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Greeks, Grits and GOP

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

Something Ventured:
November 3rd, 2000

By Brent Holliday

"Mellow is the man,
Who knows what he's been missing.
Many many men,
Can't see the open road. "
Led Zeppelin, Over The Hills And Far Away

As my guest columnist pointed out last time, I was indeed away. Far away. With ample time for reflection and relaxation in the Greek Islands (full of history and beauty), one might think that I would have new theories or sparks of creative thought to expand on here in my forum. Here's what I came up with:

Only in Mediterranean countries will you actually have the chance to see knuckle hairs in your food.

I dunno, it just kind of hit me as I was pondering the state of the world over dinner.

Regardless of whether I really had synthesized anything halfway inspiring to write about, it all has to be put off until we get these damn elections out of the way. I can't avoid this topic. November 2000 will be a unique month in history when both Canada and the US choose new governments. As we all contemplate the future of the technology industry, locally or globally, these elections are important.

Does next Tuesday's election of the US President and the Congress affect our industry in BC? Yes. Here's how. The choice will affect the results here in Canada. The extent to which the Liberals will get a majority or how close the Alliance comes to forcing a minority government will be affected by what we see and hear in the US election. In my humble opinion, I don't think George W. Bush winning next week means that the similarly right wing Alliance is stronger. Au contraire. When America wakes up the next morning and realizes what it means to have a further right Republican president, Canadians will chill to the Alliance. And vice versa. Just a hunch.

Big issues in technology will be affected by the election and the subsequent policy shifts including Internet taxes, privacy legislation, the Department Of Justice and its attacks on Microsoft, the FTC and its evaluation of mega deals like AOL and Time Warner and many other areas where governments intervene. Ramifications of these shifts in policy will affect the world's technology industry.

Personally, W (pronounced dubble-ya) as President scares me. Not because of his ideals, his party or his policies. I just don't think the man will be a good leader of the world's largest and most powerful nation. America's dominance of the world means that it must be led by someone that can command respect internationally. And I think there will far too much giggling going on when W tries to broker peace deals.

Back in Canada, the election has become all about technology. After seven years of not knowing the meaning of or successfully mentioning the word "Internet", Mr. Chretien has fallen in love with it. Paul Wells of the National Post wrote a very funny piece after the Red Book policy release ridiculing the announcement of the policy platform. While I think it invites cynicism for the sitting government to have found technology religion just in time for an election, I believe that there is more than just political rhetoric being floated in the Red Book III. The focus on innovation, increases to R&D and exultation of all things Internet is very positive. It means that the new government will be built on the foundation of a "Smarter Canada". Excellent.

But there is a problem. In fact there are two. The first problem with the Liberals is that they think that government should take an active role in helping "Canadians in the New Economy."

I have to side on the approach of the Alliance when it comes to making Canada a leader in information technology and other "new economy" industries. Get government out of the way. As much as possible, the industry will grow by having policies that encourage businesses to be created and sustained without a government employee involved directly. There are definitely active roles in education and access to technology that the Liberals properly tout. They can overhaul the CRTC to make the market more competitive for communications. They can be proactive on on-line privacy and copyright laws. But I get worried about some new grand HRDC handout plan for "stimulating" new economy jobs. Can you imagine? Every business with a webmaster gets $100,000 in handouts, even if you are a bakery. Don't laugh. Jane Stewart might get re-elected.

The second problem is that the apparent discovery of the Internet seems out of date by a year or two. They are guaranteeing Internet access to everyone, but who wants to bet that they claim a 28.8 K modem connection shared by 250 students counts as a connected school. They want to create a portal for Canadians, called access.ca that, get this, "will take Canadian to Canadian sites first" and "will jump start demand for Canadians seeking on-line shopping". So now the government wants to be your home page and take business out of the hands of the private sector companies that do this already. Regardless of the interference of the access.ca site, it is just plain dumb. Who gave them that advice? Didn't anyone tell them that it won't work. A portal for all Canadians. That's so 1997. Next they'll be telling us that they will provide all sorts of new Canadian content to help us keep our culture relevant in the face of the American monster. Oops. They did say that in Red Book III, page 9, under "Putting More Canada in Canada"

I don't want to affect your vote, but this is pretty much a done deal. The Liberals will be back. They have taken some pretty major steps in taxation (personal, capital gains and corporate) that we have screamed for and finally got. They are all for a smart, connected, innovative Canada that creates tons of new ventures. Hey, I'll buy that, as long as they know that they have to make good on those promises and that type of thinking. We will make sure that they stop the stupid initiatives like access.ca and stick to the smart ones. We will lobby for policies that don't require direct government intervention.

Like I said earlier, the degree to which the Liberals hold power may be affected by the US. In the end, we have Papa Jean back for term three and a technology industry that is top of mind. And that's a hell of a lot more support than any other government at any time in Canadian history. Now we have to use this opportunity to grow fast.

Random Thoughts -

- The BC ESTI (Early Stage Technology Index) is much lower now at 5.5 out of 10. We are seeing a hesitation among early stage angel investors as some prepare to take write downs and losses for the year. Those that have made money are hesitant to invest as they are new to the investing business and are not taking advantage of that new $500,000 capital gains tax deferral. So the early stage is being hit. For Vancouver entrepreneurs, there was a breathless time in late 1999 and much of 2000 where they were calling the shots on investment and valuation. Sorry to say that the tightening of the market has made that harder to do. But, the good news is that new companies are springing up with revenue generating business models. Flat and significantly hit public stocks have engineers and managers thinking about foregoing the options that are underwater and trying something new. We are better off here than in Seattle or the Valley where the wild success has been followed by wild failures.

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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