Will we ever have our own Silicon Valley?

Let me start by admitting that answering this question is not easy. But by examining those pillars that make a certain city worthy of this title will give us a clue whether the answer yes or no.

First and foremost the existence of second-to-non educational institutions tops this list. We all know how Stanford University played a major role in producing the majority of engineers and future founders of well-known companies and start-ups. What makes Stanford unique when compared to other North American universities is its focus on promoting entrepreneurial culture. Engineering or business students who take time off to start their own ventures is not viewed as a minus but to the contrary is viewed in a positive way. One has to only visit the University book store to realize how many books are dedicated to business and entrepreneurship.  

Second, the existence of Venture Capital firms and Angel investors who understand the technology language is so crucial. In Silicon valley you do not have to spend months or years explaining to VCs (or Angels) why your solution to a certain technology problem is disruptive. They will immediately get it as they breath this day and night. Furthermore, these VCs are willing to take greater risks than their counterparts in other cities.

Third, the overall culture that is promoted, especially by serial entrepreneurs, encourages people to try new things and never be afraid of failure. This in turn encourages innovation and creativity.

There are various cities in Canada that have tried to copy the Silicon Valley example. Ottawa was once called the Silicon Valley North. Unfortunately this was short lived.

We are now witnessing few rising stars such as Vancouver, Toronto and Waterloo. In my opinion, Waterloo has a greater chance of deserving this title in few years from now as the city has the infrastructure and all of the pillars mentioned above.  One has to only follow Maclean's School Rankings year after year to realize that Waterloo University is on track to become the Canadian Stanford. The University's focus on entrepreneurship is evident. One has only to take a look at its Velocity Program, a university-based micro incubator. Furthermore, many high-tech entrepreneurs such as Jim Balsillie are putting a lot of effort into making this happen.

Will Waterloo truly deserve this title? Time will tell but one can already see that all the pillars are there to make this dream a reality.

Incubators: the Entrepreneur's Alternative to Government-Supported Programs.

The Canadian government has established many programs to help high-tech entrepreneurs. These programs, while useful in providing information and support to some entrepreneurs, they are still bureaucratic in nature. Entrepreneurs who have tried to get money from the government or from government-funded organizations know this first hand. From the amount of paper work to fill out to the time and effort it takes, these programs discourage many first-time entrepreneurs from even trying to start the process. I do not blame them because we live in the Internet age where the execution plan has be implemented very quickly or competition will take these entrepreneurs by surprise.

Luckily, entrepreneurs now have more effective alternatives. Incubators such as Bootup Labs in Vancouver, Extreme Venture Partners (EVP) in Toronto and Montreal Start Up in Montreal are doing a very good job in filling out this gap. These incubators provide seed money and mentorship during the incubation period (which ranges from 3 to 9 months after which entrepreneurs can seek follow up financing or continue to bootstrap their newly-born venture).

It is extremely encouraging to see that these incubators, while they are less than two years old, have already made a noticeable impact. Consider, for example, the fact that two out of five companies that won the Facebook Fund were part of EVP’s portfolio. I can almost sense that the success of these incubators can also be attributed to the fact they talk the E-generation language to whom the new entrepreneurs belong

I have no doubt that more incubators will emerge as time goes by (I am involved in establishing one in Ottawa) . The future of our economy and prosperity very much depends on how quickly we adapt to rapid changes and the establishment of such ventures is only the first step in the right direction.

Personal reflections on VCs and the future of high-tech in Canada

It is sad news that Nortel Networks, a national icon, has disintegrated into many smaller fragments that have already been swallowed by foreign high-tech companies.  Nortel's demise was almost predictable given the unethical behaviour shown by many of its past executives.

Nortel's death was not the only one though. It just got a lot of publicity because of its size and its iconic significance. While few high-tech start-ups succeeded (one can for example cite the example of DragonWave) many more start-ups have failed for sometimes the same reasons that killed Nortel.  The question is:  why is this happening? While there can be a multitude of reasons, I believe some venture capital firms share the blame as they have been promoting a culture of laziness when it comes to do a proper due diligence on the companies they fund. I witnessed this first hand when I worked for a wireless start-up back in the late 90's. It was extremely easy for the CEO's, the CTO's, the CFO's to convince investors that they were going to meet their deadlines even though all the engineers working on the project said otherwise. End result: $40M spent while sales were extremely negligible.  Of course the company vanished few years later. I was fortunate to have left the company very early.

The problem very much lies at the core of how some venture capitalists choose the companies they fund: they seem to blindly favour more business people over technical people (I am by no means demeaning business people here). It also seems that personal connections make a huge difference to the point where these VCs overlook their own established funding procedures. By doing so they have ended up creating a culture where failure is rewarded as these same failed executives end up being funded by the same VCs again and again!.  I can cite many more explicit examples (it is my habit not to mention names unless it is absolutely necessary).

Knowing the above, along with another experience I had with some VCs in 2001 (I will talk about this story in a follow-up post), I decided not to pursue venture money in 2007. While working on my Ph. D. I invented an energy-efficient parallel MIMO (a hot technology nowadays) algorithm that can send and receive wireless signals. This algorithm can be efficiently implemented on multi-core processors.  I instead decided to sell the rights to my invention to Wilan, a respectable intellectual property company.

The question is how can we fix this. If we assume that we cannot fix how VCs operate (an enormous task indeed) then I believe wannabe entrepreneurs have to start getting used to the idea of bootstrapping their companies. While this may not be possible for hardware start-ups, it is very feasible for a lot of software-based ideas (one can for example think of web and mobile applications). My favourite example is a US-based web company called 37signals . The company has always been profitable since day one. Fortunately, we have recently been witnessing this bootstrapping trend in Canada (Freshbooks and Shopify are two good examples). I believe we have to nurture and encourage this trend as our high-tech future very much depends on smaller companies who can innovate and adapt quickly to change.

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