrepreneurs. Noooooo. The money guys are just as guilty for laughing people out of their offices. If you're a cynic you might say that Canadian investors look for any reason NOT to fund you. Is it possible for a venture capitalist, the riskiest adventurer in the financial community, to be conservative? You betcha. If we don't think big, we will miss great opportunities.

Canada has some prohibitive environmental conditions that work against businesses growing to be big. I'm not ignoring it or saying it doesn't matter. I am always asking myself the question, why aren't there more billion dollar technology companies here? Many will say that they have been snapped up by U.S. firms before they can grow to that size. Others will say we lack the infrastructure or the talent pool. I agree that it is an uphill battle, but the will to succeed has to be there. In fact, it has to be taught at an early age. The acceptance of failure needs to happen in Canada like it has in the U.S. And all Canadians need to think bigger. If we don't change the way we approach business, the environmental conditions won't matter much at all. This is why I gave the punch line at the beginning that Canada won't amount to much in the next century. We will be a non-player if we continue to wallow in the finger-pointing, blamestorming, conservative culture and slide into the abyss of mediocrity, letting all of the new economy riches pass us by.

Look, I know I'm generalizing to a fault here. And I realize that the collective success of Canada starts with the success of individuals. But I'm guessing I made my point. Canadians need to give their heads a shake and start to take a few more risks. We need to look at ourselves and start to believe in our abilities in order to even begin to capture new opportunities. I wrote two articles that may be of interest to re-visit here. One was What It Takes To Be An Entrepreneur and the other was The Perfect Investor. In these articles I talked about the conditions necessary to be the best.

What's it going to be folks? Laurier said in 1914 that the 20th century would belong to Canada. Well, Wilf, it might have got you elected, but it wasn't very accurate. So, if I say that the 21st century won't belong to Canada, will my picture be on the $5 bill?



Random Thoughts

- I want to start a pool that tries to predict the day that Internet stocks start to drop drastically. In other words, it's a pick the peak kind of deal. Frist prize should be one of those jester hats, because you predicted when the last fool was left holding the bag. The fear of being that fool has kept me on the sidelines. OK, I'll start. I'm picking April 1st, 1999. Seems fitting.





Response From Last Week's Column:

Further to your Something Ventured article of December 18, 1998 and wish list item #1, where you mentioned Ireland, Oregon and Ontario as examples of jurisdictions that have made themselves tech-friendly and have prospered as a result, I thought you might be interested in this article from Upside's online edition where the Irish technology industry

is profiled: http://www.upside.com/texis/mvm/story?id=3687f8af0

David Ing

Thanks David. That article will be in the print version out now, I believe. It's worth a look for all of us that still want to change the policies (yes, I'm a hypocrit already and I just finished my article)

Re: Santa Wish # 4 (The incubator for New Media)

We're working on setting up one of these right now, here at TechBC. We've only just opened our facility and so far we've got one tenant in our incubator. We're looking to expand that for 1999. It's a work in progress for us right now and we would welcome your input. Our first tenant works closely with Tim Collings, one of our inaugural faculty members, and we expect that as we add faculty rapidly in 1999, that new tenants will benefit from similar linkages. Let me know if you can make it out to Surrey to visit us in the New Year -- we'd like to see your wish (and ours) come true.

Best of the season to you!

Bob DeWit

Bob, I would like to come and see it. Are you aware of the initiatives of the IICS and New Media BC groups organizing to try and duplicate the success of the Telecite Multimedia facility in Montreal? There's lots of input available there...


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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