A Life around Startups: Fun, Frustrating and Financially Fascinating

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

  • Slide 1
  • A Life around Startups: Fun, Frustrating and Financially Fascinating
  • Slide 2
  • Overview VC experience Accountancy/Consulting experience Rules of Thumb/Bitter Experience
  • Slide 3
  • 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
  • Slide 4
  • Consulting Experience Scientific Research & Experimental Development Tax Program Ontario Interactive Digital Media Tax Credits Industrial Research Experience Program Corporate Finance NOT!
  • Slide 5
  • Success factors Management Operational systems Technical smarts Cash
  • Slide 6
  • Dont 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 shouldnt be put in charge of the money, just as you wouldnt put an elephant in charge of the peanuts.
  • Slide 7
  • Dont 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
  • Slide 8
  • 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.
  • Slide 9
  • 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)
  • Slide 10
  • Find good advice, then take it Get references for a good lawyer and accountant. If you dont like them, walk. When they give you advice, take it. Dont try to do everything yourself. You cant. Instead, build a great ecosystem of consultants, suppliers, customers, etc
  • Slide 11
  • When they are passing the hors doeuvres, 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 Dont worry about dilution 50% of something > 100% of nothing Currently, dont waste time raising private investment
  • Slide 12
  • 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.
  • Slide 13
  • 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).
  • Slide 14
  • Check the ego at the door Related to the previous two points Hire people better than you Dont use your company as a tool to look important. Having a tee-shirt that says I won really isnt worth that much. People fight so hard because the stakes are so low.
  • Slide 15
  • 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
  • Slide 16
  • Cases A: Mad Scientists with too much money & zero business sense (continued) GCo World class theoretical manufacturing modeling software Revenue stalled at $400K/yr; wont take on CEO to address sales, despite all sources of advice telling him to.
  • Slide 17
  • 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.. Didnt 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
  • Slide 18
  • 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 doeuvers 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
  • Slide 19
  • 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.
  • Slide 20
  • 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).
  • Slide 21
  • Q&A/Thank you! Kevin Goheen, PhD, P.Eng. kgoheen@mclartyco.ca