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A Life around Startups: Fun, Frustrating and Financially Fascinating

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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

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

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

  • OverviewVC experienceAccountancy/Consulting experienceRules of Thumb/Bitter Experience

  • VC ExperienceAnalyst with Yorkton Securities and Raymond JamesPrimaxis Technology VenturesJV of Royal Bank of Canada and British Technology GroupStartingStartups (later Axis Investment Fund)LSIF

  • Consulting Experience

    Scientific Research & Experimental Development Tax ProgramOntario Interactive Digital Media Tax CreditsIndustrial Research Experience ProgramCorporate Finance NOT!

  • Success factorsManagementOperational systemsTechnical smartsCash

  • Dont Let the Pigeon Drive the BusKey to success was a good management teamPast success was best indicator of future successCrashed fighter jet analogyMad scientists shouldnt be put in charge of the money, just as you wouldnt put an elephant in charge of the peanuts.

  • Dont trust anybody/be trustworthyHandshake deals are worth the paper they are printed on.Paper everything with suppliers, customers, employees, partners, lawyers, accountants, spouses, children, etcAt 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 skillsIn written and verbal communication:Tell them what you are going to tell themThen Tell themThen Tell them what you just told themIn verbal communicationThen get them to Tell you what you just told themSimplify: NO JARGON.Useful for customers, suppliers, employees.

  • Write it downProper documentation in company development is very importantTax complianceIP protectionManagement continuity (i.e. being run over by a bus)

  • Find good advice, then take itGet 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

  • When they are passing the hors doeuvres, take twoWhen raising capital, if an investor offers to give you more money then you want, TAKE IT.Cash is the most rare resource at the momentDont worry about dilution50% of something > 100% of nothingCurrently, dont waste time raising private investment

  • Admit mistakesPeople are smart. Spin never works and will cost you more effort in the long run.Customers and investors worth keeping appreciate honesty.

  • Be flexiblePortfolio 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 doorRelated to the previous two pointsHire people better than youDont 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.

  • Cases A: Mad Scientists with too much money, zero business senseMCo:Great nanofiltration technology, applicable to food, oil&gas, etc, etc..Recruits great board, all resign when CTO gets in unwinnable fight with CRASaves $1500 by doing books internally, costs $5000+ to fix (3 years in a row!); risks IRAP and SREDWill NEVER be able to attract external funding or salesHCo:Exceptional computer scientists at earliest stages of WWW developmentBlow 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)GCoWorld class theoretical manufacturing modeling softwareRevenue stalled at $400K/yr; wont 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 this20Q.net:20 year old Artificial Intelligence technology, applicable to gamesCTO 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 PhotonicsAttracted 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 MotionJim Balsillie: easily distracted, very litigious, massive egoBut great CFO Dennis Kavelman + lots of hor doeuversDalsa CorpUniversity of Waterloo spin offWorld class CCD and CMOS vision technologyCEO/CTO/Professor Savvas Chamberlain relied on excellent CFO and COOMagna vs LinamarStronach 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 SemiconductorIP designers for semiconductor security market.Original partners included senior sales exec from NewbridgeFormed strong ecosystem with fabs, large semicos, telco equipment manufacturers.Early royalty sales, with up-front design fees, lessened need for external capitalICoSystems integrators for robotic cutting systems.CAGR of 250%Doing what their accountant tells themHiring a COO very soon.

  • As a result: my portfolioBank 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, [email protected]

    As discussed in Basus presentation, there are a number of factors that go into identifying eligible R&D work. In each case, the facts of the specific case must be reviewed within the context of CRAs interpretation and the income tax act definition. However, for preliminary analysis of whether or not you MIGHT be doing R&D, think back to projects that were undertaken for the purpose of making things faster, cheaper or better. There is usually a technical advancement sought in these cases.

    If you had trial groups grown for the purpose of testing a new product or method, this may be an indication of uncertainty and advancement, and it is definitely evidence of an organized, systematic approach.

    Lower than average yields in and of themselves are not necessarily part of R&D, but the underlying reason for the low yield may be directly related to a project or may have led to a project.

    Failures and crop losses may be an indication of uncertainty and could be indicative of an underlying eligible project. Failure is not a requirement to qualify.