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


Something Ventured:
Sep 15th, 2000

By Brent Holliday

"It's the new Mother Nature taking over
It's the new splendid lady come to call.
She's getting' us all."
The Guess Who, No Sugar Tonight/Mother Nature

{Last column on the future of education drew an unprecedented response. My crack editorial team has sifted through the mountains of emotional and thought-provoking responses to glean a few key Letters From Last Week at the bottom. As such, I need to save space and get straight to the point with this week's commentary. PS. If you are printing this, I suggest going to the very bottom and downloading the Word file.}

Venture capital spending on new investment opportunities is going to dive in the US in the 3rd and 4th quarter and slow down significantly in Canada across all sectors, but more so on Internet related companies.

This had to come on the heels of the big spring market correction. We are in a bear market for venture capital and early stage financing. It seems that the powers that be in the US returned from their summer holidays, looked at their portfolios of early stage investments and the lukewarm IPO market and said, "Time to cut the fat".

Back in the spring when I wrote about the correction, I said that venture investing would not slow down immediately, but that it might slow significantly after a few months of sober thought and a slow IPO market. After all, the economy was not (and is not) in recession. The tech industry was (is) still cranking out valuable products and services that were (are) in demand. The problem was that through 1999 we all got a bit silly. A giant pendulum of momentum investing swung forward and the correction in April started to slow its movement forward. Now the pendulum is swinging the other way and is gaining speed. In practical terms, investors paid any price and shoveled lots of money into companies in 1999 and early 2000. Now, investors are not willing to pay any price in certain sectors.

I know that some venture firms have said that they will do no new investments until January, at least. What does this mean? They will invest, but only into their existing companies as they need money. Many VCs have looked back at what they paid for shares of dotcoms and other investments and thought they must have been drunk. We need to generate returns for our investors that are far above the average stock market gains. If we overpaid for companies relative to the stage of development that they are at, we will not get the multiples needed to perform. We may get nothing, if the sector dried up completely (think e-tailing).

Some VC firms are even telling some of the companies that they invested in that they will get no more money. That is the death knell for your early stage tech company. No investor will put money in a company whose existing investors have high-tailed it out of there. Yet, this is happening in the US as the seven on-line furniture retailers that raised a collective $135M US last year, collapse to one survivor. You no doubt heard about Living.com shutting its doors after its high profile investors said, "No mas."

This is the inevitable result of an out of control market where wanted felons were able to raise US$25M for video streaming service companies (see the Pixelon story, an absolute shocker). Many VCs will go out of business because of this mess. Pop.com, started by Dreamworks SKG, couldn't even launch their site, before their plug was pulled. Some of the VCs there lost upwards of US$25 M each. I'm sure you are all shedding a tear right now for those poor unfortunate VCs.

What this means for the next six months is that solid early stage companies that are pre-customer and therefore pre-revenue, will have a tough time raising money. The inevitable reaction of the investment herd that has been spooked is to turn away. VCs will be looking to lower their risk in the investments they make by looking for solid business models and proven customer value propositions. That's if they are looking for new investments in the short term, at all.

And, of course you know, valuations will be MUCH lower. That $50M valuation you were looking for three months ago? Think again. Except for one very molten area of investment (that may in fact have its own mini-bubble), optical networking gear, your sector will be seeing reduced valuations across the board.

While I think that the pendulum will likely swing too far the other way over the next few months, resulting in an investment desert, the fundamentals for a rebound are in place. I think that early 2001 will see a renewed enthusiasm in early stage investment after VCs have licked their wounds and need to get their very large investment funds to work again. There is far too much to be done in infrastructure, wireless, optics and other areas to be sitting on the sidelines too long.

Bottom line: If you are looking for new financing from VCs, having no deep-pocketed investors in your company already, you are in for a very tough go in the next four months. If you are a company that already has some financing and you project to need more by the end of December, I would tighten your belt and try and ride it out until January.

It comes down to a useful adage that you can take to heart if you want to be a big success: "Always hire people smarter than you."

Random Thoughts –
- I was at the Banff Venture Forum last weekend, which featured Alberta tech companies and Tony Perkins, Editor of Red Herring as a speaker. It was very good. Better than expected. The energy was very high, probably due to the location. By keeping the delegates in a remote area, everyone stays together and more networking gets done. Maybe future forums in Vancouver should think of Whistler as a location for the same result. The most newsworthy event for you readers here in BC was when Lorne Taylor, a member of Ralph Klein's cabinet stood up and spoke. You gotta love Albertans. Lorne was half cut when he spoke and riled up the crowd with his down home style, punctuated with fist pumping and pedestal pounding. And it was very genuine. I would cheer too with the news he was giving (Actually, I was just slowly shaking my head, as you'll see):

The surplus was $5B this year in Alberta.
There will be no provincial debt in two years.
Every Albertan will receive about $500 as an energy rebate this winter.
Next year, the corporate tax rates will be the lowest in Canada and lower than more than 75% of the US states.
A commitment was made to spend $700 M over the next few years on scientific R&D in the province to make it the premier location for doing R&D in Canada (they have a long way to go to catch Quebec).
Because of the dead dinosaurs under the ground, they have a massive Heritage Fund from oil royalties. So, in four or five years they may not need any provincial tax at all. None. No corporate, no gas, no capital gains, no income tax at all (Don't get too excited, they will stay pay federal taxes) All services, like health and education, could be funded from the Heritage Fund every year and the allotted transfers from Federal coffers.

The really, really good news for BC? They live right next door. The disparity will drive our government to pay great heed to what they have done there /font>

Letters From Last Column –

Here we go! If I did not edit these responses, and leave a few out, I would have run out of time. Thank you all for your thoughtful replies (essays!).

Hello Brent,

You raise several a number of interesting points about education (some, like seniority vs. quality, aren't likely to be resolved anytime soon).The issue of identifying a child's motivation and tailoring the learning to suit their interests is extremely important. A few years back I came across a study that indicated that when an individual, of any age, has the internal motivation to study in a particular area they can achieve superior results. External motivation (scoring good grades to meet the expectations of parents / teachers) wears rather thin over the years. I've witnessed this first hand with my son, who commenced his last year of high school today. The subjects he enjoys he does very well in. The ones he doesn't like (eg...Spanish) suffer quite badly. Parents and teachers have a crucial role to play in helping children identify their unique interests and learning styles.

There's a book called Dumbing Us Down : The Hidden Curriculum of Compulsory Schooling by John Taylor Gatto that you may find interesting. He discusses the rise of the public education system and the unrest that resulted when children from a largely agrarian society were legislated away from home schooling into the industrial education model that prevails to this day.

Over the years we've come to understand that there is no one way or right way for children to be educated, as each one is unique and has something very special that they bring to the process.... Enjoy the journey....

Bob Macdonald

Bob: You echoed another strong theme of the responses. There is no blame to lay at any particular group's feet. In the end, we are all very different and we learn differently. I tried a few suggestions for recognizing that individuality and embracing different learning needs. But practically administering that vision seems, well, it seems like it needs a little more thought.

Hello Brent:

I disagree that "the" most important factor in education is the teacher ("the education you receive is far more dependent on who is teaching it to you than any other factor"). *The* most important factor in your education is YOU. Even in grades 1 and 2 my son's experience differed greatly from some of his peers because of his attitude. Same teacher, same program very different results.

We need to take responsibility for our own education, health, financial affairs etc. etc. etc. and not expect the government, Education System, Health Care System to solve all our problems for us. If a child does not go to school with
1. a good night's sleep
2. a good breakfast
3. a big hug
They WILL NOT LEARN, no matter how wonderful the teacher or the program.

The most powerful enrichment program available to your children is the one you provide at home by teaching them the value of life long learning. If they have a love of learning, the rest will follow.

Heather Regehr mother of a Grade 3 Student

Heather: Thanks for the reminder. My kids sleep and eat well. I am the one forgetting steps 1, 2 and 3. Five hours of sleep, followed by a quick shower and caffeine for breakfast. Hmmm.

Dear Brent,

I appreciated your article on the educational system in Canada and type of questions we need to be asking about preparing ourselves and our children to be the business, social and cultural leaders of tomorrow. As an educator, life-long learner and researcher on the knowledge-based economy, I was pleased to see that you did not fall into the trap of supporting 'skills, skills, skills' as some have done. Granted, a good case can be made that in many Universities we do a good job of educating students to think critically and ask good questions, we do however, sometimes fall short on equipping them with the skills to *answer* those questions. Conversely, many new tech colleges and tech universities load students up with skills, but unfortunately ignore that skills are only as good as the creative mind behind them. Given this scenario, some would say the problem is solved - you hire certain people to think creatively and create vision, others to work that vision into reality. 20-50 years ago when development stages and product life cycles were measured in years not months, that was an option - today with the pace of innovation it is not. You need people who can think creatively and problem solve individually.

Therefore, my comment is that to equip ourselves and our children to meet the economic, political, social and environmental challenges of the future, we must focus on developing *abilities*, not skills. It may seem like I am splitting hairs, but look closely and you realize that the difference is enormous. Simply teaching students a variety of skills does not necessarily mean they will be able to use those skills in a creative and imaginative manner. Ability however, implies that the student is not only comfortable with skills content, but can use those skills in a variety of creative and able manner to realize their visions (cognition and metacognition... if ya want the educational jargon). That, in my opinion, would go an enormous way in creating life-long learners who are imaginative, creative, flexible - and any other new-economy term you might want to throw at them! To realize this, we must all embrace the idea that to dream is not enough, to 'know' is not enough - we must combine our knowledge and our visions. To me, this means at a University level we return to our roots of creating 'thinkers', but do so in an enlightened way, benefitting from a greater understanding of how people learn. In addition to teaching students how to 'do' chemistry, or how to 'do' history, we must first teach them how they *learn* and where their strengths, aptitudes and natural abilities lie. In doing so, we create a student-centered approach where students take responsibility for their own education and if they get a teacher that 'sucks', they still can draw from that person's insights and experiences. In addition, it would greatly enhance the experience because you would hopefully no longer have the engineer picking an Art's Requirement on the basis of the least amount of writing, or an Art's student avoiding any subject with too much Math (rocks for jocks anyone?).

Anyway, Brent, that is my two cents. Thank you again for the article, it is refreshing to read something from the Venture / High-tech side which sees education as something more than just career training. As a personal aside, let me extend my condolences for marrying a teacher - I grew up in a house where my Mom, Dad and even (eventually) my sister were teachers and know how much they love to tell stories from the classroom! If you ever want to get together for a beer as a bit of a mini-support group, let me know!

Matt Ferguson

Matt: Excellent response. I don't think we have yet solved the issue down to the "micro" level. Can we really get children to understand where their abilities can take them? Do we have the facility to figure out what's best for the individual? How much can we steer them without being overly suggestive? (Eg. Stacey, you have great abilities in logical thinking and reasoning. I know you want to be a ballerina, but your abilities suggest you would be a better accountant.) I'm being Mister Rhetorical, but there are some tough practical things to work out, aren't there?


I have a 7 year old girl in grade 2, and I am confronted with the same difficulties - to get the teacher to challenge her in the area where she has the strongest interest. Old habits ( or systems ) die hard. I agree with your logic. If you ever decide to go into politics, I vote for you.

David C. Lam

David: Politics? I'm not sure I could ever keep my mouth out of trouble in that game. And I have zero patience for red tape and due process. Ugggh. I appreciate the vote, though. And I will keep watching West Wing, just in case.

Hi Brent,

Enjoyed your column as always. The state of public education right now is pretty much as you describe - I have kids in Grade 5 and 9. But there are a couple other important points.

The equation is weighted in another way - where wealthier parents can and do invest in extra training, coaching or private schools for their kids; probably the same as it always has been. This does give an advantage to the kids fortunate enough to have the benefit of this. My kids compete with others who go to extra classes up to 6 days a week - in Math, languages, music, Reading, etc. My kids will be joining the extra training hoards this year - because they have to - to be able to have a future.

So is the best chance to excel in life to have rich, caring parents? It sure helps.

The public schools are determined to cram even more info into the kids - not how to learn. I saw all the grade four's last year with huge backpacks. My daughter regularly came home with 20lbs. of books each day. Since she only weighed 60 lbs, it's a damn good thing we chose to move right across the street from the school. I can't remember having homework until about grade 8. This isn't the change that you mentioned. Is it the result of the extra class madness?

Since we're so damn smart now, why can't we test and find an easier way to operate our own brains; to input the facts quickly, easily and then, as you suggested, let the kids find and explore what they are good at. No compelling business model there so we are not investing in it.

Why not organize a huge investment in the research and testing of how humans learn - akin to the Human Genome project - in order to get answers on how to optimize this, for everyone on earth. There are people who exhibit amazing capabilities; memory, reading speed, intuition, business acumen, etc. We all use little of our potential. This might just give kids time to be kids - you know to explore life without having to have a frikkin' organizer at 10 years old.

Aside - Job satisfaction comes from knowing and doing what you are good at; fulfilling your potential - yet many spend their whole lives not enjoying their work life because they are doing something that they are not good at.

Thanks for the thoughts.

Mark Bossert

Mark: Very deep final thoughts. I hadn't realized that the class loads were getting that ridiculous. We absolutely should not be creating a bunch of Alex Keatons running around our elementary schools trading stocks and "doing" lunch. Any accelerated learning needs to be balanced with fun and just being young.

Hi Brent,

Even if children aren't learning computers at school, many are messing about on the family computer and getting further ahead with simple curiosity than any parent or teacher could provide them with..... and they often end up teaching their parents how to work the machine because adults hate to admit to ignorance (especially when they think this thing's simple.....if only everyone used a Mac..).

I suppose we need a fusion of the general acceptance of this lovely technology (so that EVERYONE's comfortable with it, not just the geeks) and, assuming that the pace of innovation/change continues unabated, providing current information and technology to the children to learn on.... without descending into the crassness of commercials pitched to children while they're at school, to pay for the technology.

The other substantial pressure is the deification of stupidity in this society: those with the brains and the encouragement at home are usually ostracised by others because they're far too bright and are open about it.

Roger Brown

Roger: You made some great points, but I pulled these out for others to read. Generally speaking, the responses agreed with me that teaching just skills, like computer skills, is only a small step towards a "brighter" society. I like your last point. We need to celebrate the geek… let those who feel ostracized step out of the closet and feel comfortable in their skin.

Brent, you've hit my hot button, and I'll bet it's the hot button of many more of your readers, too!

I'm a product of that pre-1950 education system you referred to (UBC grad, BASc '55). I guess you're too young to have experienced it, but in my experience at least, it wasn't all, or even largely, rote learning. I was taught to think, even in the elementary grades. I agree that the teacher makes the difference, and I believe I had some good ones -- especially in math and english. And in my schools, at least, we had choice. Once the basic courses were mastered, I was allowed to progress at my own rate and do other things. I was fortunate to attend King Edward High School. At King Ed, right from grade 9, we were given course outlines and teaching schedules, then had to scurry around and sign up with teachers for the courses and times we wanted. We could take as many or as few courses as we liked, but had to achieve a certain number of course credits to advance to the next grade -- just like at university. King Ed was the only high school in Vancouver operating on that system. The classes with the best teachers filled quickly, and second-rate teachers were quickly identified as such by the lack of sign-ups for their classes. It seemed those lightly-loaded teachers somehow were replaced after a couple of years!

Interestingly enough, it was at university that I found myself stifled by instructors and professors who did not allow us to think things through, but expected us to learn almost by rote -- at least in the engineering school, and in physics and chemistry courses. English and math profs still expected us to think, however.

Bill Tracey

Bill: You had many good thoughts in your long letter, but this was very interesting. Your experience at King Ed speaks to one solution for poor teachers. They would sit in front of empty classes. I agree with the rote method of university teaching. I learned how to write multiple choice exams in my science courses. Not until fourth year when I was in a small group, did we learn how to do really good research and challenge each other to be better.


I enjoyed your article very much and found myself nodding emphatically at several of your points.

Since your bright son is starting the adventure through our education system (be it public or private), you may wish to consider joining your local chapter of the Gifted Children's Association (http://www.vcn.bc.ca/gca). The GCA is very active in working to achieve the very goals you espoused in your article.

Thealzel Lee

Well, I'm not sure that he is gifted, but I appreciate the notification of such an organization. I had heard of Shad Valley through a friend of mine, David Vogt. This sounds very different.


What I wonder is if ever in socialist Canada will the big brother government and their friends in unions let go of the control over education eg: as in allowing decent private education (ahem, not necessary religious based)??? -- as in free market. Sure it has to have some regulations (note SOME...) to outline the common ground for all institutions, but only that.

Oops, here comes the storm...


Someone had to say the uncomfortable, I guess. Two tier education is as hot and issue in California as two tier health care is in Alberta. California has "charter schools" which are semi-private, benefiting only those that can afford to pay the extra amount. As for religion in the school, I am not even going to touch that one. Let me just say that we have been killing each other for 5000 years because of deeply ingrained intolerance of other religions, but I digress.


I'm a Burnaby Elementary School teacher, and enjoyed reading your column on Education. Here are some thoughts on your thoughts.

When I began teaching in 1975 teaching was just leaving the 'teacher as craftsman' phase. The concept of teacher as professional was just being developed. After teaching for a few years I went back to school and returned in 1992. I found the system had dramatically changed. The demands by society had changed. I am not an expert on educational history, but I agree with you that 'the memorization as learning paradigm' began to fade in the early 1950's, but I believe the big change was the recession of 1982 when General Motors went from 50% to 33% market share under the attack of the Japanese. Among the Japanese innovations were quality circles, that is factory floor workers providing suggestions. I think that marked a turning point in the 'industrial mind set' in North America. Suddenly large influential companies needed factory floor workers to THINK. This was new, and has had a profound effect on the expectations we have for our education system. Before about 1982 it was nice if people could think as citizens, but now society NEEDED thinkers or we'd all be working for Japanese companies! It meant all the graduates of the public school system needed to think (rather than just the elite).

Another thing that had changed is we 'discovered' a new 'microscope' to look at learning.

New tools make new understandings possible. Prior to about 1982, to be accepted in peer reviewed journals, educational research had to be done in such a way as to prove 'statistical significance', this meant it had to be reducible to numbers, and this meant some type of standardized testing. Imagine how limiting it is to study something as complex as a learning person, let alone the interactions of a classroom full of them and a teacher! In the early 1980's ethnographic research techniques, which might be described as the observations of a skilled observer (which was used for years by sociologists and anthropologists), became acceptable. This opened up a powerful new avenues for research and has resulted in a much better understanding of what is going on for learners in a classroom. Of course good teachers were doing their own observations before that, and 'always knew' about many of the 'new' ideas, but it has still had a powerful effect on what techniques are recommended, and promoted. This is good and has resulted in curriculums and workshops and textbooks that are much more skilfully done than 20 years ago. As a result of all this the skill level is much higher too, as is the talent level of most student teachers. All of this is improving the performance in the classroom. The curriculum is much more demanding for example the curriculum of the mid 1980's is now allotted about 70% of the time because of new courses such as personal planning, and so on. We are doing more now than ever before. I recently discovered some of my own notebooks from junior high, and found I was covering much of same material in my grade 4/5/6 classes, and we now teach it to all the kids, not just the streamed ones as in the past.

I would agree with you in general about allowing students to follow their interests. I'm fortunate to teach Grade 4/5/6 which also happens to the golden age of hobbies. I try to encourage these hobbies, and have able and sometimes not so able kids follow their interests. I think interests are actually like a pyramid, in order to go really high (deep knowledge) you actually have to eventually go wide (build wide knowledge).

Re Teacher's unions: Perhaps teacher's unions are too strong, some observers of management might say you get the union you deserve. I think this is the case here too.

While there are militants within any group, in general, like other knowledge workers, teachers have a higher affiliation to their profession than they do to their union. Most of the issues teachers and the BCTF champion, like class size are more complex than just wage issues.

In general, I think our society is less caring for children than it was when I was growing up (maybe we are more knowledgeable, but we don't put our children's priorities ahead of our own wants to the degree our parents did I think). In many ways the education system is called on to supply some of that care now. I think that the best way for us to improve society and educational performance is to concentrate on the 0-5 age group (don't you just hate to hear this as your kid reaches 5 years old, I did). In elementary schools we end up doing major 'repair work' on a few kids in each class that have not had the best experience in the first 5 years of life. Fraser Mustard (sp?) of the Advanced Systems Institute makes a very good case for investment in this stage of life.

The kids who will graduate in the next few years from high school have amazing abilities to collaborate in ways that I certainly did not have at the same age. I really noticed a turning point in the kids in my classes about 7 years ago (those kids are just graduating now). I can't speak for any where else on this, but I really think the kids I had when Nintendo first came out were scary, but he kids after that have been amazing. As for collaboration, sure the internet etc will help, but in my world at least, we've been working hard on the 'soft' people skills that make group work effective, and overall I've been impressed with the abilities the kids display as they get older.

As an aside, I'm convinced that a major challenge in our education and in society is 'How do we make the bottom third of boys positive contributors to society?' The top 1/3 of boys will do well anywhere, girls have gone through a dramatic improvement in their opportunities to contribute and so are doing better. However the bottom half or third of boys are in trouble, and unlike females, when they are in trouble, they won't blame themselves, they will blame someone else. They become destructive both to themselves and to others. Unlike girls, boys who are not employable may not be 'marragable(SP?)' and often don't make the same contribution to society (I not referring to children here, but overall contribution). Have you read Lester Thurow's Building Wealth? He talks about the need to skill the 'non elite' to make them competitive with the rest of the world and applies to boys especially.

That's all for now, I've got to get ready for the first day of school, cheers!

R. Myrtle

I left this one to the end because I could not edit it. There were far too many good points. I hope people took the time to read it. Thank you for a well thought out response.

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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