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

Something Ventured:
November 10th, 2006

By Brent Holliday
Greenstone Venture Partners

The Valley Way (Redux)

“Come on baby...
And she had no fear.
And she ran to him...
Then they started to fly.
They looked backward and said goodbye...
She had become like they are.
She had taken his hand...
She had become like they are.
Come on baby...
Don't fear the reaper” – Blue Oyster Cult, Don’t Fear The Reaper

A few years ago, I wrote one of my more popular columns called “The Valley Way, Eh?”. It was a 10 point essay on how the Silicon Valley company/employee/entrepreneur looks at a start-up company differently than we do.  I wrote it in a hotel room in San Jose right at the end of the bubble.  Two years after that, when misery gripped the Valley, I thought that perhaps I had written about a snapshot in time… a mania brought on by the dotcom and networking bubbles. Nope, six years later it turns out I was bang on.  It’s different down there and this week I want to re-iterate why.

Ron Stevens, CEO of mixpo, fka Pixpo, fka How2Share, spent 15 years in the Valley as part of six different companies.  He now resides here for personal reasons and can’t get over how different it is here.  Now, “here” is not meant to just be Vancouver.  It actually refers to everywhere else but “there”, which is the Silicon Valley (with the possible exception of parts of Boston and Austin).  So Ron doesn’t pick on Vancouver, per se, it just happens to be that he can only compare this market to there.  You with me?  Good.

Ron has espoused to me on many occasions the differences between (as he likes to think in sports metaphors) the professional league and the minor league.  It is not derogatory, as I will explain, but you can’t help but feel some civic pride well up inside you and want to call him an a—hole and let him pack up and go back if he doesn’t like it here… but that’s not the point.  This isn’t about insults.  It’s about reality and a heavy dose of it.

So, six years ago, I told you what the Valley was like.  Now I want to tell you what it is like here and compare that to the Valley and see why guys like Ron are left scratching their heads.  This is all focused on the technology start-up and the really, really big ideas that could create >$100M in value.  It also only really applies to the first 20 or so people that you hire because they get the rocket ship built and lifting off.  Keep that in mind.  Here are the five traits that I see (and Ron has observed) in companies/ employees/ entrepreneurs that block the creation of a really, really big technology company:

1)     Founderitis – One of the most amazing phenomena I have witnessed over a decade working with BC start-ups is the attachment of the founders to the company.  When the sweat has been poured, the midnight oil has been burned and the shape and strategy have emanated from one person or a small group of company starters, the attachment is nothing short of parental.  You hear it all the time… “this is my baby”. The company becomes your offspring.  Heck, some entrepreneurs even name the company after their offspring! And, just after unconditional love, the second strongest feeling of a parent is protectiveness.  So the founders will not let anyone else tell them that their baby is ugly, that it has a funny odor or that it ain’t worth half of what you think it is worth.

Founderitis is rampant.  I have a thousand anecdotes about the condition.  If you don’t want anyone’s money to grow your business, founderitis is just fine.  If you want money, you get shareholders and, guess what?  You work for them.  All of a sudden, your sweat and tears in the past are less relevant.  It is all about what happens now.  If you do not have the capability to move the company forward fast  or to grow to obscene heights, you will be removed. It’s business, not personal.  But more than wanting to keep your job or wanting to be the CEO, the offensive part of founderitis to Valley veterans is the attachment to one idea.  Valley people shrug it off because there is always another company to start.  If this is a pain for you, if this role is not right for you, move on.  One thing about the Valley that is so vastly different is the idea of sunk cost. We want it back, because we earned it.  They don’t care. You may have poured your heart into it, but it didn’t work.  Go pour your heart into something else.  Get over it.

2)     Fairness – We have a strong sense of fairness in Canada.  Most US people have the same values, by the way.  In a technology start-up, looking to rule a market segment and reap great rewards, fairness becomes relative.  It’s not fair that they ask us to stay until 10 pm every day this week, you say.  True, because it wasn’t explicitly in your job contract.  But is it also not fair that your competition is using Chinese or Indian labour, has $10M more than you in the bank and is getting their product out the door before you.  If you don’t bust your butt, you will lose and your company will go out of business.  Hmmmm.

Sure, there are rules.  Rules of law protecting workers.  Rules of conduct protecting businesses.  But more so than in 2000, when you compete in 2007, you will be competing on a very flat earth with lots of new workers who can do what you do.  Worker productivity here must improve dramatically to offset the wages that pay the higher cost of living in this lovely urban park that we call home.  If you want fair, get a job with a union backing you up.  If you want to sit on a rocketship, then forget fair.  Instead, get the Valley attitude of “do what we have to do to win”.  They know it’s not fair to be paid what they are being paid to work as hard as they do.  But they don’t care.  They want to win. They want to make the options worth something. 

3)     Minutiae – If I could count the number of times that I have argued the finest detailed point of a vice president’s employment agreement or the clause in the subscription agreement that has a chance of actually happening about as small as the chance that Jack Layton will be Prime Minister, well, I’ve lost count.  And you know what?  Shame on me.  Shame on me for falling into the trap of minutiae.  The gigantic time-sucking vortex of lawyer-paying meaninglessness.  The company needs to run fast, grow fast, get in front of customers and sell hard.  Minutiae is like a cancer, the more there is the slower the company grows until it chokes to death.  Why do we feel compelled to protect our interests in such labyrinthine ways?  What drives us to spend hours contemplating miniscule details.  In a start-up that I changing the world, the details can wait.  If you want to cover your ass for every possible permutation in this and several parallel universes, then have at ‘er.  But you will be forgoing productivity for protection and making a smaller company for your effort.

The Valley folk pay lawyers and accountants just like we do.  But the negotiations seem to be very different.  Perhaps the local lawyers need to jack up their rates so that we talk to them less, but they make the same amount of money… because that’s what happens down there. It gets done faster.

I’m picking on legal documents, but minutiae happens at all levels and areas of a company.  People in insanely great companies need to see the forest, not the trees, and keep moving.

4)     Practicality – We do have a very exciting mix of cultures in Vancouver leading to an extremely high index of creativity.  Creative types have been stereotyped as a little odd, to say the least.  You could argue that this crowd we live in would be less practical and more open to change and chaos.  But for whatever strength of culture and counter culture in our midst, we still seem to be a fairly practical, civil lot.  Now, I’m not saying the Valley is anarchic. Nor am I saying they dress better.  They actually lack culture there… almost completely. I think it is more the attitude of freedom from caution and embracing of change that permeates the Valley. They are not practical when it comes to committing to win.  They want to win the big prize and they might try ten times before they hit the right one.  It does not seem very practical to have a resume of failed companies.  It does not seem very practical to take a lot of stock options because they rarely turn into anything.  It does not seem practical to value the company over your personal life.  Yup. We might have better nightlife here because we think we are “edgy” and “nouveau”, but we are really still very practical folks.  As I said six years ago, risk means standing on the edge of the cliff and leaning.

5)     Fear – This is the main event right here.  We fear failing in our society more than we value winning.  That is fundamental to understanding why these seemingly nerdy, intelligent people from the Valley have no life, except their work.  They are so stimulated by the idea of creating the insanely great company and reaping the vast rewards of doing so, that they forego other worldly pleasures.  They don’t care if they fail.  They pick themselves up and, like lemmings, head into the next two storey, non-descript technology park building to start the next one.  We shrink in fear of losing “our baby”, disappointing our shareholders, having failed companies on our resume or damaging our reputations.  And that fear is exacerbated by the relative lack of success on a Google-like scale.  Without huge successes, people won’t catch the whiff of excitement of winning and the fear of losing continues its prevalence.

OK, so now you’re pissed.  I’ve insulted you because you think you are building an insanely great company AND you get the benefit of living in this paradise we call BC.  You say you can have it all, if you have the discipline and the smarts.  I believe you can… on a smaller scale.  You can make a very comfortable living and still ski on the weekends.  You can sell a company for $20M, make your angel investors happy, buy a fancy car, vacation in Tuscany and take your kids around the world by boat for a year.  You can do that because you are smart, dedicated and found a very good niche for you innovation. 

But, you didn’t build Google or Intel or Genentech.  That’s what I’m talking about.  How do you find twenty or thirty talented people in your field of expertise in Vancouver who are willing to risk it all to be a global leader?  Twenty or thirty that lack founderitis, can ignore “fairness”, can avoid the minutiae, are free from overt practicality and who lack the fear of failure.  The point of my thesis and Ron’s observation is that it is tough to find these folks in meaningful numbers anywhere but in the Valley. It’s tough, but it could happen.  Just screen your first twenty employees well.  Measure their fear of failure.

There is nothing wrong with loving your family and valuing it over your work.  Work to live is a very noble and proper way to go through life.  In fact, the reason Canada is a great place to live is that people have that option and most take it.  If you are smart and a bit lucky, you can be very successful and focused on family and recreation.  But if this is you, you are not cut from the type of cloth that creates the biggest technology successes.  At least not among the first few who share the biggest upside in those successes.

By the way, venture capitalists are, by and large, not in the group either.  We like our lives and let the entrepreneurs do the sweating.  So I am not on any soapbox from personal experience.  But I have seen what it takes and it is a rare quality when you are outside of the Silicon Valley.

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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