A Life around Startups: Fun, Frustrating and Financially Fascinating

21
A Life around Startups: Fun, Frustrating and Financially Fascinating

description

A Life around Startups: Fun, Frustrating and Financially Fascinating. Overview. VC experience Accountancy/Consulting experience Rules of Thumb/Bitter Experience. VC Experience. Analyst with Yorkton Securities and Raymond James Primaxis Technology Ventures - PowerPoint PPT Presentation

Transcript of A Life around Startups: Fun, Frustrating and Financially Fascinating

A Life around Startups: Fun, Frustrating and Financially Fascinating

Overview

VC experience Accountancy/Consulting experience Rules of Thumb/Bitter Experience

VC Experience

Analyst with Yorkton Securities and Raymond James Primaxis Technology Ventures

– JV of Royal Bank of Canada and British Technology Group StartingStartups (later Axis Investment Fund)

– LSIF

Consulting Experience

Scientific Research & Experimental Development Tax Program Ontario Interactive Digital Media Tax Credits Industrial Research Experience Program Corporate Finance – NOT!

Success factors

Management Operational systems Technical smarts Cash

“Don’t Let the Pigeon Drive the Bus”

Key to success was a good management team Past success was best indicator of future success

– Crashed fighter jet analogy Mad scientists shouldn’t be put in charge of the money, just as you

wouldn’t put an elephant in charge of the peanuts.

Don’t trust anybody/be trustworthy

Handshake deals are worth the paper they are printed on. Paper everything with suppliers, customers, employees, partners,

lawyers, accountants, spouses, children, etc… At the same time, in Ottawa, word gets around very, very quickly about

unethical and/or untrustworthy behaviour.– e.g. certain unelectable ex-Premiers of Ontario

Work on your presentation skills

In written and verbal communication:– Tell them what you are going to tell them– Then Tell them– Then Tell them what you just told them

In verbal communication– Then get them to Tell you what you just told them

Simplify: NO JARGON. Useful for customers, suppliers, employees.

Write it down

Proper documentation in company development is very important– Tax compliance– IP protection– Management continuity (i.e. being run over by a bus)

Find good advice, then take it

Get references for a good lawyer and accountant. If you don’t like them, walk. When they give you advice, take it. Don’t try to do everything yourself. You can’t. Instead, build a great

ecosystem of consultants, suppliers, customers, etc…

When they are passing the hors d’oeuvres, take two

When raising capital, if an investor offers to give you more money then you want, TAKE IT.

Cash is the most rare resource at the moment Don’t worry about dilution

– 50% of something > 100% of nothing Currently, don’t waste time raising private investment

Admit mistakes

People are smart. “Spin” never works and will cost you more effort in the long run.

Customers and investors worth keeping appreciate honesty.

Be flexible

Portfolio companies which still exist are managed by smart guys and girls who can, and did a lot of different things based upon core IP (or in some cases, not based on core IP).

Check the ego at the door

Related to the previous two points Hire people better than you Don’t use your company as a tool to look important. Having a tee-shirt that says “I won” really isn’t worth that much. “People fight so hard because the stakes are so low.”

Cases A: “Mad Scientists with too much money, zero business sense”

MCo:– Great nanofiltration technology, applicable to food, oil&gas, etc, etc..– Recruits great board, all resign when CTO gets in unwinnable fight with CRA– Saves $1500 by doing books internally, costs $5000+ to fix (3 years in a row!);

risks IRAP and SRED– Will NEVER be able to attract external funding or sales

HCo:– Exceptional computer scientists at earliest stages of WWW development– Blow startup money on 3 companies from chasing wrong markets from

expensive, fantastically furnished offices, and ruin all marriages in process

Cases A: “Mad Scientists with too much money & zero business sense” (continued)

GCo– World class theoretical manufacturing modeling software– Revenue stalled at $400K/yr; won’t take on CEO to address sales, despite all

sources of advice telling him to.

Cases B: “Mad Scientists with (close to) zero business sense, and recognize this”

20Q.net:– 20 year old Artificial Intelligence technology, applicable to games– CTO partners with excellent CEO and “retires” to lab.– CEO does marketing deals with Mattel, Burger King, Digital Chocolate, etc..– Didn’t waste time attracting external capital. Rely on royalty deals.

BTI Photonics– Attracted seed VC in 2001.– Still going, albeit with different management, technical leadership, investors,

customers, etc…

Cases B: “Mad Scientists with (close to) zero business sense, and recognize this” (continued)

Research in Motion– Jim Balsillie: easily distracted, very litigious, massive ego– But great CFO Dennis Kavelman + lots of hor d’oeuvers

Dalsa Corp– University of Waterloo spin off– World class CCD and CMOS vision technology– CEO/CTO/Professor Savvas Chamberlain relied on excellent CFO and COO

Magna vs Linamar– Stronach clan: Massive egos, easily distracted, Class B shares (see comment

about trustworthiness)– Hasenfratz clan: Frank and daughter Linda. Great leaders. Modest, smart,

hardworking

Cases B: “Mad Scientists with (close-to) zero business sense, and recognize this” (continued)

Elliptic Semiconductor– IP designers for semiconductor security market.– Original partners included senior sales exec from Newbridge– Formed strong ecosystem with fabs, large semicos, telco equipment

manufacturers.– Early royalty sales, with up-front design fees, lessened need for external

capital ICo

– Systems integrators for robotic cutting systems.– CAGR of 250%– Doing what their accountant tells them– Hiring a COO very soon.

As a result: my portfolio

Bank stocks/oil and gas/utilities. Dividends are great. Every tech stock has been a 100% write-off, even those that are still

operational! (i.e. cram down rounds) Except for RIM (0.0001% of portfolio), (which I am waiting to blow up).

Q&A/Thank you!

Kevin Goheen, PhD, P.Eng.

[email protected]