This morning I woke up to an opinion piece by local (Ottawa) tech guru Adam Chowaniec in the G&M.

The article entitled "How do we stop loosing tech companies?" Adam goes on at length to speak about how the American SEC rules give Public Companies more leeway than Canadian companies, and that we should change the rules etc etc. 

Now Adam does have an axe to grind here.

He was Chairman of two companies that were both "bought" before they had 'time to prove' their turnaround strategies, Zarlink & Tundra. The problem was that both of these companies were perennial underperformers. Talk technology all you want, the companies underperformed on the public markets making them targets for a buyout, they just didn't have the metrics their competitors did. One will note that Mos-Aid was taken out after being put 'into play' by WiLan, but yet again that situation was a result of an inability to grow shareholder value. Like the rest their stock was an underperformer too.

These companies shouldn't be looked at as small tech companies that need protection from greedy buyout operators, almost all of them sported huge valuations in their pasts. In all cases were nearly 30 years old. They were hardly on the cutting edge of tech as they were when founded and they didn't employee all that many people (Ottawa headcounts provided).  

• Zarlink - was founded in 1978 as Mitel Semiconductor (it was spun out and renamed in 2000). 140 employees at buyout
• Tundra - was founded in 1981 as Calmos Systems (it was acquired by Newbridge, and spun out as Tundra in 1995), 55 ottawa staff at buyout.
• Mos-Aid - founded in 1975 is the only that retained its name and ownership from beginning to end. 50 employees at buyout.

The truth is that these businesses were at a transition point in their businesses and that’s usually a great point to buy them out. Adam would have you believe that there were side benefits to having them in Ottawa, there were some, but not that many in this case. That said their deaths have been a boon to startups in the semiconductors space, I should know. 

The odd thing about the article was the comments it brought about, almost no one spoke about protecting big lumbering tech companies that had watched investor value decline. They all spoke of the need to help startups get more financing to build newer better tech companies… I think that’s probably a more apt description of what’s needed in Canada.

Hi York Angels,

My name is Matt Roberts and we have a lot of things in common.

We're both investing in Canadian entrepreneurs. We've both put our hard earned money on the line. We both like to think we're mostly a help rather than a hindrance to building great companies.

You might think we do things a lot differently as I work in Venture Capital and you're in an Angel group. That’s true, but on a more personal level I'd disagree as I have been an Angel.

I've invested in around 12 companies directly or more if you include my family's investments that I help manage. Since I started in my current role I no longer invest directly (conflicts and all) but I still advise young companies, I truly love that aspect of my life.

I'm a former entrepreneur, though I'm not sure how you can ever not be entrepreneurial. Many of the people in your group have also started their own firms or companies.

I've also raised money for startups, something you guys also help with - its hard work to get a seed round or a Series A - much tougher than most people would know unless they've tried. If you can help with that you're a huge contributor to the success of a company.

We both advise startups or aspiring entrepreneurs. I like to think I bring a lot to the table, people say I do - but maybe they're being nice, I'm sure your networks and experience are also helpful when investing or advising an entrepreneur.

So, as you can see, I think on the important points we have a lot in common.

I know Venture Capitalists are ragged on. I've done it (and sometimes still do) and I understand the frustration. So with that in mind I'd like to point out that York Angels is beginning to be spoken about with some of the same complaints. Are these fair, perhaps not. But we in the venture community do our best to listen to criticisms and either articulate why we disagree with them or respond to fix them, occasionally they don't even deserve a response. But we do it anyways, I think it's just good karma. 

Here's some advice.

You shouldn't charge entrepreneurs to pitch to your network or submit a business plan. I know some other groups have done it in the past, but I thought we'd gotten past this in our particular corner of the universe. I'd encourage anyone hoping to raise money from you guys to refuse to pay these 'fees' or just avoid your group until you change the policy. I'd also drop you from any recommended source of funds if I ever maintained such a wirtten list, right now its in my head but you're off it.

I don't see what value your group gets or gives from such a miniscule amount of money and I know for the entrepreneur its a red flag. Why you thought this was a good idea is beyond me. What's probably more galling is that your group gets money from both a local government sponsored OCE and from Fed-dev... which means you're charging entrepreneurs AND taking government money under the guise of investing in those same entrepreneurs - seems a bit off side. 

I know you try and add value with more services for entrepreneurs including a $200 course to help them pitch to angel groups. These services are also provided by local Centre's of Excellence suchas OCRI, Communitech, TechAlliance & MARS (etc) so I can't think why you should offer a similar service for money. I'd encourage you to do this for free, refer potential opportunities to the previsouly mentioned groups or direct people to the online advice out there you agree with. 

The truth is every pitch or business plan is a learning experience for all involved - even if an investment is never done. You'll learn more about whats out there. Thats why on the front page of my website is essentially a sign up for office hours, any entreprneur can ask for 20 minutes of my time. I don't charge money. 

You guys have done some great investments in companies I've advised or might invest in one day and added some great value to your companies. With all the people out there pulling for startups in Canada lets kill the nickel and diming.

Cheers,

Matt

- As always what is written here is my opinon and does not necessarily reflect the views of my employer, my coworkers, Janet (the lunch lady), my parents, my friends, or someone in any position that may call and complain to me. If you would like to complain to someone you think has power over me I can provide my mom's email upon request. -

I got an email from a student attending my MBA alma mater, Western University's Ivey Business Program. Beyond the usual questions about London and the professors, she asked specifically: "Will the Ivey MBA be helpful getting into Venture Capital?"

Below is my cut and paste answer: 

Honestly, the answer is no. I did not get my job because of my MBA. But it was a great checkmark to have next to my name. It adds instant credibility on financial topics, accounting, and other non-technical matters. But I've been told it was my previous industry experience and tech-community involvement that got me my job.

That said the Ivey brand (HBA and MBA) is very strong in Venture Capital. Amongst Ivey grads in Venture Capital roles (analyst, associate and up) I can think of in Canada:

At iNovia, my buddy, Karamdeep Nijjar. 

At Rogers Ventures, Jason Zan.

At Mantella VP there's Russell Samuels.

At RHO Canada - Roger Chabra.

Chris Albinson at Panorama Capital.  

And at Summerhill there's Gary Rubinoff and Brian Kobus.

In the BDC IT Venture Fund there is myself and Ron Warburton - our MD and my boss. 

While in the wider BDC VC family there is Paul Kirkconnell, Glenn Egan, Charles Cazabon, Charles Morand, Denis Ho, and Tony Van Bommel.

I'm sure there are more but this was off the top of my head (seriously). So yeah....  let me restate what i meant when I said "no" earlier, I meant maybe. 

For all the talk over the past week on Steve Jobs success I think we're
missing some of the learning lessons from his life that I noticed.

From where I sit Steve Jobs was the best non-technical cofounder of his
generation. And he did it by ignoring a lot of advice that I've been
guilty of giving. You might not agree with his method but his results
speak for themselves. Here's how I see some of the Lessons of Steve Job
nontechnical cofounder, and what we might want to learn from them.

1 - Take over everything from the technical founder that is not his core
value.

Steve Jobs handled all the firing and hiring of Apple Computer early on,
he rejected technical hires that his technical cofounder wanted. He went
alone to banks and asked for money. He negotiated the early angel
financing, alone. He built the early dealers network to sell the computers
and he trained the sales people. Where was his cofounder Woz during all
this. Building and designing computers. Why? Because that's what he was
good at. Would Woz have been good at the other items up here - perhaps?
But the goal was to squeeze every inch of engineering genius out of Woz
and get every distraction out of his way. Steve Jobs did that artfully.

2 - Learn enough technical knowledge to be dangerous. Then be dangerous.
(I.e. challenge everyone to defend their technical beliefs.)

Eric Schmidt in a recent business week article pointed out that Steve Jobs
argued with him on arcane points of C while Schmidt has a PhD in compsci.

Unlike Schmidt, Steve Jobs could never program the technology he wanted, but he had a view
on it. He could defend it and he wasn't afraid to.

I suspect he learned more from the 'defend your technical beliefs'
arguments then he ever learned from looking at code. In other words the
interested layman talking arcane tech so much he sounded like he could
even do it. He did this to keep his technical staff wondering what arcane
point they would have to defend next. But it also made them prepare to
defend their design decisions so they would chose the best and easiest to
defend design decisions.

3 - Never accept people's qualifications at face value.

Steve had no qualifications and he was a success.

The opposite could also be true. You could have qualifications and be a
failure. If you ever read about people's first interviews with Jobs, he
nearly always asked them to defend why they should be hired. The resume
was only a foot in the door. Qualifications, even technical ones don't
really matter at the end of the day. Can you do it? They do so.

4 - Never let your products become too techie. They're supposed to be used
by people. Make sure you want to use it.

At the end of the day Woz was about refined technical design. Steve was
about refined design. But it was Jobs who recognized that a command line
was never going to be the future of computing it was going to be an icon.
Technical founders build beautiful technology. Nontechnical founders need
to make sure they can use it too. Steve made sure he could use it and then
made sure he wanted to use it and then show it to his girl friend.

"We made the buttons on the screen look so good you'll want to lick them"

5 - Argue for technical changes by talking about the humanity of the
end-user. Not the technical problems that need to be fixed.

If you read the folklore.org pages about the Macintosh startup time.
You'll hear the story of how he argued for shorter boot times not because
it was slow but because they were wasting away the lives of their users.  

The argument was not a technical one, the problem was. The way to inspire
his team that Steve decided to use was to not argue about loading memory
items when the user won't notice. He just explained a completely off hand
thought for saving lives.

Was it a good argument - no.

But did it explain the thinking of Steve Jobs? yes.

--- There are probably many more and better ones.

There have been hundreds of arguments on technical founders versus
nontechnical founders. We just lost the best nontechnical cofounder in
history and he certainly showed that they matter.

Steve Jobs didn't build the first computer, the first MP3 player or the first smart phone.

He just built them right.

Sometimes innovation isn't about being first, it's getting it right first. He inspired those around him to get it right.

That's a talent few people have, and we'll all be the lesser for it.

Title pretty much says it all and I suspect everyone will nod their head
to this one.

What exactly is lying? Is it exaggerating?

I'm going to go out on a limb and say in some cases yes. I see
entrepreneurs exaggerate their revenue expectations, their speed of
development, their IP, and seniority of their previous roles. I don't call
this lying.

Is the statement "I developed XYZ" true when you worked on a team of 20
people. I'm willing to take a pass on this. It's not lying - I know no-one
develops a product by themselves. Still I'll probably ask a few follow up
questions, What did you work on? For how long? With whom? But the
fundamental statement that you worked on XYZ is true. This can happen on
numerous projects not just the comp-sci example. Every success has a
thousand fathers (or mothers) I don't think it's unfair to take some
credit if you had a hand in it.

What I can't stand is people exaggerating or outright lying about their
credentials. You either have a degree, or you don't. You either took a
Computer Science degree, or you didn't. You have an MBA or you don't.
These things are binary. One's and Zero's. Yes or No.

People lie about this stuff all the time or they obfuscate the truth.

I now have three examples of Waterloo students calling their MBET an MBA.

Why do they do this? Probably because no one has a clue what the MBET is.
But it's not an MBA, it doesn't require the GMAT (no math!), has roughly 1
year of work experience. When you visit their MBET website at Waterloo and
click on success stories you get none, when you click on their 'notable
alumni' you get none. Maybe it's because all the grad's are lying and say
they have an MBA from Waterloo (which the school doesn't offer). Why lie
about this - I have no idea... but it's funny.

Others don't lie outright they obfuscate. Obfuscate is a great word for
it. It means: Render obscure, unclear, or unintelligible. And reading some
people Bio's you would have a hard time figuring out what they took as a
degree. Here are two copy-past jobs with names changed to protect the
guilty.

"Joe Blow has a degree from University of Alberta where he took classes in
History, Economics and Computer Science." So what did he get?

Or "Jane Doe took business in Toronto." So where did she go?

These are two examples among many. Truth is Joe Blow got an Arts degree in
Economics.. and he did take a class in CompSci in first year. But now he
works in Tech so it's kind of uncool not to have a Degree in CompSci....

Jane Doe took her Business degree at Humber College in Accounting and Bookkeeping. But now
she's an executive in a company that's growing fast, everyone who works
for her is a York or UofT commerce grad. She needs to obfuscate.

Let's be blunt... who cares if you have an MBA or an MBET? Took no compsci
classes when you were 19? The truth is very little of this matters.
You've got a company you cofounded, you're there and presumable you know
what you're doing... why risk the red flag being raised? It's just bad
karma.

During a recent round I saw a clause that was new (to me) inserted by a VC firm out of the US. They asked for the requirement that any founder or member of the group of 'key employees' that leaves the company had to to conduct a ‘third party’ exit interview with their Partner on the BOD, without management included. They also tried to put some teeth behind by making it a requirement for the employee to keep their earned out equity when leaving the company.

Usually there are clauses of some sort similar to this in ones shareholders agreement regarding the exiting of ‘key staff’ or founders etc. but never had I seen the process explicitly give this right to an investment firm outside of the usual BOD duties. This was in addition to the usual ‘processes of an employee leaving the group.’ I asked why it was there. The answer gave me some pause.

“We’ve all been entrepreneurs at our firm and the first sign of something not going in a positive direction is usually a key member of the technical staff leaving or a founder looking to leave.  This is the symptom of something that we at the BOD level have a hard time identifying, we’d rather just goto the source and see if its something we should be aware of. Not have it from a secondary, biased person.’

For the most part I agree with this view that someone leaving a company is usually a sign of a problem, but it shouldn’t be the first sign. I’ve been pushing the companies I advise to conduct 360 Reviews once they get past eight to ten employees and I’m not the only one.

360 reviews conducted regularly can be a huge help for management, investors, the BOD and most importantly staff to identify problems early, before they lead to someone leaving the company.  This is one of the takeaways from my MBA at Ivey, Lyn Purdy, the professor who introduced them to me deserves a prize. I probably would have dismissed them out of hand, had she not shown how they build employee morale and retention, with things like numbers and examples. And in these days when each hire is an expensive process of technical prowess and 'fit' a review process can save you money. 

It was a 360 Review process that ultimately got the offending clause removed. The reviews would be conducted every six months, and be reviewed by management and the BOD - none of the other investors were particulalrly ecstatic about one investor group conducting exit interviews. I’d encourage founders to get out in front of this issue by having some thoughts around a process for employee feedback before it comes from your investors.

The Ontario Government thinks this will help innovation and startups. While this is happening.

I'm by no means an expert, but there are a bunch of practical tips I've learned about being the CEO of a startup from both being one and advising them. Since I don’t see them being posted to the wider internets I thought I'd share the first few that come most readily to my mind.

These aren't head in the cloud tips (iterate and iterate, pivot & iterate, send out 50 emails per day, eat lunch with your team, etc.). I'm talking about the actual day to day things that you should do or not do. Learned from painful (or painful for others) experience.

1 - Don't use direct deposit to pay your staff.

This has come up to many times now, so I decided to put it first. Direct deposit is great for everyone but the founder/CEO of a startup.

Why? In order to make a direct deposit system work you need to give them one to two weeks’ notice of who is going to get paid, changes from each pay period also cost money.

 Every startup will have a cash flow hiccup, its guaranteed. The CEO and founders will man up and skip a paycheck and let their staff be none the wiser on the cash flow issues. Unfortunately its harder to do that if you use direct deposit. The money needs to be there Monday night, Tuesday at the latest to make payroll for Thursday (Friday at midnight). Taking the founders off the payroll can sometimes take a couple of weeks (sometimes less). But if you can't get all the cash into the account for the payroll - you'll end up cutting checks come Friday. Your staff will know something’s up. And you'll have to admit something is.

Direct deposit sucks for startups. Cut checks and pay monthly. 

2 - Sublease space or 'rent a cube' and never commit to more than 1 year on realestate.

Matt’s Rule of thumb - how old is your startup? Divide by two, that’s the maximum you should commit to anything like real-estate. This lesson is borne out by numerous examples I've been involved in. I'm not saying you won't stay in a space longer then that number - but you'll find that you shouldn’t commit to a longer one.

A great example is a fast growing startup here in Ottawa: 6 years old. At 3 years they moved out of their 'founding space' and moved into a great loft space with a 4 Year lease. They stayed there 1.5 years before moving into their 'current' larger space, it came with a 5 year lease (plus costs of upgrades). They've been in that space for 1.5 years and are moving into yet another larger space this fall. The fallout? The COO has become a local landlord and real estate tycoon (I exaggerate – sorta) as he tries to sublease all this space he now has.

People will say that’s an example of poor planning. I call it an example of conservative headcount and growth planning. Even if they had forecasted expected growth to be 30% higher than it ended up being, their real estate conundrum would have pushed it out another quarter or so… in other words try not to commit to anything for too long. Real-estate is the most expensive example.

 3 – Never talk about your ‘real’ job

I hate entrepreneurs who do this. They talk about the company they’re starting or running… then talk about what they ‘actually do.’ Don’t. If you’re not all in on what you actually are doing. No one else is going to be. I’ve written about this before.

Don’t tell people how you pay your bills today. Unless its your startup.

4 – treat potential hires like consultants.

People say not to do this. I’ve had people do this to me and I hate them for it. The world is against people doing this.

But there will come a time when you need to do this. Don’t feel bad, you're just one of the many people who have done this. 

And its cheaper then actually hiring a consultant who you can't afford.

5- Never pay your bills on time.

When I see companies paying their bills on time I ask if they’d like a free 3 month loan. They inevitably all say yes. “That’d be a huge help on cash flow”.

You can pay almost 75% of your bills late and get away with no late charges. Get used to that idea, it’ll save you  when you need cash. Pay as much late as possible. 

6 – never list a paid consultant listed as an employee.

Just don’t. Its silly looking. And investors will sincerely think you’re an idiot.

Consultants aren't employess - if they were they wouldn't be consultants.