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Engineering BC’s Technology Future
A bi-weekly column with timely, relevant and possibly irreverent insight into the BC technology industry.

Something Ventured:
November 23rd, 2001

By Brent Holliday
Greenstone Venture Partners

“Won't give you money
I can't give you the sky
It’s better off if you don't ask why” – Uncle Kracker – Follow Me

In 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?

One 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.

We 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 it.  It’s 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 there faster.

There are five basic tents that any policy decision must be measured against to be effective in growing a technology industry.  If the policy does not enhance any of these items then it is not worth doing:

  1. Increase Brain Power and Skills
  2. Stimulate R & D
  3. Increase Intelligent Funding Sources
  4. Build Globally Recognized Anchor Companies
  5. Enhance Smart, Experienced Infrastructure

These 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.

The 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 confidence.  Now is the time to hunker down and refine the products/services that we want to sell into a better market.  It 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.

So 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 implement.  One $ 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 Canada.  It 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 sector partnerships.  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 industries.
  • $$ - Aggressively Convert to E-Government – The government has to spend the money now to automate government through the web in order to realize the efficiency gain from the 11,000 workers that they just torpedoed.  Now, any normal business would have automated processes BEFORE turfing the excess workers, but certainly, now that they have done it, the BC government needs to accelerate the move to automation.  We have more than enough talent in BC to build the proper technology to support this.  Get on it and get BC companies to work.  And make sure that business red tape is removed in the process.
  •  $$ - Create a Business Culture In Technology – The government can assist in strengthening education and real-world experience for technologists.  Canada has strong technology and technologists.  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 stories.  Stanford 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 companies.  Bolster the industry association’s efforts to attract bigger and better speakers from around the world to their SIGs and forums.
  • $$$ - Recruit And Keep World Class Educators and Researchers – It will be expensive, but we need to have a plan to get the best and brightest to our province.  Building world class facilities (labs, school classrooms, etc.) will help attract people.  Creating centres of excellence in certain science fields will help.  My belief is that you do not need to give them financial incentives beyond paying them, in CDN dollars, what they would be able to get elsewhere.  But the most important facet to getting these people to come to BC is having the facilities and the opportunities for them to work their craft.
  • $$$ - 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 provider/buying group.  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.

  • $$$ - Develop Clustering Initiatives More Effectively – While we are grateful to have a diverse technology industry because it buffers us from cyclicality in any one sector, clustered concentration of industry is the only way to world dominance.  Three or Four of our dozen core tech sectors should be made stronger through initiatives like R&D spending, attraction of major industry players and promotion.  This needs careful consideration of all of the costs/benefits to growing any one industry here in our province.  There are a lot of factors at play.  It appears that we are developing the fuel cell/alternative energy cluster, but the government can be more active here is organizing thoughts around how to proceed.  Once the decision has been made, it will be an expensive effort to foster the clustering, but in the long run it will be of great benefit.
  • $$$ - 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 suggestions.  Safe 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.

While the fuel for growth is money, the ignition is ideas and people that can innovate.  There needs to be a balance in policy towards each.  Money will not come if there are no great ideas and no great teams to build great companies. 

The 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 future.

I am 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 implementation.

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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