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

Something Ventured:
July 12th, 2002


By Brent Holliday
Greenstone Venture Partners

 

“It’s a slow ride,

take it easy…”  Foghat, Slowride

 

Almost four years ago, I wrote a column in this space that advocated the slow, methodical approach to building a big company.  In 1998, the idea of taking your time to build real value was viewed with much skepticism.  Those were the go-go days, where “first to market” and “Internet branding” were the buzzwords.  If a company could not sell $100M worth of goods in its second year of operation, then it wasn’t a real company.  VCs expected an “exit” within 2 years and of at least 10 times their money.  We all know that this is now a very extinct business model.

 

The company I was referring to in 1998 as an 8 year overnight success was Radical Entertainment, a local video game company that appeared to have the world by the tail.  Alas, they failed to finish the execution of their plan and stumbled, badly.  But from a bankruptcy to a re-structuring to a sizzling hot video game market, Radical is back, Ian Wilkinson was an Entrepreneur of the Year in 2001 and the future is bright once again.

 

Now, I’m not advocating bankruptcy as an effective strategy for growing a company.  What I am saying is that it takes time to build real lasting value.  That’s why VCs structured 10 year funds.  The expectations used to be that VCs would get in and out of investments in early stage companies in 6-8 years.  ALI Technologies recently sold for over $500M.  The initial investors were in that company for 12 years before seeing real value on their investment.  Ballard Power Systems was 10 years before the stock took off.  Creo Products was 12 years before its successful IPO.  Pivotal took a paltry eight years to its IPO and exit for early investors.  Angiotech and Sierra Wireless were speedy at 5 and 6 years, respectively.  If you want to be big and play on a global scale, you have to be patient. 

 

Believe me, there is a lot to do in those years in order to be a success and there are never guarantees.  In fact, doubts about viability or receiving financing or product uptake in the market were there for every company.  But management and investors stuck with it.  They persevered and gritted it out in tough times.  None of them more so than Ian at Radical who had everyone give up on him and leave, including his best friend and co-founder.

 

While this isn’t the focus of this column, I’ll say it again for emphasis.  Each of these big local technology companies got through the first few years on very little money compared to what companies get today in financings.  They stayed lean, built customer and joint venture revenue sources and got cash flow positive as fast as they could.  Once stabilized with some customers, they went for larger investment rounds and grew into global markets. 

 

Back to the theme today: Sticking with it.  I’ve also talked in the past about the cyclical nature of business and the technology sectors.  We are in a long, profound slump in technology.  But the sun will rise again.  If you want to be a big, global company then you have to weather the storm.  Some of your dumber competitors will spend themselves into history.  Some of your customers will love your product and help you refine it.  When the market starts to heat up again, investors will look for healthy companies with innovative products that customers are using.  At that point, the frugal, lean, smart management team will better utilize new capital in expanding the business.  And in time, they will win.

 

These are lean days for capital providers as well.  While we cast one eye on new opportunities at decent prices, we have another on our previous investments hoping that we can help them survive this wreck.  But with determination, blood, sweat and tears, we will also get through the lean times.  We also have to stick with it.  Eat the losses, stick to the fundamentals and don’t chase rainbows.

 

If your company is suffering from repeated disappointments and you feel that it might be time to bail, on this company or on this industry, ask yourself will you be better off?  You may see successes in other areas and say, I could do that!  But every job has a learning curve and every opportunity requires experience and domain knowledge to fully capitalize on it.  If you jump today, you will lose all you have built and be starting at some new level.  If you stick through the tough time, then you will be stronger on the other side.  You will have the arrows in your back to prove it.  You will be a veteran.

 

If your company is going under, then you may not have a choice to stick it out.  Try and find some stability in a similar role in a similar company if you can.  Try again to build something big. 

We need a lot more 10 year overnight successes here in Vancouver.  Keep your head down and grit it out.  We’ll see you on the other side.


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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