Last week, a new angel investing network launched in the National Capital Region to support new business initiatives, mentor the next generation of entrepreneurs, and of course, generate great returns for investors.
The Capital Angel Network (CAN) is an informal network sponsored by the National Angel Capital Organization (NACO) where angels can view potential investments and discuss them as a group. The goals are to increase the quantity, quality, and success of angel investments in Ottawa, to create a greater pool of capital for innovative start-up companies and to complement existing angel groups.

Laurie Davis, a long time angel investor in the Ottawa area and a member of CAN’s board of directors, took a few moments to share his thoughts.

What was the impetus behind the creation of this new network?

Davis: I meet with entrepreneurs all the time and they tell me they have a great deal of trouble raising money. It’s always been difficult, but much more so in recent times for various reasons. It takes a lot time and effort to find enough angels to give you the amount of money you need. So if you can gather a number of angels together in a group, it saves the entrepreneur a lot of time and effort.

From the angel’s point of view, I enjoy working with others in a group and hearing their perspectives on things before agreeing to commit money.

What are your key objectives and goals?

Davis: Obviously this is only a useful exercise if companies get funded. In the end, the goal is to have people fund companies they find useful and interesting. We are going to track what happens and see if by the end of the year we have four or five companies that have been funded.

How is CAN different from other angel investor organizations that we have seen in Ottawa over the years, such as Purple Angel, Band of Scoundrels and the Ottawa Angel Alliance (OAA)?

Davis: I am a member of Purple Angel, a founder of OAA and friends with members of Band of Scoundrels. What are we doing different? We got some feedback when OAA wound down that there wasn’t much appetite for a formal organization. With OAA, you had to pay membership dues and commit to a certain level of investment. People didn’t like that level of formality. The bottom line is to try something different until you find something that works. The challenge of course, is to make sure you have real investors, as opposed to the room getting filled up with lawyers, accountants and other service providers looking for business. With the informal model that becomes a little harder, but we’ll be watching it.

Where do you think we have the most significant gap in turning great ideas into competitive commercial products that make it to market?

Davis: In general we have people who know how to go about building a product, but that whole go-to-market strategy, to know how to get a product to customers and to identify real customers – that’s the problem we have.

How will CAN help early stage companies overcome this hurdle?

Davis: We are not going to be tackling it directly. The key thing is, if you have a group of smart people in a room, the expectation is that someone will step up and help. The whole idea of angel investing is not to just provide money, it is to get involved and help where you can. We hope to see a lot of that.

What do you think of Terry Matthews’ recent announcement of his new commercialization fund?

Davis: It all helps. None of us are competing. There is a problem out there that needs to be solved and anything that can be done to solve it is a great benefit to the community.

What is the future of the venture capital model?

Davis: I wish I knew. It certainly is not pretty out there right now. If you look at it from an entrepreneur’s perspective, it is painful. And they are trying to address that by creating companies that need less capital. There are some businesses that you can launch with a few hundred thousand dollars, but others you simply can’t without tens of millions of dollars – and those are the companies no one wants to start right now. This is a huge problem and I don’t know how it’s going to be resolved. There is talk that institutional investors will invest directly in companies, as they once did – that would certainly help, but I haven’t seen this happen so far.

Technorati Tags: angel investor, angels, Purple Angel, National Angel Capital Organization, NACO, Capital Angel Network, Laurie Davis

For the first time in practically the decade-long lifespan of this technology-focused PR agency, I did not attend any part of the Ottawa Venture and Technology Summit held last week at the Chateau Laurier. Actually, that’s not quite true; I went to a packed StartUp Drinks in the Byward Market on Wednesday night and from there popped briefly into the thinly-attended Young Venture Capitalists OVTS networking event that was happening just a few doors away. But the point is, I didn’t see any of the company presentations, hear any of the speeches or, most importantly, glom onto any of the corridor scuttlebutt that is usually the most interesting aspect of these things.

In the days since, I have heard various reports from attendees from across the investor-entrepreneur spectrum and I have read what little reportage made the public record. Very little of what I’ve heard or read left me terribly hopeful that a new crop of exciting Ottawa technology ventures was about to get funded any time soon. The most consistent sentiment seemed to be contained in the comment VG Partners managing general partner Pat DiPietro made in an Ottawa Business Journal story on the fact that the OVTS and a similar event in Banff had a scheduling overlap. “But on the other hand there are no VCs investing, so it doesn’t really matter right now,” DiPietro said.

This caused me to wonder if venture fairs have passed their sell-by date. Can anyone remember the last company that could claim to have met at one of these things the connection that led to successful funding?

Then my pal James Smith weighed in on his newish blog, Startup Great White North. Unlike me, James not only attended the Ottawa venture fair, he also winged out west to the Banff shindig. Despite the fact he there witnessed “institutional investors focused principally on shaking off modest Thursday night hangovers and cradling Blackberrys and iPhones like long-lost friends” rather than paying attention to the entrepreneurs’ pitches, he decided in the end that investors don’t regard those pitching companies “with the attention my mini-van driving wife might give to passing picked-over roadkill on the road to our cottage.”

I’m not sure I’m as persuaded as James but he does go on to provide a solid list of techniques that serious venture-seeking entrepreneurs can deploy to improve their outcomes from such an event.

While we’re on the question of the utility of VC fairs, we might as well start asking questions about the utility of the VC model itself. We have begun work on a series of articles about this very question. We will look at who is actually funding startups in Canada, the U.S. and Europe. We’ll ask experts which pieces of the model work and which don’t. And most importantly, we’ll examine the state of the ecosystem beyond VCs that needs to be in place to help companies, especially those that will never be VC-fundable, bring their technology to market. We’ll look at the proliferation of new government funding here in Canada and compare it with what’s in place in other markets. If you believe you have a perspective on this, we’d love to hear from you. You can email me at fmoran (at) inmedia.com.

Technorati Tags: Venture capital, investment, Ottawa Venture and Technology Summit, Banff Venture Forum, Pat DiPietro, James Smith, technology, technology marketing

A weekend-long, competitive startup boot camp in October that will see the winning team take away $5,000 in seed funding was the most interesting piece of a coherent new programming line up announced last night by The Ottawa Network, the city’s grassroots networking club for the technology sector.

The startup camp, which will be repeated in the spring, was the second of four “program pillars” revealed by TON president Rick O’Connor. The first pillar, Network, will see TON continue to hold business networking and educational events, although at two a month, these will happen only half as frequently as last year’s somewhat over-ambitious weekly schedule. The third pillar, Finance, will feature a repeat of last year’s popular Founders and Funders dinners that saw angels and venture capitalists rub shoulders for an evening with entrepreneurs looking for funding. Details of the final pillar, Grow, will come later.

TON will also start charging a membership fee for the first time since it was founded in 2001 by a cohort of down-sized refugees of the telecom crash who gathered together to commiserate and help each other found new ventures and find new jobs. General membership will cost $25 per year in a move O’Connor said the organization hopes will lead to a more committed, targeted and involved membership.

The first startup boot camp is scheduled for October 23 to 25, and TON hopes to attract up to 75 participants who will self-categorize themselves into the various functions a new company needs, such as development, marketing and so on. On the Friday evening, as many as a dozen of the participants will pitch their ideas for a startup and teams will be formed based on who else wants to join them to work on that pitch for the weekend. On Sunday evening, each team will make its pitch, with the winner coming away with $5,000 if it incorporates as a fresh start-up.

TON’s new programming line up is a welcome evolution for an organization that significantly revitalized itself last year after a couple of years of fairly moribund existence. We’ve been big supporters of the network almost from the beginning, and I saw several instances last year where exciting new ventures got a solid helping hand as a result of a TON initiative.

Even better, in my view, is the introduction of a membership fee. As Shopify founder Toby Lutka said at a different event a few months ago, “Twenty four dollars is a slightly more annoying version of free.” His point, which I thoroughly endorse, is that if you have created something of real value, people ought to be willing to pay you something to use it. Not incidentally, in the process of charging for something, you also find committed customers, rather than just tire kickers. Those who can’t afford the fee — TON has always been attractive to those looking for work or operating ventures on a shoestring — can still attend up to three events a year without paying anything.

I’ll be a regular at TON events both for its inherent value to my own business and so that I can continue to bring its news to readers of this blog.

Technorati Tags: The Ottawa Network, startups, startup boot camp, Founders and Funders, technology

“Venture capital is dead. It’s gone.”

Sir Terry Matthews didn’t mince words Thursday morning as the keynote speaker at OCRI’s Technology Executive Breakfast. Not that he ever does. And while some might argue that statement about the status of Canada’s venture capital industry, or at least its level of activity in the nation’s capital, may be a bit premature, that’s not the point.

The point is, who cares?

Matthews and partner Michael Cowpland began the first incarnation of Mitel in 1972 with persistence, sweat and a $4,000 bank loan. That was enough to get their first product to market in nine months. This was followed by Mitel’s breakthrough product: a PBX phone system with a software switch. Mitel beat out about 40 larger competitors to win a watershed contract with AT&T, the first time, Matthews said, that the telecommunications giant contracted out. That deal, and a $250,000 grant through Canada’s IRAP program, took Mitel from zero to a 20-per-cent global market share in five years and made millionaires out of penny investors.

And while sheer persistence and hard work were part of the secret sauce for Mitel’s success, and for every success Matthews has had since then as the man behind the creation of more than 80 high-tech ventures, he cited an even more important ingredient: the core competency of partnerships.

Partnerships build technology clusters. Partnerships allow a company to capitalize on another’s strengths without having to carry the overhead of developing a  particular area of expertise in house. Partnerships take advantage of another’s time and money invested in R&D to compliment your own.

Matthews holds Nortel’s utter aversion to partnerships to blame in no small degree for the company’s misfortunes.

And while there undoubtedly are challenges in the marketplace at present, Matthews insisted there is a resurgence at hand as ambitious and nimble entrepreneurs of the next generation make their mark. They just need a commitment of time and mentorship from those with experience and money to invest. Venture capital is irrelevant. Time is what’s important.

Matthews’ approach is to find the key contact in a post-secondary institution passionate about commercializing ideas into start-up companies to help him cherry pick the cream of the crop from among new grads. He wants to work with the handful who have the drive, ambition and adaptability critical to surviving and thriving in tough times. He puts these teams together, puts his resources behind them, and sets out to identify and develop a viable product and market niche. By engaging with the market, he will guide this team through the process of honing, refining and focusing the idea until there is a viable business ready to be formally launched.

In return for this intensive mentoring and a high-pressure work schedule that pays little attention to weekends and holidays, each team member is paid the lofty salary of $25,000. However, what they should be paid but are not is parlayed into ownership stakes in the new company.

Matthews believes there is no more effective way to quickly bring a product to market. And being first to market is the only way for North America and Europe to compete in a global economy that is now flat with few if any true trade barriers. With Asia pumping out engineering talent that works for a 10th of what ours does, trying to compete on cost is a death sentence.

So the next time you hear someone pining for the return of the good ol’ days of the telecom boom, or whining about the demise of the venture-capital industry, do as Matthews does and take a chapter from Darwin: it is not the strongest or the most intelligent that survive, but the ones most capable of adapting.

Technorati Tags: Terry Matthews, Mitel, Nortel, startup, IRAP, venture capital, OCRI, business development, commercialization

Seeing the forest for the trees
Francis is fond of describing our roles here at inmedia as “advocates in the court of public opinion.” That’s a much more appropriate and accurate label than “spin doctors.”

But the role of advocate is more than simply conveying our clients’ stories to the outlets that matter. We must also be willing to impress upon clients the agendas, or the simple realities, of the markets we are trying to reach on their behalf. What elements of their story must we have to effectively attract and retain the attention of the media we are targeting? What works? What doesn’t? How is the way the client wants to approach things more of a hindrance than a help to our efforts? To adequately serve our clients, we must deliver frank and honest counsel that sometimes includes feedback from the marketplace that may be painful to hear.

Over at the PR Conversations blog, Kristen E. Sukulac offers an interesting perspective on this by citing a classic exercise in inattentional blindness and change blindness.

PR helps raise venture capital
Bottom line here: good PR pays. Don’t take my word for it. This post at PR Squared may be a couple of weeks old, but the findings of the study it cites are timeless. A survey of 300 U.S. startups that received funding in the past three years found a clear correlation between employing a PR program and greater success in securing new financing.

Time well wasted?
And over at really practical marketing, Mark Nagurski gives a no nonsense primer and how to create, and derive value from, an effective online presence and the pitfalls that come of looking at it in terms of traditional advertising. In his view, less can be a whole lot more.

Technorati Tags: public relations, media relations, social media, venture capital, financing

Defiantly channeling the “greed is good” credo of character Gordon Gekko from his self-avowed favourite movie “Wall Street,”  venture capitalist Paul Dawalibi from St. Lawrence Capital ruffled more than a few feathers at an Ottawa Network event at TheCodeFactory last night.

“Arrogant putz,” one attendee said to me as I headed out the door, while another, accused by Dawalibi of asking a “hostile question,” retorted back, “That was a hostile presentation.” Other opinions were equally scathing. “Why would any self-respecting entrepreneur submit themselves to that,” one audience member asked me rhetorically, while another wondered, “Is this is what it’s come to in Ottawa that we have to put up with the likes of that,” after commenting that Dawalibi’s presentation and approach seemed rather barren of ethics.

Indeed, at one point Dawalibi, whose fund claims an interest in backing green technology, told the 40 or 50 people in the room, “If it (an investment in a company’s technology) earns me a 10x return, I don’t care how badly it pollutes.”

It was a remarkably unrepentent and jarringly discordant approach at a time when greed and unrestrained capitalism have toppled so many of Gekko’s modern-day Wall Street compatriots.

Dawalibi’s “I am not your friend” pitch to entrepreneurs was also in sharp contrast to the other funding source represented at last night’s event, the Ontario government’s Accelerator Investment Fund. Investment manager Shirley Speakman put as much emphasis on the friendly and nurturing support structures the fund offers its portfolio companies as she did on the half-million dollars she could invest.

Technorati Tags: venture capital, St. Lawrence Capital, Paul Dawalibi, Investment Accelerator Fund, Shirley Speakman, The Ottawa Network

I already wrote a post at Dangletech.com, where I try to contribute weekly, about the most fascinating highlight the Red Herring Canada 08 conference held earlier this week at Mont Tremblant. For my money, the best entertainment was the riveting behaviour of Red Herring publisher and CEO Alex Vieux who dominated the event with his bewildering mix of brilliant observation, insightful analysis and boorish, insulting and condescending treatment of those who paid big bucks to attend.

But there was, fortunately, more of value beyond Vieux’s theatrics and here, in no particular order other than how they appear in my notebook, are some of the better gems from nearly two days of presentations, round tables and corridor chitchat at an event focused on technology startups and the venture capitalists they pursue for funding.

Miranda Technology Inc. chairman Brian Edwards said there is a “liquidity crisis in Canada,” leading many funds-seeking companies to consider going the capital pool company route on the TSX-Venture Exchange. “That’s pretty scary to me.” And while he applauded that lots of government money is going into research in Canadian universities, he said there is “very little management of that money. … We need to bet on the creation” of new companies.

Jacques Bernier, senior vice-president at Fonds de solidarité FTQ, was equally skeptical of the temptations of an early or inadequate IPO. “We won’t touch” a company that goes public on the venture exchange for its first million dollars or so and then comes to his firm looking for more. Being public “puts the focus entirely on the wrong place,” he said.

Mike Grandinetti, a senior lecturer at MIT Sloan School of Management, said too many companies looking for funding have “an unhealthy focus on not wanting to dilute” the founders’ ownership. If you’re in it to win, he said, retaining less than 50% ownership — sometimes much less — should not be an issue. As for the view that markets are too unsettled or times are too tough, “turbulence creates opportunity,” he said.

RBC Venture Partners managing director Robert Antoniades agreed with Grandinetti on founders accepting lower stakes in their companies, saying, “You can be a very successful entrepreneur with 10% ownership.” He cautioned founders not to try to remake a “VC process (that) is well understood.”

The critical role marketing plays in the early development and revenue growth of a young company was emphasized by Yahoo Canada general manager Kerry Munro. He encouraged companies to boost their marketing spend when the economy turns sour. “Marketing is the first thing you cut in times of trouble,” he said. “It should be the first thing you invest in in times of opportunity.”

The challenge, he added, is to see marketing in a new light. “Most companies in Canada look at it as a cost and not as an investment.”

One Ottawa CEO who successfully found venture backing earlier this year told the conference he did not share any belief that money is not available, so long as the idea being pitched is worthy. “If you want to raise VC money, you’d better come up with an idea that’s VC-fundable,” said OverlayTV’s Rob Lane, something he defined as having the potential of being worth $100 million some day.

Technorati Tags: entrepreneurs, venture capital, Red Herring, Miranda Technology, capital pool companies, TSX Venture Exchange, Fonds de solidarité FTQ, MIT Sloan School of Management, RBC Venture Partners, Yahoo Canada, OverlayTV