The Canadian Venture Capital Association (CVCA) annual conference was held in Montréal last week. There was an interesting panel consisting of Canadians in the Valley: Anthony Lee, General Partner, Altos Ventures; Jeff Mallett, President, Mallett Sports and Entertainment and former President, Yahoo!; Shawn Price, President, Zuora; CJ Prober, SVP Electronic Arts; and Joel Scott, COO, Autonomy/HP.
For CJ Prober, Electronic Arts admitted to face tough competition from disruptor Zynga, which made several acquisitions. “Zynga profited from a transition point," he explained. "Recently, the market capitalization dropped by more than 50%. Now it is mainly niches markets providing great consumer experiences across platforms that would provide returns in the video games industry."
Electronic Arts has been doing some recent strategic changes in order to cope with Zynga. Thus, EA is trying to shift its DNA, the capabilities and composition of their teams. The acquisition of Playfish was a big step toward this new strategy.
Joel Scott, the COO of Autonomy/HP proposes that the acquisition of Autonomy by HP was driving mainly by a re-orientation of HP toward software, to bundle tech solutions and get more intelligence into HP’s servers. This also enables HP to market more appliances each quarter.
The key for HP is the value of big data. HP paid a heavy 80% premium to gain access to Autonomy. The CEO of Autonomy was replaced recently by HP, due to performance below expectations Mr. Scott also suggests that there is a bubble in the Valley, but valuations are way more reasonable in Canada.
Anthony Lee, who invests in startups and growing firms with Altos Ventures, stated that 22 new public firms have reached a market capitalization over $1 billion. 21 new private firms got also a valuation over $1 billion. He proposes that the startups in its portfolio don’t really care in the short-term about the reaction of the incumbents, since these latter firms tend to react slowly to disruptors or new competitors.
Jeff Mallett pinpointed that is it very difficult for managers to guess when it is the best time to sell: “When the decision is made, it is often too soon or too late."
The assessment of the context when selling is very important. He suggests that in order for incumbents to deal with disruptors, big firms must have great abilities to recognize opportunities and being able to bet heavily two-three times the initial investment in a short period of time. Few incumbents have internal processes that allow this reaction.
Canadian entrepreneurs possess more of a North-South mentality: “They do not fear failures but should fear success." They should prepare for the consequences of having a potential successful business model, he offers. Managing growth and building big tech companies requires long-term vision.