July 12th, 2002
a slow ride,
it easy…” Foghat,
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
a company could not sell $100M worth of goods in its
second year of operation, then it wasn’t a real
expected an “exit” within 2 years and of at least 10
times their money.
We all know that this is now a very extinct
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.
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
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.
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
of them more so than Ian at Radical who had everyone
give up on him and leave, including his best friend and
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
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.
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
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.
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
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
will be a veteran.
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.
need a lot more 10 year overnight successes here in
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
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