bi-weekly column with timely,
relevant and possibly irreverent
insight into the BC technology
November 9th, 2007
Greenstone Venture Partners
Industry Health Check
“Look up - Look down
Look out - Look around
Look up - Look down
There's a crazy world outside
We're not about to lose our pride” – Yes, It Can Happen
Being on the wrong side of 40 now, I had to get that
all-expenses paid physical exam recently.
Things are fine, thank you for your concern.
I see the exam as more of a baseline for future
checkups. It got me thinking a
little about the health of BC’s technology industry and
whether we could look back on the baseline from previous
years, just to compare.
Anecdotally, things are rocking in BC.
The job wanted ads are a good indication of the
tightness in the technology labour
markets. BC TIA is working with the
provincial government in initiatives to attract US
workers now that our loonie
can pay for higher US dollar salaries.
I have heard of many searches for high level
executives with CFO’s especially in demand now.
Everyone I talk to is either trimming weak staff
to add more experienced folks (if they can find them) or
adding bodies for growth.
Despite the financial mess in the
markets these days, the technology industry appears to
be robust (except maybe for those technology companies
selling critical IT infrastructure to the financial
companies… thank you John Chambers for raining on our
parade a bit!). Wireless continues
to boom. Enterprise IT is fine in
all non-financial sectors. The
consumer is still buying… for now. Against this macro
backdrop, let’s see how the BC companies are faring:
November 2003, the big tech companies locally were:
the big employers included Electronic Arts, Alcatel and
Nokia who had purchased local companies and stayed.
Motorola was moving out.
T-Net has kept the score of total market capitalization
for over a decade in its T-Net 20.
In November 2003, the CDN market cap of our top 20 was
$14,036B. It was the highest point
since the bubble of 2000 and it would go higher.
Of that $14B, $750M was Creo,
which was purchased a year later by Kodak.
This was a time of renewal and the very beginning
of a surge in the stock markets that has no abated to
forward to November 2005. The list
of companies does not change except that Kodak gets
lumped in with the big employers and our T-Net 20 index
no longer includes that $750M or so of market cap.
The score then? $11.1B.
Down 20% overall, and down 16% if you add
Creo back in to compare
apples to apples. In the same time
period, the technology heavy NASDAQ went from 1865 to
2273, a gain of 22%. So, even
accounting for Creo taken
out of the index in BC, we were far below the growth of
the technology markets as a whole.
QLT was flying in 2003, but not in 2005.
Ballard had also wilted. But
MDA and Angiotech were
Crystal was bought by Business
Objects before it could really add to the public market
let’s look at today. The list is
exactly the same (for the big technology companies) than
it was in 2005. Today, the total is
$9.9B for the T-Net 20. That is down
a further 12% since 2005 and down 34% since 2003
(factoring out Creo).
For comparison, the NASDAQ is at 2630 today, a
16% gain over 2005 and an amazing 57% gain since 2003.
The BC list includes new players like
Aspreva and Absolute
that carry big market
capitalizations today. But high
flyers Angiotech and QLT
have taken a bath. Collectively they
don’t reach the size of Aspreva
today. Of course,
Aspreva will disappear from
the list soon after its $915M acquisition. By the way,
MDA has slowly and steadily grown to be our number one
technology company in BC.
BC, as represented by its largest independent technology
companies, has lost shareholder value over 4 years while
the NASDAQ has grown almost 60%.
Relative to the rest of the industry, our big boys have
not been winning.
Anchor companies are necessary to foment a critical mass
of people and capital for the creation of new technology
companies. We have had billion
dollar anchor companies for over a decade in BC.
Our bigger employers acquired (sometimes for a
billion dollars) their way into this market and continue
to grow their businesses (it is impossible to carve up
their market capitalization to reflect what is done in
BC, so you can’t add them into this discussion
quantitatively). Going back to the anecdotal evidence I
started this discussion with, things are actually quite
rosy in the sector. So what’s going
Acquisitions in BC continue to generate returns…
Here’s my short list from 2007:
Taking out the public companies acquisitions, where much
of the value had been realized already prior to the
event, the total value in BC might be $500M in private
company acquisitions and $350M of it was Club Penguin
leaving about $150M in private company wealth creation.
To compare, 2003 was only $50M in BC according to
an exit study of Canadian technology companies and 2005
was $120M, again if you leave out the big public company
acquisitions of ID Biomedical and
it all doom and gloom in the numbers? Not really. The VC
dollars invested in BC are climbing although behind
these numbers are fewer companies raising more dollars
per investment round:
2005 - $219M
2007 so far - $170M
region appears to be doing OK if you look at numbers
other than the big company’s market value.
But our largest technology company.
MDA, is a $1.7B company that
employs less people here in BC than a couple of American
companies that operates facilities here after acquiring
private companies. Since 2003, we haven’t been making
much headway in growing really big technology companies.
Will we be able to do it?
Clearly it can be done. Kitchener-Waterloo has a $62B
behemoth in its backyard, Research In Motion.
Now that’s an anchor company… although I’d be
happy with three or four $15B companies to diversify
away from just one.
summary, I don’t think there is reason to panic.
Our baseline checkup has revealed a small concern
in the health of the industry. If
the biggest players here are not getting really, really
big on the world stage, are we in trouble? Why is it
important? Our ability to make the
technology industry a huge industry in BC will depend on
many factors, but huge companies draw people, create
buzz and spin out people and technologies into the
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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