November 23rd, 2001
give you money
I can't give you the sky
It’s better off if you don't ask why” – Uncle
Kracker – Follow Me
the span of 48 hours this week, I was asked to meet in a
roundtable set up by the BC TIA with Rick Thorpe,
Minister of Competition, Science and Enterprise and then
to present at a Policy Forum at the Vancouver Board of
Trade. The topic for both was what policies can/should
the government adopt to help create a larger and more
sustainable technology industry.
The trick here is to suggest things that don’t
cost money, at least not a lot of money.
To suggest aggressive fiscal stimulus to a
government that just cut 1/3 of its staff and nearly as
much of its revenue through tax cuts is just not on.
So, let’s see.
Create a world-class tech industry without
spending a nickel. Hmmm. Minister
Thorpe… how fast can you learn Java?
of my esteemed VC colleagues at the round table for
Minister Thorpe suggested that government should just
stay out of the way and not adopt any stimulative
measures at all. That is music to the ears of a
government that has no cash.
However, it is completely unrealistic.
The status quo just ain’t good enough.
Government should step in to areas where the
market fails if it serves the good of the people. And the market is currently failing in some key areas.
For instance, is our market functioning correctly
when $446M was invested in early stage BC technology
companies in 2000 and our neighbours to the south in
Washington has $4,253M to build their companies with in
the same year? That’s
10X more capital for not even 1.5X as many people. I invest in Seattle and there are not 10X as many quality
opportunities to invest there.
have built an impressive industry here during a time
when the government was not only NOT helping, but was
actually hindering the progress of the industry.
Imagine what we can do with a gang that will
stand shoulder to shoulder with us!
Clearly, the BC Liberals want to help.
I have been a continuous vocal
supporter/cheerleader for our industry here.
Make no mistake, we have the foundations laid for
a very bright future.
However, our biggest tech companies are still
rather puny on the world stage.
Greg Aasen, founder of PMC-Sierra said it
himself, “We don’t even show up on the radar against
companies the size of Nortel, Microsoft and Cisco”. The benefits to the regions that the technology titans
inhabit is very clear and pronounced.
Greg would not be unhappy if his company could be
a tech titan and we would all indirectly benefit from
mostly up to Greg and the brain trust at PMC-Sierra to
plan and execute a path to growth.
But provincial policies can help his company get
are five basic tents that any policy decision must be
measured against to be effective in growing a technology
the policy does not enhance any of these items then it
is not worth doing:
Brain Power and Skills
R & D
Intelligent Funding Sources
Globally Recognized Anchor Companies
Smart, Experienced Infrastructure
are the building blocks for a successful industry.
Check this list against Ottawa, Canada’s
technology mecca today.
They have attracted some of the best and
brightest minds in communications technology and have
drawn considerable engineering skills to the region.
They had Bell Northern Research, NRC’s largest
labs and the CRC (Communications Research Centre) as
well as two universities cranking out innovation.
They have Canada’s most successful VC fund
(Terry Matthew’s Celtic House) and have attracted the
most US VC money of any region in Canada.
They have Newbridge (now Alcatel), JDS Uniphase,
Mitel and a chunk of Nortel.
They have technology only lawyers, savvy
accounting, very good recruiting and HR outsourcing and
many experienced marketing/engineering/strategy
consultants as part of their infrastructure to get
world-class companies to market.
current situation in BC is far from dismal, but is also
far from ideal. It will be 12 months before we start to
see a meaningful economic recovery if we do not see any
escalation in terrorist activity.
It will take that long to see meaningful numbers
related to cost-cutting by the technology companies, to
see a meaningful return to public market financing, to
see a pronounced improvement in cross-border movement of
goods and people and to see what effects the low
interest rates have on consumer and business buying
is the time to hunker down and refine the
products/services that we want to sell into a better
is also the time to plan for a better tomorrow and begin
the process of implementing sound policies to put us on
a better ground when things get better.
here is what I thought we should ask the government to
do (with our help). I will put a $ sign in front of each suggestion to reflect
the amount of money and/or resources required to
$ is cheap, three $ signs is expensive and probably not
doable until the government has balanced the books.
Remember, nothing happens overnight.
These have to be five to ten year plans to see
the desired effects.
- Promote BC’s Technology Industry to targeted
groups in a smart, effective way – Draft off the
Industry Canada “Brand Canada” initiative and
add the specifics about BC.
Tell success stories.
Counteract myths and perceptions.
Focus the message and the delivery to the
audience (increase capital investment? Target the
investors with a message of higher returns.
That’s all they care about.)
Find champions and/or messengers in the US,
Europe and Asia that the US people respect (anyone
from Peter Jennings to James Richardson of Cisco or
Jeff Mallett of Yahoo).
- Bring in Experts on Successful Policy Planning for
Technology – Finland was just ranked the #1 most
competitive country in the world ahead of the US and
is strikingly similar to BC in size and composition
of industry and people.
They went from the armpit of Europe in 1985
to number one in the world (the cockpit) in 2001
through specific concentration on R&D,
technology commercialization and public/private
Bring the Ottawa Regional Development people
in to share their success and policies to keep
Ottawa going. Have all of these experts present/meet with government
and business leaders from technology and other
- Aggressively Convert to E-Government – The
government has to spend the money now to automate
government through the web in order to realize the
efficiency gain from the 11,000 workers that they
Now, any normal business would have automated
processes BEFORE turfing the excess workers, but
certainly, now that they have done it, the BC
government needs to accelerate the move to
have more than enough talent in BC to build the
proper technology to support this.
Get on it and get BC companies to work.
And make sure that business red tape is
removed in the process.
- Create a Business Culture In Technology – The
government can assist in strengthening education and
real-world experience for technologists.
Canada has strong technology and
We need technology managers who understand
how to attack a market and win. Bolster the business
schools to include mandatory entrepreneurship
courses for engineers.
Bolster Science and Engineering schools with
real world successful technologists teaching their
is the model as they have hundreds of guest
lecturers that come from industry.
Andy Grove, co-founder and former president
of Intel, teaches MBAs and engineers at Stanford.
Have continuing education bolstered to get
people in industry learning the finer points of
raising money or properly positioning products and
the industry association’s efforts to attract
bigger and better speakers from around the world to
their SIGs and forums.
- Recruit And Keep World Class Educators and
Researchers – It will be expensive, but we need to
have a plan to get the best and brightest to our
world class facilities (labs, school classrooms,
etc.) will help attract people.
Creating centres of excellence in certain
science fields will help.
My belief is that you do not need to give
them financial incentives beyond paying them, in CDN
dollars, what they would be able to get elsewhere.
But the most important facet to getting these
people to come to BC is having the facilities and
the opportunities for them to work their craft.
- Make It Easier To Start A New Company – Adopt
policies and procedures that “grease the skids”
for early stage innovation.
I am NOT suggesting direct subsidization, but
rather increased funding for pre-commercialization
bodies like ASI and Science Council.
Also, create more physical space in a
public/private partnership to give start-ups a home
that is wired for sound and has the basic lab
functionalities to build on.
Then, tell start-ups that pass a certain
criteria that they have access to the space cheaply.
In other words, try and remove the overhead
costs of doing business at an early stage so that
all of the capital raised goes to the
commercialization and the business directly.
Foster the development of private agencies
that can assume the non-core operations of these
start-ups into a larger more efficient service
Market research, accounting, corporate legal
work and anything else that is not critical to the
company’s strategic advantage can be too small for
any one group to make money at.
But a company that gather’s twenty or
thirty of these company’s service needs together
has a large business.
They can turn around and act as a buyer for
computers, employee benefits etc. giving the
start-ups more leverage to keep costs down.
- Develop Clustering Initiatives More Effectively
– While we are grateful to have a diverse
technology industry because it buffers us from
cyclicality in any one sector, clustered
concentration of industry is the only way to world
or Four of our dozen core tech sectors should be
made stronger through initiatives like R&D
spending, attraction of major industry players and
needs careful consideration of all of the
costs/benefits to growing any one industry here in
our province. There
are a lot of factors at play.
It appears that we are developing the fuel
cell/alternative energy cluster, but the government
can be more active here is organizing thoughts
around how to proceed.
Once the decision has been made, it will be
an expensive effort to foster the clustering, but in
the long run it will be of great benefit.
- Increase The Flow Of Capital To Early Stage
Technology – This is my area of expertise and I
think I could fill a whole column worth of
to say that we need to create two separate levels of
incentives to get more capital.
One is for the individual to entice the angel
investor to invest in very early stage companies.
This is often easily done through tax
incentives like capital gains rollovers.
The second is to create an environment where
returns can be maximized which is the only thing
that large institutional players are interested in. No tax breaks will make a large fund come to BC.
They will come because they believe that the
returns can be made here through great opportunities
and great execution by management.
the fuel for growth is money, the ignition is ideas and
people that can innovate.
There needs to be a balance in policy towards
will not come if there are no great ideas and no great
teams to build great companies.
government is looking for ideas and asking as many
people as possible. Here’s my two cents. I
believe that the government can help to build a brighter
really interested in any of your ideas that can help,
keeping in mind the five foundations of building a
better technology industry and the costs associated with
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
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